Tesla shares spiked on Monday after the Securities and Exchange Commission settled securities fraud charges with CEO Elon Musk, who will remain at the head of the company, while stepping down as chairman of the electric-car maker, according to a news release from the SEC.
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Within 45 days, an independent chairman will replace Musk, who will be ineligible for reelection for the next three years. Tesla will also be required to appoint two new independent directors to its board, in addition to putting into place controls to oversee Musk’s communication. The settlement is still subject to court approval.
Musk and Tesla will also be required to pay $20 million in penalties each.
The eccentric billionaire came under investigation by the SEC after he abruptly tweeted in August that he was considering taking Tesla private at $420 per share and had already secured the funding (Tesla shares soared upon the initial tweet, rising more than 10 percent).
This week, the SEC filed a lawsuit against Musk claiming securities fraud and that he’d intentionally made “false and misleading” statements about Tesla’s privatization plans. The lawsuit also alleged he “knew or was reckless in not knowing” that his statements were false and/or misleading.
After sending the tweet, Musk outlined additional details in an online blog post, noting that he was all but certain to have landed the investment from the Saudi sovereign fund in July. He later said it was in the company’s best interest to remain publicly traded.
“The SEC’s complaint alleged that, in truth, Musk knew that the potential transaction was uncertain and subject to numerous contingencies,” the news release said. “Musk had not discussed specific deal terms, including price, with any potential financing partners, and his statements about the possible transaction lacked an adequate basis in fact.”
Last month, Musk said during an interview with The New York Times that he wrote the tweet in his car on the way to the airport and no one reviewed it.
Tesla stock closed nearly 14 percent down on Friday at $264 per share.
Tesla did not respond to a request for comment.