OAKLAND, Calif. (KTVU) - Tesla CEO Elon Musk has agreed to step down as chairman of the electric automaker as part of a $40 million settlement after a government lawsuit alleged Musk mislead investors about a proposed buyout of the company.
The settlement was announced Saturday, just two days after the Securities and Exchange Commission filed the case seeking to oust Musk as CEO. Under the agreement, Musk will remain the CEO but will resign from his role as chairman of the Tesla board and cannot seek reelection for at least three years.
The SEC's complaint Thursday in federal court alleged Musk lied in a tweet on Aug. 7 stating he was going to take the company private at $420 per share. Despite notifying the market in 2013 that Tesla intended to use Musk's Twitter "as a means of announcing material information about Tesla's SEC findings," Tesla had not take proper actions for Musk to make a statement about a possible transaction, according to the SEC.
The SEC said Musk wasn't close to locking up the estimated $25 billion to $50 billion needed to pull off the buyout. Musk, a billionaire, and Tesla, which concluded June with $2.2 billion in cash, will each pay $20 million to resolve the case.
Friday Tesla's stock dropped off around 11 percent in after-hours trading following the SEC's announcement. The dive erased more than $7 billion in shareholder wealth and analysts projected shares to fall further if Musk was forced to resign.
Tesla and Musk settled without admitting to or denying the SEC's allegations.
An email to Tesla on Saturday seeking a comment on the SEC's announcement was not immediately returned.
The Associated Press contributed to this report.