Posted by Surya Makkar.
Over the past few years, Tesla has emerged as a frontrunner when it comes to electric vehicle technology. Their technology packed, self-driving, vehicles have come with their fair share of problems however. Not only has Tesla faced legal obstacles when it comes to their various technologies they use in their products, but more recently, Tesla CEO Elon Musk was sued by the Securities and Exchange Commission (SEC). Elon Musk was accused of committing fraud by publically making false statements, which could have impacted investors. To give some background, around a month ago, Elon Musk tweeted saying that he had “funding secured” to take Tesla private at $420. Something interesting to note is that the SEC did not sue Tesla as a whole, but rather only filed a suit against Elon Musk.
Elon Musk had never said anything before this to investors or shareholders about taking the company private, which is why everyone was caught off guard and was extremely shocked. After the suit was filed, Tesla shares fell more than 12 percent in after-hours trading. The SEC subpoenaed Tesla, financial institutions, and Tesla board members, to interview them and gather more information. The SEC found that Musk had been in a feud with investors who continued to say Tesla shares would fall.
A few days later, Musk and the SEC reached an agreement that required Elon to step down as Chairman of the board of Tesla and required him to pay a $20 million fine. According to the agreement, Musk does not have to admit any guilt and has 45 days to step down from the role of chairman. He will continue to serve as the CEO of Tesla however. This case goes to show how business professionals are being watched at every moment. One wrong move in the business world can lead to millions of dollars of legal action being taken against you, which is why it is imperative that people in the business world act as if they are being watched at all times.
Surya is a business law student at the Stillman School of Business, Seton Hall University, Class of 2021.