A judge on Tuesday approved a $40-million settlement by Tesla Inc. and Chief Executive Elon Musk with the U.S. Securities and Exchange Commission, resolving government claims that Musk misled the public with a flurry of tweets about a plan to take the electric-car maker private.
U.S. District Judge Alison Nathan in Manhattan signed off on the accord after Tesla, Musk and the regulatory agency said in a detailed joint filing that the deal was in the best interest of investors. The company and Musk will each pay $20 million.
The judge’s decision was largely expected, even after Musk muddled the process by insulting the SEC in a series of tweets a few days after reaching the settlement deal.
The ruling lets Palo Alto-based Tesla resolve an unwelcome distraction as its core business of making electric vehicles is improving. The company hit its targets for production and deliveries in the third quarter as its Model 3 sedan climbed the ranks of the top-selling cars in the U.S. market. Total output of the model probably exceeded 100,000 last week, according to Bloomberg’s tracker.
An SEC spokeswoman didn’t immediately respond to a request for comment.
The SEC investigation was triggered by Musk’s Aug. 7 tweet that he had “funding secured” to take Tesla private. Tesla shares surged until trading was halted temporarily. Within hours, questions began to swirl around Musk’s claims, and the SEC quickly opened an investigation. The agency moved with unusual speed, questioning Musk, Tesla’s board and other executives.
Musk and Tesla agreed to resolve the allegations without admitting or denying wrongdoing. The plan called for their combined $40 million in penalties to be distributed to harmed shareholders through a court-approved process, the SEC has said.
It also called for Musk to step down as Tesla’s chairman for at least three years, though it allowed him to remain as CEO. And it called for the naming of two new independent directors.
Within days of agreeing to the proposed settlement, Musk shot off a tweet referring to the SEC as the “Shortseller Enrichment Commission" and sarcastically praising the regulator’s work. Experts said the tweet could be viewed, problematically, as a denial of wrongdoing by Musk, but they said it wasn’t likely to derail the deal.