Elon Musk’s 420 Tweet Cost Him $20 Million and His Tesla Board Seat
Elon Musk fined $20 million and demoted to Tesla CEO over $420 tweet that mislead investors.
The rollercoaster Elon Musk story has come to a swift and brutal end. Though for the 47-year-old entrepreneur and co-founder of Tesla and PayPal, things could have been worse. Early on Saturday, Musk agreed to settle the charges the U.S. Securities and Exchange Commission brought against him on Thursday. Essentially, Musk pled no contest to the charges of fraud and misleading investors. The settlement agreement requires Musk to pay a $20 million fine and step down as Tesla chairman. But Musk will still serve on the board of Tesla as its CEO, an unusual decision that has buoyed the company’s stock price as of trading this morning.
Elon Musk’s 420 Tweet Wreaked Havoc
Last week, things were looking bleak for Elon Musk. His August 7 tweet, reportedly made under the influence of cannabis and acid and in the company of Canadian pop star Grimes, kicked off a series of cascading consequences that culminated in a lawsuit from the SEC.
We’ve been covering the Musk saga all summer. The bizarre threesome weekend in LA with Azealia Banks and Grimes. The text conversations about big dicks and Elon’s newfound love of weed. And of course, the blunt-smoking appearance on Joe Rogan‘s show. We know that Grimes takes credit for introducing Musk to cannabis culture. And that his infamous $420 per share “funding secured” tweet was a bad weed joke to try and impress his then-girlfriend.
And we know that the $420 “funding secured” tweet is what drew the heat of the SEC. With over 22 million twitter followers, anything Musk says about his public companies publicly has the potential to influence investors and the market. Indeed, the SEC’s lawsuit alleged that Musk made false statements and misled investors when he claimed to have secured the funding necessary to take Tesla private at $420 per share. Shortly after the statement, stock in Tesla rose. But the SEC said Musk had no factual basis to make the claims about the company.
There were also other tweets that the SEC cited in its complaint. Tweets mocking investors who’d taken short positions on Tesla’s stock and more announcing funding that never really materialized. All of that added up to the SEC’s Thursday lawsuit, which Musk settled on Saturday.
SEC Punishes Musk for Fraud, Not Weed
The terms of the settlement are harsh, but not as harsh as they could have been—or as lenient. Musk reportedly passed on an earlier settlement offer from the SEC to pay a “nominal” fine and leave his chairman position for two years. Unnamed sources say Musk refused the earlier offer because he felt it would not be truthful.
But without a settlement, the SEC’s lawsuit would have prohibited Musk from serving as an officer or on the board of any public company ever if it succeeded. Tesla’s Saturday settlement avoids that penalty. Instead, Musk will remain on the board of Tesla as its CEO but step down as chairman. Tesla will also pay a $40 million dollar fine, of which Musk will pay half.
Tesla Stock Rises After Musk Leaves the Board of Tesla
Some financial experts wager the SEC allowed Musk to keep a seat on the board of Tesla out of fear that banning him entirely would hurt investors—the very reason the SEC filed suit. And with Musk still at the helm of operations, Tesla’s stock is already recovering. At the time of this writing, TSLA is trading at $307.75, up 16.25 percent.
It’s important to note that the SEC is punishing Tesla and Musk for making false public claims that mislead investors. It’s not an issue with Musk’s apparent cannabis use. Though it is tough to deny that it was smoking weed with Grimes that contributed to the 420 tweet and everything that followed.
Elon Musk Pays Most Expensive Weed Ticket Ever
And therein lies the irony. We know that in the U.S. marijuana enforcement vastly disproportionately targets and impacts black and brown people. Drug laws, even for possessing small amounts of cannabis, have destroyed countless lives and devastated minority communities. Musk didn’t violate any weed laws, of course. But he did get high and make false claims about a $53 billion company. For Elon Musk, however, $20 million dollars might as well be just a very expensive weed ticket. And it looks like, despite the $20 million setback, Musk and Tesla will be just fine.