Elon Musk settled a SEC lawsuit on Saturday after Musk walked away from a better deal on Friday.

"It is not clear why Mr. Musk changed his mind so quickly," said the New York Times.

I speculate the Tesla board demanded Musk settle.

Regardless, Musk got off lightly given the SEC filed fraud charges and threatened to bar Musk from being a CEO of a public company ever again.

The terms of the settlement are slightly tougher than those that two people briefed on the talks said Mr. Musk had rejected on Thursday, which called for a two-year bar on serving as chairman and a $10 million fine. [It's now $20 million].

Tesla, which is also settling with the S.E.C., will pay a $20 million penalty. The company was not charged with any fraud.

In addition, the company will add two independent directors and take steps to monitor Mr. Musk’s communications with investors. It will also create a permanent committee of independent directors to monitor disclosures and potential conflicts of interest.

Jay Clayton, the S.E.C. chairman, said the settlement with Mr. Musk and Tesla sent a message that “when companies and corporate insiders make statements, they must act responsibly, including endeavoring to ensure the statements are not false or misleading.”

In settling, Mr. Musk neither admitted nor denied misleading investors under the civil fraud charge, which means he cannot later say he did nothing wrong.

Ammunition for Lawsuits

Because Musk cannot deny he did anything wrong, Tesla's SEC Deal Provides Ammunition for U.S. Probe, Investor Lawsuits.

Tesla Inc’s settlement with U.S. regulators will help soothe investors calling for more oversight of Chief Executive Elon Musk, experts said, even as it gives ammunition to short-sellers pursing separate cases and to a probe by the Justice Department.

“The real worry for the company is not the SEC but private actions that follow a settlement like this,” said Charles M. Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. “By paying that size fine, it bolsters investors’” claims over stock market losses, he said.

Bit of a Numbnut

A former SEC commissioner says Elon Musk is ‘a Little Bit of a Numbnut’

“ Musk might be a genius when it come to electric cars and space travel, but he’s a little bit of a numbnut when it comes to dealing with the SEC.”

Those are the words of Stanford Law School professor and former SEC commissioner Joseph Grundfest, in an interview Saturday with the San Jose Mercury News.

Grundfest told the newspaper that Saturday’s settlement of the SEC fraud investigation — in which Tesla Inc.’s chief executive agreed to give up his chairmanship and he and the company would pay $40 million in penalties, while not admitting guilt — is a good thing, especially a stipulation that Tesla must monitor the tweet-happy Musk’s communications.


“He won’t be able to tweet unless he runs it by a sober, responsible adult,” Grundfest told the Mercury News, “and that’s a good thing for Elon and the world.”

Entertainment Value Decreases

If someone monitors his Tweets, the public loses free entertainment. Damn.

"Very Close" to Profitability

In a Weekend Email, Musk told employees Tesla ‘Very Close’ to Profitability.

“We are very close to achieving profitability and proving the naysayers wrong, but, to be certain, we must execute really well tomorrow (Sunday),” Musk wrote in the email to staff. “If we go all out tomorrow, we will achieve an epic victory beyond all expectations.”

Sunday is the last day of the third quarter. We may see production numbers on Monday. Musk said Tesla would produce between 50,000 and 55,000 Model 3s this quarter.

Tesla managed a profitable quarter once before. It didn't last long.

Questions Abound

Musk also said it would take 6,000 a week to hit profitability. Let's call it 5,000. Even at that lower rate, Tesla would need to produce 65,000 cars a quarter.

Are there 65,000 buyers a quarter with all these problems?

And speaking of problems what about money lost on warranties?

It will be interesting to see where Tesla sweeps repairs given that so many people report they are waiting for weeks to get parts.

If Tesla can produce cars, how can it not produce parts?

Monday Reaction

The settlement has to be good news vs. what took place on Friday. I have no expectation, but little would surprise me, either direction.

I will offer this. If the reaction is "gap and crap", look out below.

Mike "Mish" Shedlock

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