Famed entrepreneur Elon Musk is reportedly out as electric car maker Tesla’s chairman after the Securities Exchange Commission slapped him with a lawsuit that could have been far more ruinous.
Musk agreed to step down as his company’s chairman and also agreed to pay a $40 million fine to settle the lawsuit brought against him after he began tweeting claims that Tesla was being bought by a Chinese company ahead of the legal actions required to announce such a move.
The deal with the government requires Musk to relinquish full control of his company for at least three years.
According to the Associated Press:
Tesla must hire an independent chairman to oversee the company, something that should please a number of shareholders who have criticized Tesla’s board for being too beholden to Musk.
The deal was announced Saturday, just two days after SEC filed its case seeking to oust Musk as CEO.
Musk, who has an estimated $20 billion fortune, and Tesla, a company that ended June with $2.2 billion in cash, each are paying $20 million to resolve the case, which stemmed from a tweet Musk sent on Aug. 7 indicating he had the financing in place to take Tesla private at a price of $420 per share.
Some estimated that the reckless cost Tesla $20 in company stock prices.
The deal could remove one cloud that hangs over Tesla. Investors fretted about the company’s ability to cope without Musk, a charismatic entrepreneur whose penchant for coming up with revolutionary ideas has drawn comparisons to one of Silicon Valley’s most revered visionaries, Apple co-founder Steve Jobs.
Tesla’s stock plummeted 14 percent Friday after the SEC filed its lawsuit, erasing more than $7 billion in shareholder wealth. Many analysts predicted the shares were bound to fall even further if Musk had been forced to step down. Tesla’s stock has dropped 30 percent since Aug. 7, closing Friday at $264.77.
Its all just more evidence of how shady Musk really is. In fact, few of his businesses are stand-along successes and his entire empire is built on government handouts in the form of tax subsidies, outright government grants, and other forms of government funding.
According to Ideapod.com:
Los Angeles based entrepreneur Elon Musk has created a multi-billion-dollar fortune running companies that make electric cars, sell solar panels and launch rockets into space.
And these companies have been built with the help of billions of dollars in government subsidies.
According to data compiled by The Times, Tesla Motors Inc., SolarCity Corp and Space Exploration Technologies Corp. (SpaceX) have together received an estimated $4.9 billion in government support. The numbers shed light on an emerging theme running through Musk’s business empire: a public-private financing model to manage the risk of launching long-shot start-ups.
As Dan Dolev, an analyst at Jefferies Equity Research, said: “He definitely goes where there is government money. That’s a great strategy, but the government will cut you off one day.”
The subsidies are made up by a combination of government incentives, tax breaks, grants, factory construction, discounted loans and environmental credits that Tesla can sell. The total figure of $4.9 billion also includes tax credits and rebates to buyers of solar panels and electric cars.
Without our tax dollars flooding into his bank accounts, Elon Musk is essentially a failed dreamer sitting in his garage.
But if there is one thing he is an expert at, it is finding ways to get billions in free money from, you and me by raiding our taxes.
In any case, this lawsuit could have been far worse. If Musk fought the lawsuit, he could have lost all control of his company forever, AND even been barred from controlling any new companies in the future!
Follow Warner Todd Huston on Twitter @warnerthuston.
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