Editor’s note: This story has been modified to reflect the settlement between the SEC and Tesla, which was announced after the print edition went to press.
Elon Musk has a history of announcing important decisions about Tesla via Twitter without consulting the company's board or high-level executives, one former senior executive told Automotive News.
Now the penalty for his sometimes impulsive Twitter habit has been rendered. The Securities and Exchange Commission reached a Sept. 29 settlement with Musk and Tesla that calls for each to pay a fine of $20 million and for Musk to step down as chairman for three years but remain CEO and a company director.
The sweeping deal came within days of an SEC suit charging Musk manipulated markets and committed fraud when he announced via Twitter in August that the company would be going private at $420 a share. As part of the suit, the SEC moved to bar Musk from sitting on the board or as a CEO of a publicly traded company.
Musk hasn't commented on the settlement but said last week the SEC's fraud allegations were "unjustified."
"I have always taken action in the best interests of truth, transparency and investors," he told CNBC. "Integrity is the most important value in my life and the facts will show I never compromised this in any way."
Tesla did not respond to a request for comment about the lawsuit or settlement.
Yet Musk's relative lack of consultation with Tesla executives and board members prior to tweeting is something of a longstanding practice, according to the former senior executive at Tesla, who did not want to be identified for fear of retribution.
Musk would make newsmaking revelations about decisions as important as the potential Gigafactory location, the decision to name Tesla's third car "Model E" and the company's open-patent policy in public comments, the source said, leaving Tesla employees scrambling to catch up.
"There were many instances where he would just decide to do something and announce it," the source said. "You would see something tweeted, and you'd have to react."
That kind of rushing-to-react behavior was on display in the SEC's complaint against Musk.
According to the complaint, Musk had sent an email to the board of directors two days after meeting with a sovereign fund, which expressed interest in taking the company private. That meeting lasted about 30 to 45 minutes, and at no point did Musk or fund representatives discuss a price. On Aug. 2, Musk's email to the board had the subject line, "Offer To Take Tesla Private at $420."
He admitted he picked the number 420 in part because it is a reference to marijuana, and Musk thought his girlfriend would find it funny.
The board and Musk had a conference call to discuss the move on Aug. 3, and then, according to the SEC, nothing happened. There were no further discussions with the sovereign fund, and the company did not take any further steps to inform shareholders about the plan, explore regulatory issues that would affect such a transaction, nor retain any advisers to help with the deal. Musk had one conversation with a private equity fund partner on Aug. 6.