Here’s how Tesla’s Elon Musk got a worse deal than the SEC first offered

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Elon Musk tried to play hardball with the SEC, but caved and ended up with a worse deal than he was originally offered, according to a new report detailing last week’s drama that ended Saturday with the settlement of a fraud investigation.

Late Tuesday, the New York Times reported a timeline of events, starting with Thursday morning’s surprise announcement that Tesla Inc. was pulling out of a proposed fraud settlement with the Securities and Exchange Commission over Musk’s August tweet that he had “funding secured” to take the company private, which he did not.

The “extraordinarily generous” offer on the table Thursday morning would reportedly have allowed Musk to remain CEO and give up his chairmanship for just two years. But before the final meeting, Musk threatened Tesla board members that he would resign immediately if they approved the settlement, the Times said. The board backed off and rejected the settlement, and later praised Musk’s leadership and integrity — at Musk’s own demand, according to the Times.

That led the SEC to sue for securities fraud late Thursday, raising the risk that Musk could be ousted as both chairman and chief executive if the regulators won in court.

After Tesla stock plunged about 14% Friday, Tesla’s lawyers were “all but groveling for a second chance — this time with Mr. Musk’s grudging approval,” the Times reported.

On Saturday, a settlement was agreed upon that was harsher than the terms Musk faced just two days before — while Musk could remain CEO, he was barred from being chairman for three years, and his fine doubled to $20 million. Tesla will also pay a $20 million fine, and be required to add two independent directors, as well as a new independent chairman. Neither Musk nor Tesla admitted guilt in the settlement.

Read: Opinion: SEC settlement forces Tesla to give Elon Musk adult supervision

“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,” Stanford Law School professor and former SEC commissioner Joseph Grundfest said in a weekend interview with the San Jose Mercury News.

Tesla shares TSLA, -3.12%   bounced back Monday, but slipped Tuesday, despite beating third-quarter Model 3 delivery expectations and meeting production goals. Tesla stock has had a tumultuous year, and are currently down about 3% year to date, compared to the S&P 500’s SPX, -0.04%   9% gain.