Published: Tue, October 02, 2018
Markets | By Terence Owen

Tesla Shares Rise After SEC Lawsuit Leaves Musk as CEO

Tesla Shares Rise After SEC Lawsuit Leaves Musk as CEO

Elon Musk has reached a deal over fraud charges that will see him step down as electric automaker Tesla's chairman of the board and pay a $20 million (roughly Rs. 145 crores) fine but stay on as CEO, US securities regulators said Saturday.

Shares of Tesla (TSLA) surged in early trading Monday after the SEC settled a lawsuit accusing the company's founder and CEO Elon Musk of defrauding investors when he tweeted last month that he was considering taking the company private. The SEC charges against Musk shaved about $7 billion off Tesla's value. The funding had not been secured. According to SEC, this settlement will assist Tesla to strengthen its corporate governance and protect its investors. He'll also not be eligible to be elected into the Chairman position for three years, Time reports.

Tesla jumped in pre-market trading after Elon Musk settled a United States lawsuit over his take-private tweet storm, reassuring investors that the billionaire will keep calling the shots at the electric-car maker he's said is on the verge of profitability.

He arrived at the $420 a share figure by assuming a 20 percent premium on Tesla shares and rounding up one dollar because "he had recently learned about the number's significance in marijuana culture", and to impress his girlfriend, according to the SEC's complaint.

The settlement also requires Tesla appointing two new independent directors, and Tesla setting up a "new committee of independent directors and put in place additional controls and procedures to oversee Musk's communications".

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"The total package of remedies and relief announced today are specifically created to address the misconduct at issue by strengthening Tesla's corporate governance and oversight in order to protect investors", said Stephanie Avakian, co-director of the SEC's Enforcement Division.

In the immediate aftermath of the "funding secured" tweet, Tesla stock rose by six per cent.

Shares in Tesla sank more than 14% on Friday, wiping more than $5bn (£3.8bn) from the company's market value after the SEC filed its suit, claiming Mr Musk issued "false and misleading" tweets about potentially taking Tesla private.

"Shareholders with Tesla will be able to go to sleep tonight knowing the Musk will remain at the helm of the company".

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