Published: Mon, October 01, 2018
Markets | By Noel Gibbs

SEC Lawsuit Against Musk Wiped $7.3 Billion From Tesla’s Market Value

SEC Lawsuit Against Musk Wiped $7.3 Billion From Tesla’s Market Value

The SEC filed its lawsuit Thursday, less than two months after Musk tweeted - falsely, according to the agency - that he secured funding to take the company private. As part of the deal, Musk and Tesla will also both pay $20 million, while the former will neither admit nor deny the allegations.

"The $40 million in penalties will be distributed to harmed investors under a court-approved process", the SEC said.

Musk will stay on as company CEO but will relinquish his role as company chair for at least three years as part of the agreement, which is still subject to court approval. Musk said August 7 in a company blog post that he was considering taking Tesla private at $420 per share, representing a 20% premium over the stock price following the company's second-quarter earnings release. The funding had not been secured.

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Tesla in recent years has become one of the most valuable American auto maker, with its stock worth more than $50 billion.

Tesla stock (NASDAQ:TSLA) is exhibiting a strong recovery on Monday, trading up 15.40% at $305.54 per share during the opening bell. The SEC said the company had no way to determine if his tweets contained information that must be disclosed in corporate filings, or if they contained complete and accurate information.

The company has recently been struggling to meet audacious production goals for its Model 3 sedan.

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"Shareholders with Tesla will be able to go to sleep tonight knowing the Musk will remain at the helm of the company". On Saturday, the SEC released an update announcing that Musk had accepted a settlement for his lawsuit. The appointment of two new Board members, as well as the creation of a committee tasked with "placing additional controls and procedures to oversee" Musk's communications, were warmly received by the Tesla community as well.

The settlement doesn't resolve investors' lawsuits, which were significantly strengthened by the SEC's complaint.

Musk has said the company needs to produce 7,000 cars a week to make money, a target he aimed to reach in the July-September quarter.

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