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

Tesla shares jump after Musk settles with SEC

Tesla shares jump after Musk settles with SEC

Shares of Tesla Inc jumped 18 percent on Monday as signs it had met targets for quarterly auto production added to relief at Chief Executive Elon Musk's settling of a lawsuit with regulators that had threatened to force him out. Neither responded to requests for comment.

Investors anxious that heralded a long-drawn out fight with the regulator that would see Tesla lose its talismanic leader, undermine its ability to raise capital and cripple operations as it ramps up production of its crucial Model 3 sedan.

"We believe Musk's settlement with the SEC is positive for all stakeholders and should allow TSLA to return its focus to producing quality cars", Baird analyst Ben Kallo said.

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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.

Tesla analyst Garrett Nelson of CFRA Research upped his rating on the stock Monday morning to Hold, after downgrading it on Friday to Sell. On Saturday, the SEC released an update announcing that Musk had accepted a settlement for his lawsuit.

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.

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"As a result of the settlement, Elon Musk will no longer be Chairman of Tesla, Tesla's board will adopt important reforms -including an obligation to oversee Musk's communications with investors-and both will pay financial penalties", Steven Peikin, Co-Director of the SEC's Enforcement Division, said in the SEC statement. Shareholders are betting the company is on the cusp of stemming losses and cash burn thanks to its lower-priced Model 3 sedan.

Now, the company has to hire a chairman to replace Musk (something corporate governance experts have suggested for years), along with 2 new independent directors.

The settlement with the SEC won't be the end of the matter, though, as Musk is also facing a series of class action lawsuits relating to the tweets.

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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.

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