Finance

Tesla shares soar 16% after Elon Musk settles fraud lawsuit with regulator

Tesla shares soar 16% after Elon Musk settles fraud lawsuit with regulator

Tesla is required to appoint two new independent directors to its board.

Musk allegedly tweeted "considering taking Tesla private at $420".

"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.

Tesla has turned to an army of volunteers to help it meet ambitious third quarter vehicle production targets after a bruising few days for chief executive Elon Musk, who was forced to pay $20m in order to settle a dispute with U.S. regulators.

Tesla shares rebounded from last week's US lawsuit over Elon Musk's take-private tweets, as a settlement ensured the billionaire will keep calling the shots at the carmaker he's said is on the verge of profitability.

"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. Tesla's showroom in Paramus, New Jersey, was closed by 8 p.m. local time Sunday. Along with leaving, Musk has to pay a $20 million fine for a tweet he fired off saying he planned on a massive buyout of Tesla. Tesla had come under criticism for years prior to Musk's take-private episode for lax governance, though shareholders sided with the board in June by voting against an independent chairman proposal and approving the re-election of three directors.

According to the SEC's complaint, Musk's misleading tweets caused Tesla's stock price to jump by over six percent on August 7, and led to significant market disruption.

But several experienced litigators said on Monday that, while the DOJ probe is separate, the SEC's settlement could mark the end of official action against Tesla and Musk. "The resolution is meant to prevent further market disruption and harm to Tesla's shareholders", said SEC enforcement division co-director Steven Peikin. On Friday, its stock dropped nearly 14 per cent.

He accepted the deal "without admitting or denying the allegations of the complaint", according to a court document. Monday's gains erased Friday's 14 percent plunge after the SEC filed its lawsuit late on Thursday.