The Securities and Exchange Commission announced the deal two days after it sued Musk in federal court for misleading investors by tweeting about taking his company private. He and Tesla will pay $20 million each, and the company will have to find an independent chairman to replace Musk, who will stay on as CEO. Tesla will also name two new, independent directors to its board. Musk and Tesla each will pay a penalty of US$20 million, with the total US$40-million penalties to be "distributed to harmed investors under a court-approved process".
Tesla shares jumped 17 per cent on Monday as signs it had met targets for quarterly vehicle production added to relief at CEO Elon Musk's settling of a lawsuit with regulators that had threatened to force him out.
Billionaire businessman Elon Musk has stepped down as the Chairman of Tesla following a tweet where he claimed he has the funding and investor support to buy the publicly-traded company.
But the key outcome is that Musk gets to continue as CEO, and in the role that as the visionary, evangelist and, well, the driver and inspiration to develop new products, new strategies and plot the end of the fossil fuel era.
A row of new Tesla Model 3 electric vehicles is seen at a parking lot in Richmond, California, U.S., June 22, 2018.
In a letter to employees, Musk said Tesla's volatile stock has served as a "major distraction" to staff and that being public created a lot of pressure on the company to 'make decisions that may be right for a given quarter, but not necessarily right for the long-term'.
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The SEC had charged Musk with fraud in response to his tweet in August suggesting he could take Tesla private at $420 (around Rs 30,581) a share, a substantial premium at the time, and had secured funding to do so.
Tesla in recent years has become one of the most valuable American vehicle maker, with its stock worth more than $50 billion.
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.
Musk reached a settlement with the regulators, announced Saturday. But actual Model 3 production during Q3 has averaged out at a little more than 4,000 cars a week.
The tweet caused Tesla's stock price to jump and, according to the SEC, "led to significant market disruption".