U.S. judge approves SEC settlement with Tesla, shares jump
A U.S. judge on Tuesday approved a settlement between a federal regulator, Tesla Inc and its chief executive officer, Elon Musk, over his tweets promising to take the company private, signaling an end to a tumultuous period for investors.
Tesla shares rose as much as 5.5 percent to $273.88 before easing to $269.95 in morning trade on Nasdaq. Despite the gains, the stock is still down more than 20 percent since Aug. 6, the day before Musk took to Twitter promising to take the company private and claiming he had secured funding to do so.
Judge Alison Nathan of the U.S. District Court for the Southern District of New York approved a motion filed by the U.S. Securities and Exchange Commission outlining the agreement with Musk.
Under an agreement with the SEC, Musk has agreed to pay a $20 million fine and step aside as Tesla`s chairman for three years to settle charges that could have forced his exit from Tesla.
The company will also pay a $20 million fine, despite not being charged with fraud.
The government lawsuit threatened Tesla and Musk with a long fight that could have undermined its operations and ability to raise capital.
Under the settlement announced on Sept.29, Tesla must appoint an independent chairman, two independent directors and a board committee to set controls over Musk`s communications.
Musk must also comply with procedures set by the committee, including preapproval of "any such written communications that contain, or reasonably could contain, information material" to Tesla or its shareholders.
Twitter has frequently been Musk`s go-to venue for freewheeling communications and confrontation with Tesla`s supporters and critics.
The stock dropped last month after the SEC accused Musk, 47, of fraud over his "false and misleading" tweets on Aug. 7.
On Oct. 4, just hours after Nathan ordered him and the SEC to explain why their settlement was fair and reasonable, Musk appeared to mock the SEC on Twitter.
"Just want to [sic] that the Shortseller Enrichment Commission is doing incredible work," Musk, a frequent critic of investors who have bet against the company, wrote. "And the name change is so on point!"
The Financial Times reported last week that outgoing Twenty-First Century Fox Inc CEO James Murdoch, a son of Fox mogul Rupert Murdoch, was the lead candidate to replace Musk as chairman. Musk called the report "incorrect." Tesla has until Nov. 13 to appoint an independent chairman.
Thanks to Musk`s vision and showmanship, Tesla`s valuation has at times eclipsed that of traditional, established U.S. automakers with billions in revenues, and the company has garnered legions of fans despite repeated production issues.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)
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