Tesla shares soar after Musk gets ousted as chairman

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In case you haven't been paying attention to the news, Tesla's sort of going through a rough patch at the moment: The electric auto manufacturer's founder, Elon Musk, now has the US Securities and Exchange Commission breathing down his neck, and it's safe to say that the company's seen better days.

"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 a statement.

The company's shares surged 16 percent in pre-market trading on Monday following the decision.

On August 7, Musk told his 22 million Twitter followers that he might take Tesla private at $420 per share, with "funding secured".

Nelson, who called the $20 million fine as "pocket change", noted that as part of the settlement, the company will have a "healthier level" of corporate governance as it separates the chairman and CEO roles, and requires the appointment of two new outside members to the board. But it quickly became clear that Musk's funding commitment-supposedly from Saudi Arabia's sovereign wealth fund-was informal at best. Tesla will also pay a $20 million fine.


Besides the settlement news, Tesla has another milestone this week.

Curiously, and as one of the parties to the deal, Elon Musk has accepted that he can never admit or deny that he has committed fraud, which in practice means he can never publicly state that he has done nothing wrong. "The resolution is meant to prevent further market disruption and harm to Tesla's shareholders", said SEC enforcement division co-director Steven Peikin.

Tesla shares sank last week after the SEC accused Mr Musk of securities fraud, opening up the prospect of a long-drawn out fight that could have seen Tesla lose its leader, undermine its ability to raise capital and cripple operations. On Friday, its stock dropped nearly 14 per cent.

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.

"Shareholders with Tesla will be able to go to sleep tonight knowing the Musk will remain at the helm of the company".

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