Investors in electric car maker Tesla were buoyed by news that Elon Musk will have to step down as chairman of the firm. The companys shares surged 16 percent in Monday's trading following the decision.
The Securities and Exchange Commission (SEC) charged Tesla with fraud, alleging that CEO Elon Musk issued “false and misleading” statements. It was found guilty of disseminating such misleading information in connection with a tweet posted by Musk in August, saying he was considering taking the electric carmaker public at $420 a share.
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On August 7, Musk told his 22 million Twitter followers that he might take Tesla private at $420 per share, with “funding secured.” The regulator decided that Musk “knew or was reckless in not knowing” about false information contained in his posts.
On Saturday, Musk settled the charges with the SEC, agreeing to pay a fine of $20 million and step down as chairman of the board for at least three years. He has retained his post as CEO.
The surge of more than 16 percent in shares before the US market opening on Monday comes after Teslas stock plummeted 14 percent on Friday, accounting for billions of dollars in losses. The SEC charges against Musk shaved about $7 billion off Teslas value.
Musk will reportedly buy $20 million worth of Teslas stock at the next trading opportunity, according to a Bloomberg report, citing a person familiar with the matter. Musk is Teslas largest investor, holding a 20-percent stake in the company.
In emails leaked to CNBC, Musk hinted that Tesla was “very close” to being profitable and told staff to “ignore the distractions.” Tesla has never reported a net profit and has been burning through cash since it was created in 2003. The companys losses exceeded more than $1 billion in recent quarters.
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