Tuesday 19 November 2019

Tesla shares jump almost 16pc after Elon Musk settles with SEC

Elon Musk Photo: Bloomberg
Elon Musk Photo: Bloomberg
Independent.ie Business Desk

Independent.ie Business Desk

Shares of Tesla Inc jumped nearly 16pc on Monday after Chief Executive Elon Musk settled with the US Securities and Exchange Commission (SEC) over charges of misleading investors, heading off moves to force him out.

Tesla shares sank last week after the SEC filed a lawsuit accusing Musk of securities fraud and demanding the Silicon Valley billionaire be removed his role as chief executive.

Investors worried 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.

According to the settlement, Tesla and Musk will pay $20m each to financial regulators and Musk will step down as chairman but remain as chief executive.

Analysts expect Wall Street will now be able to focus more on production numbers for the Model 3 this week, with the worst case scenario of Musk being ousted off the table.

They also hoped the row would cap several months of volatility around Tesla's shares driven in part by a series of rows over Musk's tweets and public pronouncements.

"We view Elon Musk and Tesla's settlement with the SEC as a positive change, as it should improve corporate governance and allow (an) investor focus squarely on the operations," Canaccord Genuity analyst Jed Dorsheimer wrote in a client note.

The company is expected to release quarterly production numbers this week for the Model 3, seen by analysts as crucial to the carmaker's drive to achieve long-term profitability.

"We are very close to achieving profitability and proving the naysayers wrong, but, to be certain, we must execute really well tomorrow (Sunday)," Musk wrote in a mail to employees on Saturday.

As part of the settlement, Tesla will appoint an independent chairman, two independent directors, and a board committee to set controls over Musk's communications under the proposed agreement.

"The new independent chairman and board members should dramatically improve corporate governance and widen the pool of potential investors," Baird analyst Benjamin Kallo said.

Shares of the company were up 15.5pc at $305.88 in trading before the bell.

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