BANGALORE, INDIA – Shares of Tesla Inc. jumped 18 percent on Monday as signs it had met targets for quarterly car production added to relief at Chief Executive Elon Musk’s settling of a lawsuit with regulators that had threatened to force him out.
The electric carmaker’s shares sank last week after the U.S. Securities and Exchange Commission accused Musk of securities fraud, opening up the prospect of a long-drawn out fight that could have seen Tesla lose its leader, and undermined its ability to raise capital and ramp up production.
Under the settlement announced at the weekend, Tesla and Musk will pay $20 million each to the regulator and Musk will step down as chairman but stay as CEO, leaving in place one of America’s best-known corporate figures.
Analysts hoped the deal, which enforces oversight of Musk’s public communications, would put an end to several months of turmoil that has prevented investors from focusing on a business that churned out a reported 80,000 cars in the third quarter.
Relief at the settling of the lawsuit drove the biggest one-day gain in Tesla shares in more than five years.
“Those people who are bullish on Musk and think he’s a visionary think they just skirted an issue,” said Yousef Abbasi, global market strategist for broker-dealer INTL FCStone.
Automotive news website Electrek reported electrek.co/2018/10/01/tesla-production-record-q3-deliveries-crazier that Tesla had produced 53,000 of its Model 3 sedans in the third quarter, up from 28,578 in the previous three months and making good on a promise in August it would produce 50,000 to 55,000 of the cars.
Tesla did not immediately respond to a request for comment.
Musk has gained legions of fans for his bold approach to business and technology, using his 23 million Twitter followers account to promote Tesla, his rocket company SpaceX, and tunnel venture, the Boring Co.
But the claim on Aug. 7 that he had the funding to take Tesla private, and a subsequent U-turn, stunned Wall Street and came amid public appearances that saw Musk smoke marijuana live on air and call a British diver in the Thai cave rescue a “pedo.
He has tweeted only once since the settlement was announced — posting a music video by rap group Naughty by Nature.
As part of the settlement with the SEC, Tesla will also appoint an independent chairman and two independent directors, responding to calls on Wall Street to relieve the pressure on Musk and provide more balance in the carmaker’s management.
“The ideal chairman is someone with operational experience in the automotive industry because that’s really where they’ve struggled, on the operational side in terms of the model 3 ramp,” CFRA analyst Garrett Nelson said.
Lawyers said that the settlement and size of the fine might give more ammunition to short-sellers pursuing separate cases against Musk for manipulating the company’s shares through the Aug. 7 tweet, as well as to a probe by the Justice Department.
But several experienced litigators also said that, while the DOJ probe is separate, the SEC’s settlement might mark the end of official action against Tesla and Musk.
“The standard of proof for any potential criminal charge is higher than that of a civil case, which the SEC had,” said Jay Dubow, a former branch chief in the SEC’s enforcement division.
“It is possible that the DOJ investigation does not result in any criminal charges at least in part because the DOJ could determine that the SEC’s action resolved the matter and that no further governmental action is required.”
Neither Musk nor Tesla admitted or denied the SEC’s findings as part of the settlement, which still must be approved by a court.