Published: Mon, October 01, 2018
Money | By Armando Alvarado

Elon Musk’s "Funding Secured" Tweet Just Cost Him & Tesla $40 Million

Elon Musk’s

Saturday's settlement saw the SEC pull back from its demand that Musk be barred from running Tesla, a sanction that many investors said would be disastrous for the loss-making electric carmaker.

Billionaire businessman Elon Musk has stepped down as the Chairman of Tesla following a tweet where he claimed he has the funding and investor support to buy the publicly-traded company.

The news of Tesla CEO Elon Musk settling with USA financial regulators sent the company's stock soaring Monday morning. The SEC's lawsuit charged that the tweet, which caused Tesla's shares to jump, was misleading because he did not actually have the funding lined up for such a move. Tesla shares plummeted 14% on Friday, the biggest drop in nearly five years.

Munster said the settlement was the best outcome for all involved. Musk said August 7 in a company blog post that he was considering taking Tesla private at $420 per share, representing a 20% premium over the stock price following the company's second-quarter earnings release. He's Tesla's largest shareholder, with a 20 percent stake.

Tesla in recent years has become one of the most valuable American vehicle maker, with its stock worth more than $50 billion.

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Investors anxious 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. Tesla is due to appoint two new independent directors, with the board expected to oversee Musk's communications with investors. The SEC said the company had no way to determine if his tweets contained information that must be disclosed in corporate filings, or if they contained complete and accurate information.

The agreement allows Musk to stay on as CEO of the company that has struggled to meet manufacturing deadlines and slow cash burn. "At the same time, there will be appropriate restraints in place".

But its shares have been hit hard since the SEC filed the lawsuit.

The settlement doesn't resolve investors' lawsuits, which were significantly strengthened by the SEC's complaint. Munster pointed out that the terms of the settlement actually works in Tesla's favor, as the appointment of a new, capable Chairman of the Board could help Tesla reach sustainability, as well as become the wake-up call that Musk needs with regards to his behavior online.

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