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Shares of Tesla surged 15% on Monday, following Musk's $20 million settlement with the Securities and Exchange Commission over his "funding secured" tweet and a leaked memo to employees about near-term profitability.
Why it matters: With the gains on Monday, Tesla has recovered all of its losses from last week, when the SEC initially sued Musk. In investors' minds, the worst-case scenario for Tesla—the removal of Musk as CEO—has been avoided.
ICYMI: Musk will get to remain as Tesla's CEO under the deal, but must step down as chairman. Tesla, as part of a separate but related settlement, also will be required to pay a $20 million fine, must add two new independent directors, and is required to vet Musk's tweets before they go out.
The big picture: Tesla has been struggling to show it can sustainably continue expanding production of the Model 3 sedan that’s critical to the company’s future, and a prolonged case could have also hindered its future access to capital
What's next: All eyes now turn to Tesla's vehicle third-quarter production and delivery numbers, which are expected in days, and then Q3 financial results in a few weeks.
- Musk has claimed the company will profitable and cash-flow positive in the third and fourth quarters this year.
- A Saturday email from Musk to employees encouraged them to go all-out in the frenzied push to complete deliveries on the final day of the quarter.
- “We are very close to achieving profitability and proving the naysayers wrong, but, to be certain, we must execute really well tomorrow (Sunday),” he wrote, per Business Insider.
Our thought bubble: The SEC settlement amounts to some "tough love" for the company. New independent voices on the board should be helpful. And in theory the controls over Musk's communications may help prevent this type of self-inflicted wound in the future.
Go deeper: Elon Musk and the SEC both cave