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US judge approves SEC settlement with Tesla, shares jump

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A US judge on Tuesday approved a settlement between a federal regulator, Tesla Inc and its chief executive officer, Elon Musk, over his tweets promising to take the company private, signaling an end to a tumultuous period for investors.

[BENGALURU] A US judge on Tuesday approved a settlement between a federal regulator, Tesla Inc and its chief executive officer, Elon Musk, over his tweets promising to take the company private, signaling an end to a tumultuous period for investors.

Tesla shares rose as much as 5.5 per cent to US$273.88 before easing to US$269.95 in morning trade on Nasdaq. Despite the gains, the stock is still down more than 20 per cent since Aug 6, the day before Mr Musk took to Twitter promising to take the company private and claiming he had secured funding to do so.

Judge Alison Nathan of the US District Court for the Southern District of New York approved a motion filed by the US Securities and Exchange Commission outlining the agreement with Mr Musk.

Under an agreement with the SEC, Mr Musk has agreed to pay a US$20 million fine and step aside as Tesla's chairman for three years to settle charges that could have forced his exit from Tesla.

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The company will also pay a US$20 million fine, despite not being charged with fraud.

The government lawsuit threatened Tesla and Mr Musk with a long fight that could have undermined its operations and ability to raise capital.

Under the settlement announced on Sept 29, Tesla must appoint an independent chairman, two independent directors and a board committee to set controls over Mr Musk's communications.

Mr Musk must also comply with procedures set by the committee, including preapproval of "any such written communications that contain, or reasonably could contain, information material" to Tesla or its shareholders.

Twitter has frequently been Mr Musk's go-to venue for freewheeling communications and confrontation with Tesla's supporters and critics.

The stock dropped last month after the SEC accused Mr Musk, 47, of fraud over his "false and misleading" tweets on Aug 7.

On Oct 4, just hours after Judge Nathan ordered him and the SEC to explain why their settlement was fair and reasonable, Mr Musk appeared to mock the SEC on Twitter.

"Just want to that the Shortseller Enrichment Commission is doing incredible work," Mr Musk, a frequent critic of investors who have bet against the company, wrote. "And the name change is so on point!"

The Financial Times reported last week that outgoing Twenty-First Century Fox Inc CEO James Murdoch, a son of Fox mogul Rupert Murdoch, was the lead candidate to replace Mr Musk as chairman. Mr Musk called the report "incorrect." Tesla has until Nov 13 to appoint an independent chairman.

Thanks to Mr Musk's vision and showmanship, Tesla's valuation has at times eclipsed that of traditional, established US automakers with billions in revenues, and the company has garnered legions of fans despite repeated production issues.

REUTERS