Tweet storm: Musk quits as chairman over false claims

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Tesla saw its stock price plunging after the SEC filed a lawsuit against Elon Musk over his now infamous "funding secured" tweet.

Under the agreement with the Securities and Exchange Commission (SEC), Musk and the company each will pay a $20m penalty, and Musk will be barred from serving as chairperson for at least three years.

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.

In the immediate aftermath of the "funding secured" tweet, Tesla stock rose by six per cent.

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The SEC announced the deal on Saturday - two days after it sued Musk in federal court for misleading investors over his post on Twitter last month that he was considering taking Tesla into private ownership at $420 a share.

The electric auto maker is expected to report third-quarter production numbers on Tuesday, following a period of turbulence, including a run-in with securities regulators that culminated in Musk being ousted as Tesla's chairman and hit with a multimillion-dollar fine.

Analysts were relieved on Monday at the terms of Tesla chief Elon Musk's settlement with the SEC reached over the weekend, but some remain concerned over longer-term challenges the automaker faces. The company's shares surged 16 percent in pre-market trading on Monday following the decision.

In order to avoid similar inconvenience in the future, the company will also hire a lawyer that will not only monitor the communication of Musk but also oversee his tweets.

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Musk, a co-founder of Tesla, is the company's largest stockholder, owning approximately 22 per cent of its outstanding shares. Neither Musk nor Tesla admitted or denied the SEC's findings as part of the settlement.

While the 15-year-old company has never earned an annual profit, Tesla's CEO has vowed it's the verge of making money and stemming cash burn that's exceeded more than $1 billion in recent quarters.

In order to "achieve a victory beyond all expectations, Tesla must go "all out" on production on Sunday which marks the end of the quarter, Musk said".

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