Musk, accused of fraud, resigns as Tesla chairman, stays as CEO

SAN FRANCISCO — Elon Musk’s future with Tesla Motors is clearer after the firm settled a securities fraud lawsuit with the U.S. government, but there are other clouds hanging over the electric-car maker.

Under an agreement announced on Saturday by the Securities and Exchange Commission, Musk remains CEO, but must relinquish his chairman’s role for at least three years. The complaint originally sought Musk’s removal as CEO.

Am immediate challenge for Tesla is to hire an independent chairman to oversee the company and, just as importantly, its mercurial leader. In effect, the settlement is forcing Tesla into bringing in managerial help for Musk, which some investors have been calling for.

Tesla was on shaky financial ground even before government regulators set out to remove Musk. It has been under pressure to prove it can consistently manufacture enough cars to survive.

Tesla will soon release its production volume for the July through September, likely by Wednesday. The manufacturing results provide a gauge of Tesla’s financial health.

Musk told investors he expected Tesla to produce an average of 7,000 electric vehicles per week during the third quarter, enabling the company to post a profit — something it has rarely done since going public eight years ago.

Tesla’s stock is in need of good news, and the settlement should provide that. The stock is down 30 per cent since hitting an all-time closing high of $379.57 on Aug. 7 — the day Musk tweeted about possibly taking the company private, tweets that sparked the SEC lawsuit.

The drop in Tesla’s market value might have influenced Musk to negotiate a settlement. He had rejected a settlement offer before the SEC sued on Thursday, maintaining he had done nothing wrong when he posted a tweet declaring that he had secured financing for a buyout of Tesla.

Investors had worried that Musk would be forced out of the company at a time when Tesla is possibly in a financial bind.