Tesla shares jump on Model 3 numbers, Musk settlement

a lawsuit with regulators that could have forced him out.

Tesla shares sank last week after the U.S. Securities and Exchange Commission accused Musk of securities fraud, opening up the prospect of a long-drawn out fight that could have seen Tesla lose its leader, undermine its ability to raise capital and cripple operations.

Under the settlement, Tesla and Musk will pay $20 million each to the securities regulator and Musk will step down as chairman but remain as chief executive.

Analysts hoped the deal would cap several months of volatility around Tesla’s shares driven by a series of tweets and public pronouncements by Musk, and allow investors to focus on the company’s efforts to ramp up production.

Automotive news website Electrek reported after the opening bell that Tesla had produced 53,000 of its Model 3 sedans in the third quarter, citing a source familiar with the matter.

That made good on a promise by the company in August that it would produce 50,000 to 55,000 of the vehicles in the quarter and compared to 28,578 in the previous three months. Elektrek also reported it had churned out a record 80,000 vehicles in total versus 53,339 in the second quarter.

Tesla did not immediately respond to requests for comment.

Shares of the company were up 14.9 percent at $304.19.

AMMUNITION

“We believe Musk’s settlement with the SEC is positive for all stakeholders and should allow TSLA to return its focus to producing quality cars,” Baird analyst Ben Kallo said.

Lawyers said over the weekend that the settlement and size of the fine may give more ammunition to short-sellers pursuing separate cases against Musk for manipulating the company’s shares as well as to a probe by the Justice Department.

But several experienced litigators said on Monday that, while the DOJ probe is separate, the SEC’s settlement could mark the end of official action against Tesla and Musk.

“The standard of proof for any potential criminal charge is higher than that of a civil case, which the SEC had,” said Jay Dubow, a former branch chief in the SEC’s enforcement division.

“It is possible that the DOJ investigation does not result in any criminal charges at least in part because the DOJ could determine that the SEC’s action resolved the matter and that no further governmental action is required.”

Musk, whose tweets on Aug. 7 on a plan to take Tesla private that was later abandoned, has tweeted only once since the settlement was announced - posting a music video by rap group Naughty by Nature.

The Model 3 is seen by analysts as crucial to the carmaker’s long-term prospects and Musk has promised the ramp-up will help make the company profitable in the third quarter.

“We are very close to achieving profitability and proving the naysayers wrong, but, to be certain, we must execute really well tomorrow (Sunday),” Musk wrote in a mail to employees on Saturday.

As part of the settlement with the SEC, Tesla will appoint an independent chairman, two independent directors, and a board committee to set controls over Musk’s communications under the proposed agreement.

“The new independent chairman and board members should dramatically improve corporate governance and widen the pool of potential investors,” Baird’s Kallo said.