Tesla shares recovered dramatically after the weekend, as the market absorbed Friday's announcement that the US Securities and Exchange Commission (SEC) had reached a settlement with Tesla and its chairman Elon Musk.
When trading ceased on Friday shares were worth $264.77 (£203.64). However, following a weekend hiatus that allowed analysts and traders to absorb the SEC’s decision to penalise Mr Musk and Tesla to a tune of $40m (£30.5m), and his removal as company chairman, shares rocketed 17 per cent to $310.84 (£239.09) on Monday.
But Russ Mould, investment director at AJ Bell, said he was not convinced the SEC’s announcement would allay concerns over the tech giant’s future.
He said: "The company has a suspect $50bn (£38.6bn) valuation [...] and there are concerns about its board and of course Elon Musk.
"It’s a case of if you’re in, you’re in, but you need to be patient and brave, as the prospects are fantastic if they can make it work. But if you’ve not got shares in Tesla right now, I can’t see much to persuade you to rethink your position."
Charges of impropriety were brought against Elon Musk and Tesla following tweets the entrepreneurial engineer sent to his 22.8 million followers in August stating that he was going to take Tesla private at $420 (£321) per share. He also claimed funding had been secured and a shareholder vote was the only potential stumbling block.
The US financial regulator investigated Mr Musk’s claims and lodged a complaint alleging the Tesla chairman knew the transaction was uncertain. It maintained "Musk had not discussed specific deal terms, including price, with any potential financing partners, and his statements about the possible transaction lacked an adequate basis in fact."
On the same day as Mr Musk published his tweets, 7 August, Tesla’s stock price rose by more than 6 per cent, only to plummet by 13 per cent when the SEC announced it was investigating the issue.
The SEC found Tesla’s liability stemmed from the manner in which the Twitter account was set up. In 2013 the company notified the market that the account was to be used ‘as a means of announcing material information about Tesla’.
The SEC found Tesla had no disclosure controls or procedures to ensure the account was being used in a proper manner, and this lack of diligence contributed to the subsequent chaos on the stockmarket.
Elon Musk and Tesla agreed the $40m (£30.5m) settlement without admitting or denying the SEC’s allegations.
Mr Musk is required to resign as chairman, and will be replaced by an independent chair. He will be banned from seeking re-election as chairman for three years.
Additionally, Tesla must appoint two new independent directors to its board and is obliged to establish a new committee of independent directors to ensure rigorous controls and procedures are in place to monitor Mr Musk’s communications.
Stephanie Avakian, co-director of the SEC’s enforcement division, said: "The total package of remedies and relief announced today are specifically designed to address the misconduct at issue by strengthening Tesla’s corporate governance and oversight in order to protect investors."
Steven Peikin, co-director of the division, added: "The resolution is intended to prevent further market disruption and harm to Tesla’s shareholders."
