Musk Will Buy Another $20M In Tesla Stock — The Same Amount He Was Fined By The SEC

In a new 8-K filing detailing CEO Elon Musk’s fraud settlement with the Securities and Exchange Commission, Tesla, Inc. TSLA announced Musk will be purchasing an additional $20 million of the automaker's stock. 

What Happened?

On Tuesday after the close, Tesla filed an 8-K document related to the company and Musk’s settlement with the SEC after the regulatory agency filed a fraud lawsuit against Musk related to his August tweet that Tesla had “funding secured” to go private at a price of $420 per share. As part of the settlement, Musk must pay a $20-million fine and step down from his role as Tesla chairman for at least three years.

In addition to the $20-million fine, Tuesday's filing revealed that Musk is also planning to buy an additional $20 million of Tesla stock.

Why It’s Important

Tesla investors have been plagues by a wave of negative headlines in 2018, including repeated Model 3 production target misses, erratic behavior by Musk and questions from Wall Street about Tesla’s precarious financial situation. A new $20-million investment by Musk may ease some market fears about whether or not his confidence in the company’s outlook has waived since he bought $24 million of Tesla stock in June.

Musk has been criticized in the past by Tesla short sellers for borrowing hundreds of millions of dollars against the Tesla shares he personally owns. Earlier this year, a Tesla filing revealed Musk is now limited to borrowing a maximum of 25 percent of the value of his Tesla stock.

What’s Next?

Investors certainly didn’t seem reassured by the news Wednesday, with Tesla stock trading down 1.68 percent at $271.93 at the time of publication. Tesla stock is now down 21.2 percent overall in the past year.

With the SEC settlement now seemingly out of the way, Tesla investors will be watching third-quarter earnings closely to see if Tesla can hit Musk’s targets of becoming profitable and cash-flow positive for the first time. Investors will also be watching to see who the company selects as its next chairman. 

Related Links:

The Big Shorts Dig Into Tesla

Tesla Trades Higher After Judge Approves Musk's SEC Settlement