Tesla Inc and Elon Musk have agreed to pay $20 million each to financial regulators and the billionaire will step down as the company’s chairman but remain as chief executive in a deal with the stock market regulatory authority, Securities and Exchange Commission (S.E.C.) to resolve securities fraud charges.

The S.E.C. 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 had “funding secured” for a buyout of the electric-car company at $420 a share.

The settlement, which requires court approval, allows Musk to remain CEO of the electric car company but requires him to relinquish his role as chairman for at least three years. Tesla must hire an independent chairman to oversee the company.

The deal could remove one cloud that hangs over Tesla. Investors fretted about the company’s ability to cope without Musk, a charismatic entrepreneur whose penchant for coming up with revolutionary ideas as drawn comparisons to one of Silicon Valley’s most revered visionaries, Apple co-founder Steve Jobs.

Musk accepted the deal with the SEC “without admitting or denying the allegations of the complaint”, according to a court document.

His tweet about taking his company private, along with attacks on critics on social media, raised concerns with investors about whether Musk has become too focused on criticism from so-called short-sellers who had been making bets against him and Tesla.

The company has recently been struggling to meet audacious production goals for its Model 3 sedan.

On Friday, Tesla’s stock plummeted 14 per cent Friday after the SEC filed its lawsuit, erasing more than USD 7 billion in shareholder wealth. Many analysts predicted the shares were bound to fall even further if Musk was forced to step down.

The steep downturn in Tesla’s market value may have influenced Musk to have an apparent change of heart and negotiate a settlement. Musk had rejected a similar settlement offer before the SEC sued Thursday, maintaining he had done nothing wrong when he posted an August 7 tweet declaring that he had secured the financing to lead a buyout of Tesla.

The SEC alleged Musk wasn’t close to locking up the estimated USD 25 billion to USD 50 billion needed to pull off the buyout.

Musk and Tesla reached their settlement without admitting to or denying the SEC’s allegations.

(With agency inputs)