WASHINGTON / SAN FRANCISCO (Reuters) – Tesla Inc and Elon Musk have agreed to pay $ 20 million each to financial regulators, and the billionaire will step down as chairman of the company, but under a deal that will last the turbulent two months Car maker.

The securities fraud agreement announced by the US Securities and Exchange Commission on Saturday will relieve investors who feared a protracted legal battle could only hurt the loss-making electric car company even more.

The SEC accused Musk, 47, Thursday of misleading investors with tweets on Aug. 7 that he was considering taking Tesla private for $ 420 per share and having secured funding. Indeed, the tweets had no basis and ensuring the market chaos had hurt investors, it said.

Investors and corporate governance pundits said the deal could strengthen Tesla, which was violated by Musk’s recent behavior, which included smoking marijuana and swinging a sword on a webcast, as well as attacking a UK rescue diver on Twitter.

The deal should give Musk more oversight without taking the “devastating” measure of ousting him, said Steven Heim, a director at Boston Common Asset Management, which owns shares in Tesla battery maker Panasonic Corp.

Tesla must appoint an independent chairman, two independent directors, and a board committee to establish control over Musk’s communications under the proposed agreement.

“It is in the best interests of our markets and our investors, including Tesla shareholders, to resolve this matter promptly on the terms agreed,” said SEC chairman Jay Clayton in a statement.

Thursday’s indictments reduced the soaring Tesla by about $ 7 billion and dropped its market value on Friday to $ 45.2 billion, below General Motors Co.’s $ 47.5 billion.

In the deal, the agency backed off its demand to ban Musk, who is synonymous with the Tesla brand, from running Tesla, a sanction many investors described as catastrophic.

“I think this is the best possible outcome for everyone involved,” said Ivan Feinseth of Tigress Financial Partners, who rated Tesla as “neutral” and described the SEC penalty for Musk as “a slap on the wrist.”

“It is very important for the company that he can remain CEO.”

Neither Musk nor Tesla admitted or denied the SEC’s findings in the settlement, which has yet to be approved by a court. Tesla and Musk did not immediately respond to requests for comment.

HUNTING FOR A STRONG CHAIR?

Musk was directly involved in almost every detail of Tesla’s product design and technology strategy and drove the company’s people to excel – just like another Silicon Valley chief executive, Steve Jobs, at Apple Inc.

The entrepreneur must now resign as chairman of Tesla within 45 days and cannot be re-elected for three years.

The SEC accused Tesla of failing to perform required disclosure controls and procedures on Musk’s tweets. The SEC said the company had no way of determining whether its tweets contained information that needed to be disclosed in company filings or whether it contained complete and accurate information.

According to media reports on Friday, Musk was ruled out at the last minute from an earlier settlement with the SEC that would have forced him to give up key leadership positions at the company for two years and pay a nominal fine. Reuters reported Friday that Musk could reach an agreement with the SEC but was ready to go to court.

Investors said Friday that it was Musk’s mistake to reject the deal, especially at a time when the company was pressing hard to meet aggressive production targets for its Model 3 sedan.

The deal confronts Tesla’s board of directors, accused by critics of failing to contain Musk, with the tricky challenge of finding an independent chairman who can work closely with the sometimes erratic CEO.

It wasn’t immediately clear who would be called to the role. Antonio Gracias, the current Lead Independent Director and CEO of Valor Equity Partners, has been criticized for being too close to Musk and his companies.

“The question is, will Musk’s friends on the board decide to have a really strong chair that will stand up to Musk,” said Erik Gordon, a University of Michigan economics professor who advocates corporate governance.

Musk pushed the company to the brink of profitability with a costly ramp-up of its Model 3 last year. The electric vehicle news site Electrek reported that Tesla produced 51,000 Model 3s in a matter of days in the quarter and hit its target of 50,000 to 55,000.

The CEO, who has reached out to Twitter many times to promote Tesla and confront critics, said Thursday the SEC’s actions were unjustified. Tesla shares rose after his August 7 tweets, a blow to short sellers who bet on the stock’s decline.

As the public face of Tesla, Musk had won many fans for his bold approach to business and technology. He used his Twitter account to introduce his nearly 23 million followers to the achievements of Tesla, his rocket launch company SpaceX and other projects such as his tunnel company Boring Co.