Will Tesla face an SEC investigation over disclosure of Autopilot crash?

Tesla Model S -auotpilot-large

The Wall Street Journal reported that the Securities and Exchange Commission is investigating whether Tesla breached securities laws by not immediately informing investors about the recent fatal crash involving an Autopilot-equipped Model S.

The WSJ cited an anonymous “person familiar with the matter,” who said that the SEC’s inquiry is in a very early stage and may not lead to any enforcement action. An SEC spokesman declined to comment, and a Tesla spokesperson said the company had not been contacted by the SEC.

The accident occurred on May 7, and Tesla notified the National Highway Traffic Safety Administration on May 16, which the company said is sooner than rules require. Both Tesla and the NHTSA opened investigations. The National Transportation Safety Board is now also investigating.

What raised eyebrows in the financial press (including Fortune, which ran an article that earned an indignant response from Elon Musk) is the fact that Tesla didn’t disclose the accident to the public before it sold a $2 billion chunk of stock on May 18. Securities rules require companies to disclose information that is “material” to investors.

Tesla said it sent an investigator to Florida to retrieve data from the car on May 18. “The damage sustained by the Model S in the crash limited Tesla’s ability to recover data from it remotely,” said a company spokesman. “During the last week of May, Tesla was able to finish its review of the logs and complete its investigation. The financing round had already taken place by that time.”

“I didn’t know there had been an Autopilot incident at the time of the fundraising,” Elon Musk said in an interview. “What we told NHTSA [on May 16] was just that somebody died – it wasn’t that there was an Autopilot incident. I also don’t think it’s material, but I didn’t know about it.”

Was the crash material to Tesla investors? The stock market apparently thinks not – TSLA stock saw only a minor dip when the news broke, and has risen since then. Securities experts quoted by the WSJ say there is no clearly defined standard. University of Colorado law professor Erik Gerding said the issue presented a “tough judgment call” for Tesla. University of Michigan law professor and former SEC attorney Adam Pritchard is “very skeptical” that a court would find any breach of securities laws: “The behavior of the stock price – the fact that it bounced back very promptly – most courts would say was fairly persuasive evidence that it was not material.”

 

Source: Wall Street Journal

  • brian_gilbert

    Seems a bit hard on Tesla as one million people a year are killed on the roads each year and many of those are due to equally bad driving. However Tesla should recognise that drivers cannot be trusted to follow the particular Tesla instructions and disable the feature until they can.

  • Michael B

    This is really a complicated, nuanced and “edge” case, with valid arguments on both sides. I hope (the) NHTSA gets it right!

  • David Francis

    Does GM or any other listed car/truck/bus company notify it’s investors every time one of their cars is involved in a fatal crash?

  • Ramon A. Cardona

    I hold a view that Tesla car or not the truck driver did not clear the road enough to allow his long trailer to cross safely. Calculating feet per second it is easy to determine this car was withing 350 to 400 feet of the intersection. This happens everyday and YouTube has lots of video reflecting how many truck drivers operate on public roads. I hope the investigation brings this fact up. I also am not a fan of distracted driving. This driver was not paying attention like so many addicted to texting or using a phone, etc.

  • nordlyst

    If Tesla has the data to “robustly” show that Autopilot is safer, why do they only share ridiculous and irrelevant averages publicly?

    Musk has been arguing that autopilot is “50% safer” than human drivers, based on the average number of miles between accidents. Musk is a smart man and obviously knows this isn’t a valid comparison – the autopilot is mostly engaged under ideal conditions where you quickly and safely put a LOT of miles under your belt.

    If Tesla has the data, show us how Teslas with Autopilot engaged compares to Teslas on the SAME stretches of highway with AP disengaged. Even then the data is probably skewed, since you’re more likely to turn off AP in poor visibility or other adverse conditions. But at least it’s a closer-to-meaningful comparison than the average of all cars under all conditions!

    I’m not a statistician, but if Tesla posted some real data and their argument for what it shows, people who do know better could critique it. In the absence of this it’s hard not to suspect Tesla of hyping their product, potentially at some cost to the rest of us.