SEC Investigating Possible Tesla Disclosure Breach
The Securities and Exchange Commission has reportedly opened an investigation into Tesla Motors (TSLA) - Get Report over the automaker's failure to disclose a fatal accident that occurred in one of its automobiles prior to a secondary stock offering.
A Tesla Model S vehicle operating with its autopilot feature engaged crashed in early May while operating in Florida, killing the driver. The company, which raised $1.4 billion in a secondary offering in June, notified regulators of the crash soon after but did not disclose it to investors until July 1 when the National Highway Traffic Safety Administration announced a preliminary investigation into the accident.
The investigation was first reported by Dow Jones. Shares of Tesla, which traded up 3.69% on Monday, were down 1.46% in after-hours trading. Tesla said in a statement it has not received any communication from the SEC regarding the issue. The SEC had no immediate comment.
Last week, Tesla and CEO Elon Musk bickered with journalists via Twitter and through a company blog post after reporters led by Carol Loomis of Fortune raised questions about whether the crash was material and should have been disclosed prior to the secondary offering. The company has argued that one single incident is never material to an automaker, and noted that any link between the crash and the company's autopilot technology is still under investigation.
The company suggested that the media attention to the issue was driven more by a desire for clicks than it was due to actual potential disclosure issues, with Musk on Twitter linking to stories that noted that Fortune in the past has run sponsored content by alleged green energy critics Charles and David Koch.
Those who argued in favor of disclosure of the crash has argued that the Tesla brand, more than any other automaker, is built around the company's superior technology and innovative software. It is therefore quite possible that an incident involving the company's autopilot feature, a system designed to keep the vehicle in its lane without human intervention when traveling on highways, could have an oversize impact on future sales if it causes consumers to question Tesla's technical expertise.
Autopilot is also a source of $2,500 to $3,000 of additional revenue on each Tesla vehicle sold, a noninsignificant amount for what is still a money-losing company with billions in future capital expenditures ahead of it.