Was crash 'material' to share sale?

The Securities and Exchanges Commission has opened an investigation into whether or not Tesla should have disclosed to investors the fatal crash of a Model S running in Autopilot mode that occurred days before a major stock sale.

The crash occurred on a Florida highway on May 7, killing the car's occupant, Joshua Brown. The stock sale took place on May 18 and 19. $2 billion was raised.

Tesla informed the National Highway Transport Safety Administration of the accident on May 16, nine days after it occurred. It wasn't until May 18 - the first day of the sale - that Tesla was able to send its own investigator to Florida to recover data from the wreckage. Analysis of that data during the last week of May revealed that the car had been in Autopilot mode at the time of the crash, according to Tesla.

A June 30 blog post on the Tesla website announced the crash and the NHTSA investigation. It also addressed the stock sale, saying it had not disclosed the crash to investors as it wasn't "material" to the sale. It is that claim that the SEC's investigation is focussing on.

A company is only obligated to inform investors of any matters that may adversely affect its share price. As Tesla markets itself on the strength of its technology, it could be argued that any potential issues with that technology would impact the company's value. However, that hasn't been the case here. Indeed, Tesla shares actually rose nearly two per cent in the day after the crash was disclosed.

 A statement from Tesla said it has not yet received any communication from the SEC on the issue.

Source: Wall Street Journal; Jalopnik




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