Thứ Tư, 25 tháng 1, 2017

SEC Opening Inquiry part 1

  • Jul 11, 2016
    omarsultan
  • Jul 11, 2016
    Cosmacelf
    Yes, well, this was predicted by a securities lawyer in one of these investor threads.
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  • Jul 11, 2016
    msnow
  • Jul 11, 2016
    Mike Smith
  • Jul 11, 2016
    SW2Fiddler
    I predicted that there would be a dastardly Koch-funded effort to "Tucker" TM and EM. And I'm not even a lawyer. But I am wary of those Koch Tuckering dastards. Throwing daily hoaxes and hexes and hoping something sticks.
    Funny, in this age of communication, it may well stick on them. "Tucker Couldn't Tweet"
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  • Jul 11, 2016
    trils0n
  • Jul 11, 2016
    msnow
    Have you read the WSJ story? It includes the response from Tesla that they haven't received the communication so no gun jumping in this story as far as I can tell.
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  • Jul 11, 2016
    Joeski1
  • Jul 11, 2016
    trils0n
    I read the article 45 mins ago about when it was published. Don't recall that statement being in the original article. (The article notes it was edited at 5:43 est, so about 10-15 mins ago.)
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  • Jul 11, 2016
    msnow
    Oh okay I apologize.
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  • Jul 11, 2016
    JC86
    This story has been debated ad nauseam since it broke last week. Suffice to say there are plenty of entrenched positions on both sides of the argument. My personal feeling is that Tesla's marketing department won out over their legal department in the use of the turn Autopilot but I love the technology.

    That being said, in Tesla's "Misfortune" blog post, Tesla claims that the damage was too severe to remotely download the data and that they sent an engineer to Florida to do it manually. All of this makes sense until they mention that they didn't send their engineer out until May 18th, the day after their offering closed. It's impossible to infer when Tesla knew there was a fatality involved in the crash but Tesla knew a severe crash involving one of their cars had occurred yet didn't send a team out to investigate further until nearly two weeks later and a day after their offering closed.

    Now this could all be a coincidence and it really took nearly two weeks for Tesla to become aware of the fatality and launch an investigation. At the very least, I think it gives the haters/shorters ammunition in the appearance of a convenient scheduling to make sure no issues affected their offering. They probably should have erred on the side of caution and disclosed it but felt like they were sufficiently shielded that any investigation would yield nothing anyways.
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  • Jul 11, 2016
    imherkimer
    If this turns out to be a false claim, could the WSJ be prosecuted?
    In the linked article I could not find a reference to the source for the information regarding the SEC "opening an investigation." Would the SEC tolerate purveyance of false information regarding their investigative activities?
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  • Jul 11, 2016
    omarsultan
  • Jul 11, 2016
    Cosmacelf
    I'm sure the WSJ has what it considers reliable sources (which it will never disclose). Their article is protected by the first amendment guys, so stop complaining. If the WSJ gets additional information showing their original article is incorrect, they will publish a retraction. The most likely answer to why Tesla says it hasn't been contacted yet is that a government agency moves slowly. I know, hard to believe...
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  • Jul 11, 2016
    dha
    The first amendment doesn't protect against libel.
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  • Jul 11, 2016
    Cosmacelf
    You are right - I was being glib. Newspapers generally require good sources before publishing stories like this and I have little doubt the WSJ has good sources. If the SEC does not launch an investigation, then Tesla might have some recourse, but I doubt the WSJ would put themselves in that position.
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  • Jul 11, 2016
    Eclectic
    Not even close to true. The SEC doesn't inform a target when it first starts to look into a potential prosecution. Once the SEC gets far enough along to have a sense that it is on the road to prosecution, it sends the target what is known as a "Wells Notice".

    Even if an issuer gets a Wells Notice, prosecution is not guaranteed, but it is likely. I've had client receive Wells Notices who chose to not disclose the receipt of the notice, and the SEC decided to not prosecute, so the investigation was never known to the public.

    In truth, Tesla will probably be the last to know it is being investigated...
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  • Jul 11, 2016
    dha
    Fun fact: The record libel verdict in the United States was rendered in 1997 against Dow Jones in favor of MMAR Group Inc. The company was awarded $222.7 million over an article published in The Wall Street Journal.
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  • Jul 11, 2016
    TMSE
    So, what you are saying is no one knows, not even Tesla, while the investigation is underway. How come WSJ came to know of it? Does WSJ have secret informants st SEC? Isn't disclosing confidential information by itself illegal?
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  • Jul 11, 2016
    Cosmacelf
    Thank you Eclectic. So Tesla's denial of being contacted by the SEC is meaningless. Which begs the question why they bothered to say it. Do they not have a lawyer on staff or retainer than can explain securities laws and procedures to them?
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  • Jul 11, 2016
    imherkimer
    The WSJ may have what it considers reliable sources to feed the agenda determined ahead of time. This article is fraud, with a clear intention to cause material damage to the company, and should be prosecuted as such. Speech is free according to the 1st amendment, fraud and securities manipulation, are not included. I will stop complaining when I see real journalistic integrity and not fraudulent propaganda serving a blatent agenda. There is a smoking pile of money behind this "leak." Government agencies may move slowly. But if an investigation is actually underway, the company would have been notified. Subsequent updates to the story state as much, and waffle on whether it is an inquiry or investigation. This means there is no investigation at this time and they know it. They stated in the original headline that the SEC is investigating Tesla, with no verifiable evidence. This is all the agenda wanted to accomplish. Now they waffle and revise and fudge to avoid accountability, after the disinformation has been copied and spread! Worse than bad journalism, this is insidious! And it is worthy of an SEC investigation. As a shareholder, I will consider making a formal request for an inquiry.
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  • Jul 11, 2016
    X Fan
    Tesla has a tough battle on it�s hands with powerful constituencies from both sides of the aisle influencing government policy (dealers, GM/Ford/unions, etc.).

    Add in media interests that receive a big share of their ad dollars from the non-Tesla auto industry and it doesn�t surprise me that attacks would be coming particularly when Tesla is vulnerable. With a successful 3 launch making the company more mainstream (and perhaps viewed as less elitist) I suspect pressure will ease off somewhat. But....those constituencies have deep pockets/long-standing political connections so it won�t be an easy fight.
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  • Jul 11, 2016
    Cosmacelf
    Um, publishing "secrets" is what newspapers generally do. And no, publishing confidential information isn't illegal unless you are a party to some non-disclosure agreement yourself. Or unless the information has national security implications (although in the US that might still not be against the law, not sure about that one).
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  • Jul 11, 2016
    Drivin
    Probably because it is a good distraction targeting people who don't know the process.
    Those people might then assume WSJ is lying, opening themselves to libel, secret informants with illegal disclosure, etc.
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  • Jul 11, 2016
    Jayjs20
    It's not surprising when you consider who owns the WSJ.
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  • Jul 11, 2016
    Cosmacelf
    Geez guys, calm down. Eclectic should weigh in here, but even if Tesla is determined to be guilty about their non-disclosure, I doubt the SEC is going to do more than a slap on the wrist and extracting a promise to be better at disclosure in the future. And those investors are going to have a hard time proving harm since they can sell their stock at a profit now.

    If I were you guys, I'd be far more worried about someone suing Tesla for causing AP related accidents, either individually, or as a class action. I will bow down and eat my words if such a lawsuit does not get launched within a year.
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  • Jul 11, 2016
    Eclectic
    It's pretty common for government agencies to leak information, and the SEC is certainly prone to leaks. I don't think it's a case of the WSJ having a secret informant at the SEC any more than, say, the NY Times has informants at the DOJ. People at the agencies have all sorts of agendas and the media are more than happy to be the conduit. It sells papers/gets clicks.
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  • Jul 11, 2016
    callmesam
    When was the date a "product liability claim" was made against Tesla Motors?

    We may become subject to product liability claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims.

    Product liability claims could harm our business, prospects, operating results and financial condition. The automobile industry experiences significant product liability claims and we face inherent risk of exposure to claims in the event our vehicles do not perform as expected resulting in personal injury or death. We also may face similar claims related to any misuse or failures of new technologies that we are pioneering, including autopilot in our vehicles and our Tesla Energy products. A successful product liability claim against us with respect to any aspect of our products could require us to pay a substantial monetary award. Our risks in this area are particularly pronounced given the limited number of vehicles and energy storage products delivered to date and limited field experience of our products. Moreover, a product liability claim could generate substantial negative publicity about our products and business and would have material adverse effect on our brand, business, prospects and operating results. We self-insure against the risk of product liability claims, meaning that any product liability claims will have to be paid from company funds, not by insurance. (EMPHASIS ADDED)    ?

    tsla-10q_20160331.htm

    That should be an incredibly simple question for the Securities Lawyers and Experts to answer . . .
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  • Jul 11, 2016
    Eclectic
    I'm sure that their denial is based on the fact that the SEC has not contacted them. My guess is that someone at the SEC leaked word of the investigation to the media and Tesla has not been contacted by the SEC, so Tesla is doing exactly what I'd counsel them to do, which is to tell the truth.
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  • Jul 11, 2016
    msnow
    No, maybe they haven't "officially" been notified which means they aren't lying.
    Sure they could have sources at the SEC. News media has sources in all government agencies. Nothing unusual about that.
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  • Jul 11, 2016
    Cosmacelf
    Why do you think such a claim was already made? I know there have been one or a few lemon law claims, but I don't recall a product liability claim...
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  • Jul 11, 2016
    msnow
    Do you have one iota of proof to these allegations? That was rhetorical, of course you don't.
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  • Jul 11, 2016
    callmesam
    I don't think a product liability claim HAS been made . . . which is the only basis for Tesla breaching their duty of disclosure created by the 10-Q.

    If no product liability claim has been made, then there is NO BASIS for an SEC inquiry.

    Q.E.D.
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  • Jul 11, 2016
    msnow
    Also, I've been in a couple of situations where an SEC investigator would send a letter to our lawyers asking just preliminary questions prior to a Wells notice. It happens from time to time depending on circumstances.
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  • Jul 11, 2016
    msnow
    Hang on, @Eclectic should opine on this but I think the potential issue is the lack of disclosure in the stock offering filing which was more current due to the timing with respect to the fatal accident.
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  • Jul 11, 2016
    bhzmark

    ?
    Excellent points. Of course there has been no product liability claim made, or even threatened. If there is a product liability claim, for this or something else, Tesla has stated in its risk factors that that claim, or threat of a claim, could be material.

    But I still don't see anything that Tesla learned in May, especially prior to the SEC filing, that was material info that they should have disclosed.

    If you disagree tell me which fact should have been disclosed because it was material and on what date it should have been disclosed:

    • on or after May 7: Tesla learns that one of its cars was in accident. The cell antenna likely couldn't transmit at and after the accident.
    • May 18: Tesla sends investigator to location. Then downloads car logs and black box info. (Also the date of the equity sale and related prospectus)
    • May 25: date of final police report stating truck driver "failed to yield right of way" and "truck made a left turn directly in front of oncoming Tesla" The police open a homicide investigation http://documents.latimes.com/tesla-accident-report/

    What are they supposed to do? Insert a disclosure in the prospectus on May 18 that one of their cars was in an accident because a truck driver turned in front of an oncoming Tesla? When they didn't have their investigator at the site until that day?

    Or file an 8-K on May 25 that a police report states that a truck driver failed to yield right of way and is being investigated for vehicular homicide? Those are the facts at the time.

    And meanwhile when all this comes out and is digested (even with bad reporting from Fortune and others), the stock moves UP from 212 to closing today at 224.

    If WSJ source is correct, SEC Enforcement attys (who failed to put anyone in jail for peddling fraudulent mortgage securities) will be wasting their time again. Pathetic waste of govt resources.
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  • Jul 11, 2016
    Eclectic
    Like I said back when Musk originally claimed that the information was not material, those statements were basically a taunt to the SEC. The SEC doesn't like to be taunted and what Musk said about materiality was an utter bastardization of the law. Knowing what I know about the SEC, I suspect that someone at the SEC decided to push back at Musk by leaking word of the investigation. It's their way of saying "oh, you don't think it was material? We'll see about that."

    Personally, I am a huge fan of AP and I hope nothing comes of this, But if you poke your finger in the government's chest, you'll often get a painful lesson in return.

    The problem is that the government is in the business of producing regulations and this is a tempting opportunity for the government to regulate technology like AP. That's is the crux of the materiality issue...it's not whether Tesla was at fault, it's whether Tesla is now at risk of regulations that stifle the technology. It may be that the SEC leaked news of an investigation as a way of sending a shot across Musk's bow, warning him that hubris begets nemesis, and they'll let that warning be the end of it for now.

    The SEC may fine Tesla and mandate additional disclosures (and make life hell in the markets), but it can't really affect the company's operations. It's the other government agencies that regulate vehicles/roads, etc. that have the real power here. Hopefully, Musk gets the message and becomes less confrontational (arrogant) with government regulators and agencies.
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  • Jul 11, 2016
    Drivin
    The feature is in BETA

    There is Seeking ALPHA

    BETA = ALPHA + 1

    The BETA of TSLA is 0.783105. (Look it up!!) 1 >> 0.7843105.

    Ipso fasto, there is no basis for anything.
    This is all about the oil companies conspiracy to keep the man down!

    Q.E.2.

    (which is Q.E.D + 24)
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  • Jul 11, 2016
    AudubonB
    Non-Mod input:

    Nope, sorry. Doesn't work that way around here.

    Socks? Yep.
    Hat? Yep.
    Words? NO!
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  • Jul 11, 2016
    bhzmark
    Absolutely not a bastardization of the law. Musk and his attys advising him are rock solid correct. Plainly obvious to anyone who takes time to read the facts instead of sensational media.

    What precisely do you think the disclosure should have been in either the prospectus filed on May 18, based on what Tesla knew at that time, or at some later date as additional facts were developed? Including the facts as stated in the police report? What exactly should the disclosure have said?

    Rider to insert same day at the printers in the prospectus: "One of our cars was in an accident last week because a truck driver turned in front of an oncoming Tesla. Our technicians arrived at the crash location today and will get more data."
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  • Jul 11, 2016
    msnow
    How about this: "One of our vehicles was involved in a fatal accident on (insert date). We do (or don't depending on what they knew at the time) know they were using autopilot at the time. Because this is the first fatality we expect media coverage of this event to be significant."
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  • Jul 11, 2016
    Cosmacelf
    I agree with eclectic. It wasn't so much whether or not the disclosure was material or not, the SEC is investigating, everything, more because Elon is acting like an arrogant SOB and basically told the SEC to sod off. IMHO, characterizing one of their investor risk factors as "boilerplate" was a particularly egregious and stupid thing to do. The SEC has a job to do, and it's going to do it whether Elon agrees with it or not.
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  • Jul 11, 2016
    Eclectic
    What Musk wrote was to the effect that the lack of a stock price drop showed that the information wasn't material. That's an utter bastardization of the law. The test is a much more complicated test based on many factors. Also, the prospectus that was filed on May 18 was a preliminary prospectus. They then supplemented the prospectus on May 19. The offering didn't close until a week later. I suspect the SEC is looking at that gap, and the lack of disclosure during that period, as well.

    As for what would have been disclosed, I don't know what Tesla knew at the time, but if I were Tesla's counsel I'd have advised them that there's a risk of enhanced government regulation of their products as a result of a fatal accident involving a car operating under autopilot and that type of additional regulation could have a material adverse effect on the desirability of the company's products.
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  • Jul 11, 2016
    Drivin
    Agree.
    It often isn't just one thing (unless that one thing is really egregious), but add up the questions about the SCTY bid, the closeness of the two boards, the "sod off" attitude, the "boilerplate", the sort of NDA related to the reporting of safety issues, the use of those overseas workers who may or may not have been underpaid and the Mr. Hubris who they blamed the Model X issues on. The SEC individuals are humans and despite hundreds of pages of rules and regulations (and entirely different departments on the issues mentioned above), they will respond as humans do.
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  • Jul 11, 2016
    msnow
    They will but within the limits of the law.
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  • Jul 11, 2016
    Drivin
    oh absolutely agree.
    I did not mean to imply otherwise, apologize if I do.

    An investigation or inquiry seems to be within those limits.
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  • Jul 11, 2016
    TheTalkingMule
    The SEC has a job to do? Since when? We've had rampant fraud on every echange since forever. How is one car crash remotely relevant to their mandate?

    There was a crash around 11am today outside my window on N 2nd St in Philadelphia. I saw no signs of SEC investigation.
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  • Jul 11, 2016
    RubberToe
    So, Elon Musk versus the U.S. Government eh?

    My money is on Elon, literally and figuratively ;)

    RT
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  • Jul 11, 2016
    msnow
    It's
    The SEC isn't interested in the crash or the hypothetical one outside your building. They are interested to learn why the crash wasn't disclosed in their filing when the company put a lot of shares on the market for sale. One of their mandates is to monitor and enforce the law so if that is a material fact that should have been disclosed they will react accordingly.
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  • Jul 11, 2016
    Nikxice
    I don't expect you to agree, but the former SEC attorney quoted within the WSJ article basically says that this alleged case has no merit.

    Securities experts say there is no clearly defined standard for whether the May 7 accident was "material" enough to require disclosure by the company.

    Adam Pritchard, a law professor at the University of Michigan and former SEC attorney, said he would be "very skeptical" that a court would find the fatal crash material and Tesla's failure to disclose it as a 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." Also in Tesla's favor, he says: "This is development-stage technology. There are going to be wrinkles along the way."




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  • Jul 11, 2016
    msnow
    I hope he's right.
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  • Jul 11, 2016
    Eclectic
    I disagree with his statement about the stock price and materiality. The stock price is not evidence of materiality. It's evidence of damages in a private 10b-5 action. This misstatement of the elements of a 10b-5 action may help to explain why he's a former SEC attorney.

    All snark aside, 10b-5 claims are, as I said several times before, fact and circumstance specific. There are no bright-line tests. I would have advised my client to provide disclosure of this type of thing, but that doesn't mean Tesla is going to lose a 10b-5 case brought by the SEC. The fact is, though, that as a public company, you don't want the SEC making these type of allegations, even if you aren't ultimately convicted/found liable.
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  • Jul 11, 2016
    omarsultan
    But isn't that only the case if Autopilot was causal factor to the accident? If AP is working properly and within the parameters described in the docs, and it turns out the accident was simply a result of distracted driving, then why would AP be subject to greater government regulation.
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  • Jul 11, 2016
    Garlan Garner
    I say... investigate away. Although I truly feel for those who were hurt or lost their life...I hope the investigation unveils the fact that AP was improperly used.
    Folks are out there thinking that AP is there to replace their brain. Its not. Its an assist.
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  • Jul 11, 2016
    Eclectic
    Several reasons. First, the government likes to expand its scope of regulation, even if what is being regulated doesn't need regulation. So if they have a pretext to regulate, they often will regulate.

    Second, the question of materiality isn't one of what is certain to happen, it's what may happen. You disclose potential risks and the ramifications thereof. Leading up to 2000, the SEC mandated that all companies include risk factors about potential risks to the company of the much feared Y2K event. If that doesn't show how broad a net the SEC casts....
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  • Jul 11, 2016
    TheTalkingMule
    Why should Tesla disclose individual crash reports as part of a filing? Would any other carmaker do this?

    At no point was there any indication of malfunction. What's there to report?

    Edit: Elon made a snippy comment to this effect, does anyone have that quote? It was an instant classic. Something about the absurdity of reporting the normal occurrences of the day.
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  • Jul 11, 2016
    msnow
    @callmesam - I see you "disliked" my post again, what's up?
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  • Jul 11, 2016
    bhzmark
    Adam Pritchard is right, obviously, that there is no materiality issue here. This is such an absurd case that my money is that the Wall Street journal's source is not anybody at the SEC, but rather a short seller who tried to make a referral to the SEC and told the Wall Street Journal what they did and exaggerated what they think the SEC is going to do with that tip which in fact is going to be nothing.

    There was nothing material to disclose. A fatal car accident is terrible for all involved, but does not require disclosure. Speculation about future media coverage is not material. Issuers cannot pollute their disclosures with a long list of speculation and other immaterial nonsense which will crowd out the required material disclosures. Electic is unable to answer the question about what the disclosure would say and precisely when it would be disclosed, because he probably tried to do it and realized it's a futile exercise.
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  • Jul 11, 2016
    RubberToe
    A lawyers job is not in any way associated with ascertaining the truth. It is to advance the agenda for the client who is paying them, within the framework of the legal system. And sometimes outside it.

    RT
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  • Jul 11, 2016
    msnow
    1. It wasn't just a crash report, it was a fatality, their first ever so not insignificant.
    2. Elon's tweet said the sensors didn't alert or react to the truck/trailer because they were set not to so as to avoid false positives from overhead street signs. Maybe that's what you are referring to but I don't think it helps so say "we had false positives so we ignored it because it was an edge case".
    3. They would be reporting a risk to investors that could be deemed material as mentioned many times upthread. See the posts from @Eclectic and others on this topic.

    It's okay if you don't agree in time we will all find out.
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  • Jul 11, 2016
    msnow
    Okay, you're not getting it, that's fine. Not going to argue with you.
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  • Jul 11, 2016
    bhzmark
    What allegations did the SEC make?
    Answer: none. Pay attention to the details. the Wall Street Journal didn't quote any source at the SEC. the SEC made no allegations. The Wall Street Journal quoted an unnamed source that wasn't even necessarily at the SEC. A single person "familiar with the matter".

    Also please give any example of an enforcement action, or even investigation where the stock went up. It just doesn't happen. Wsj article is bs.
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  • Jul 11, 2016
    Vitold
    Fact and circumstance were not known immediately - hence Tesla did not report the accident right away.

    From what we know AP maintained driver preset speed and kept Tesla in it's lane while driver made no attempts to avoid collision. Plus witnesses reported driver could have been distracted and driving too fast and over the speed limit.
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  • Jul 11, 2016
    msnow
    Read his entire post, it was a hypothetical. He's saying in general you don't want the SEC after you. Make sense now?
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  • Jul 11, 2016
    Drivin
    August 2012 SEC announced that they charged Pfizer with violations of the FCPA.
    That day stock opened at 23.71, closed at 23.83
    Next day, stock went from 23.83 to 23.87

    Not at all unusual since the stock is influenced by multiple factors.
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  • Jul 11, 2016
    TaoJones
    All we know from the police report as published in the LA Times is that the trucker turned "directly in front of" the other vehicle.

    In the time available, the car appears to not have changed course.

    Not enough information from that to determine whether the driver had time to react at all. Only that the car did not appear to do so.

    Seems that there's a lot of information missing yet. Accident reconstruction takes time.

    Not seeing anything more than a slap on the wrist from the SEC with regard to this, and that only due to the clumsiness of the response.

    Now, beyond the SEC, the real impact, as alluded to above as well, may or may not come from other agencies in the form of additional hoops and hurdles aka regulations. In order to journey down that path, there appears to be some modeling and simulation that needs to be done.
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  • Jul 11, 2016
    GoTslaGo
    Pardon my ignorance, but IIRC after Elon's announcement of SCTY/TSLA merger the SP tanked by around 10% with low around 195 (started at around 220 or so).

    So just looking at the losses based on his announcement, if we threw in the accident information would it have really affected anything? Maybe dropped the SP another 0.5%, or really not at all as we saw later when it became common knowledge?

    If you look at the price history are there really grounds for damages due to SP loss from the accident vs. SCTY/TSLA announcement itself?

    Pardon my ignorance again, but what is SEC really investigating? As far as I can tell, based on the SP the losses were already baked in. If the stock rose after SCTY/TSLA announcement, then the accident may have been more relevant, IMHO.

    Are they investigating because Elon mouthed off? That seems really pithy and spiteful. And this is coming from someone who respects the SEC.
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  • Jul 11, 2016
    WarpedOne
    First fatality ever?
    From wrong anything follows.

    i' am glad there is nothing material against tesla even in this case, just pure FUD.
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  • Jul 11, 2016
    GoTslaGo
    But here is the opportunity. Tesla has the best Autopilot suite and data set. Hopefully our regulators will have the wisdom to go to the best, to devise future rule and regulations.
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  • Jul 12, 2016
    Vitold
    Reports said that laptop and dvd player were revcovered. Also, truck driver heard Harry Movie playing. Another driver said that Tesla passed them at high rate of speed - way over speed limit. All available information points at the driver, none at AP malfunction.
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  • Jul 12, 2016
    EinSV
    [
    Not sure what point you are trying to make. In the example you cite, the Pfizer stock price did not change after the SEC brought charges against Pfizer (for violation of the Foreign Corrupt Practices Act, not Securities Fraud, but whatever).

    This is not an example where an alleged misstatement or omission had no effect on the stock price once the information became known, yet the SEC decided to press ahead with securities fraud charges to protect investors against non-existent losses, as you seem to be implying.

    Or perhaps you were trying to say that in the extremely unlikely event that the SEC feels the need to step in to protect investors from an alleged fraud that led to the TSLA stock price going up, the market would ignore that claim in the same way it did with the SEC FCPA's charge against Pfizer?
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  • Jul 12, 2016
    Drivin
    Per my original post, i was responding to this statement

    "Also please give any example of an enforcement action, or even investigation where the stock went up. It just doesn't happen. Wsj article is bs."
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  • Jul 12, 2016
    EinSV
    Well, the article you cite is not an example of an SEC investigation or enforcement action where the stock price increased once the allegedly "material" information was disclosed, which is obviously what @bhzmark was asking about. The article refers to a situation where the stock price did not move even after the SEC enforcement action against Pfizer was announced.
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  • Jul 12, 2016
    Drivin
    What are you talking about? The stock price went up after the sec announcement.
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  • Jul 12, 2016
    trils0n
    This was not their first fatality.

    Why would they expect media coverage to be significant in the event of an accident? There are 80 or so fatal car accidents a day in the US. The other car companies don't report fatal accidents of their customers in SEC disclosures. Why should Tesla?

    All Tesla knew at the time of the secondary offering that there was a tragic, fatal accident. Possibly they had the police report, which indicated the truck driver was at fault, and pending charges.
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  • Jul 12, 2016
    msnow
    The proof is in the pudding. There was/is in fact significant media coverage of this accident. Front page news, lead story in network television at the local, national and international level.
    The regulatory environment for Tesla is also impacted.
    It was the first fatality while using Autopilot. I agree there's no proof AP was in anyway at fault but taken together these facts are material IMHO.
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  • Jul 12, 2016
    TaoJones
    Let's try this again.

    Pending the results of expert accident reconstruction and analysis, the only conclusions that can be drawn from the official report is that a previously-cited trucker turned "directly in front of" the oncoming vehicle.

    Clearly the car's driver did not react in time, and clearly, the car did not react in time.

    In my mind, it's clear that the trucker may well have caused the accident. Not the driver of the car, not the car itself. There's *causing* and there's *avoiding* - two very different things. Roads are only so wide and trucks can be very long - especially broadside. Point being the driver of the car could have been a race car driver amped up on 3 cups of coffee with no DVD player in sight and there *still* may just have been nowhere to turn (literally). It is also clear, at least from the police report I just read, that we don't know yet, and we wouldn't since for all we know the relevant firms haven't even been selected to *do* the independent analysis yet.

    In the world of cause and blame there is a certain amount of litigiousness, and that's why I will wait until expert findings are released (to which frankly we may or may not ever be privy) with regard to the accident itself.

    Whatever the SEC does in the meantime is going to have a lot more to do with preferred process than with any actual results of the post-accident analysis. We've already heard from MobilEye concerning the technology. Again - if the car had been a Ford with basic cruise control, this accident wouldn't have even made the national news. Insofar as disclosure *to* the SEC goes, one of my points above is that it takes a *lot* longer if ever to have a definitive conclusion about a particular accident than most people think. Tesla didn't know 2 weeks after the accident because, most likely, they didn't know. That's both entirely reasonable and entirely not surprising.
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  • Jul 12, 2016
    trils0n
    Yes, I understand there is significant media coverage of the accident. What I don't understand is why Tesla should have expected that given what they knew at the time, which was that a car accident occurred. Car accidents happen all the time and aren't major media events (unless a famous person died I guess).
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  • Jul 12, 2016
    msnow
    I think what you left out was the reason why they should have anticipated it. It was an accident while using AP, that's what the headlines (rightly or wrongly) picked up on.
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  • Jul 12, 2016
    trils0n
    And that wasn't known at the time, at least from what I gather from Tesla's blog post. Looks like Tesla's investigator only went out there and downloaded the black box on the day of the offering. Analysis wasn't complete until after the sale.
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  • Jul 12, 2016
    TheTalkingMule
    Headlines don't dictate reality, that's just a terrible way to operate. An accident occurred with absolutely no indication of malfunction of any system within the vehicle. What's to report? Does Fiat report a late night crash when the headlights are engaged?

    I have no problem with all the FUD headlines and the NHTSA investigations are semi-rational required steps, but the SEC piece is ridiculous. Especially on the heels of the SEC overseeing the run-up to the financial crash.
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  • Jul 12, 2016
    Garlan Garner
    I'll tell you what.... As soon as a court finds that an accident is fully attributable to any feature and not the driver...I will have to stop driving.
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  • Jul 12, 2016
    msnow
    Ok, I didn't know that. I wonder why Elon didn't just say that to the Fortune Magazine reporter instead of the comments he made.
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  • Jul 12, 2016
    msnow
    Perception is reality.
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  • Jul 12, 2016
    yesla
    GM anyone?
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  • Jul 13, 2016
    bhzmark
    Fcpa violations do not depend on stockholders being harmed by declining stock price from the late disclosure of previously known but not disclosed information in the same way that 10 B5 violations do. Totally different types of violations
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  • Jul 13, 2016
    MikeC
    This info was from the truck driver and contradicted by the police report. It said the Tesla was driving 65 mph and nothing was playing in the wreck. It's sad that the guilty party can smear the guy he killed and people just take it as fact.
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  • Jul 13, 2016
    Vitold
    Truck driver was a bit too specific to make this up. Authorities said that when they arrived nothing was playing - did not say it was not playing before (I'm sure part of investigation will be looking into this). One witness said that Tesla passed them at high rate of speed, I know no report that puts Tesla's speed at 65mph.
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  • Jul 13, 2016
    MikeC
    Lies can be very specific when you're trying to avoid manslaughter. The truck driver had also said the Tesla was going so fast he hadn't even seen it until after it went through his trailer, and he also specifically said he heard it still playing in the wreck.

    Here's an article mentioning the police report: mobile.nytimes.com/2016/07/07/business/us-safety-agency-investigates-another-tesla-crash-involving-autopilot.html

    "His account jibed with the accident report by the Florida Highway Patrol, which said the car was traveling at 65 miles per hour when it hit the tractor-trailer."

    Again, it's simply not fair to automatically believe media reports quoting the at-fault party when the victim is deceased and can't defend himself.
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  • Jul 13, 2016
    Vitold
    Tesla logs will probably give accurate car speed -I'm pretty sure that FHP was estimating. A witness said Tesla that crashed passed her while she was driving 85mph 1 mile before the accident occured. DVD player and laptop have been found in the car so there were certainly means to play video. You're right that most of it is "he said she said". Once NTSB and NTHSA investigations conclude we'll get better insight into what likely happened.
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  • Jul 13, 2016
    MikeC
    Agree that Tesla logs will give the accurate speed and we'll know more when the investigations conclude.

    I'll just add that since max speed on autopilot is 90 mph, he couldn't have passed the car going 85 mph as quickly as implied by the witness' statement.

    Also, it's not at all unusual to have a DVD player and laptop on a roadtrip (gotta do something while supercharging), so I don't think that adds any more weight to the truck drivers assertion than, say, if a smartphone capable of playing video was found.
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  • Jul 13, 2016
    SteveG3
    from the Tesla blog "Misfortune"

    "Next, Fortune entirely ignores what Tesla knew and when, nor have they even asked the questions. Instead, they simply assume that Tesla had complete information from the moment this accident occurred. This was a physical impossibility given that the damage sustained by the Model S in the crash limited Tesla's ability to recover data from it remotely.

    When Tesla told NHTSA about the accident on May 16th, we had barely started our investigation. Tesla informed NHTSA because it wanted to let NHTSA know about a death that had taken place in one of its vehicles. It was not until May 18th that a Tesla investigator was able to go to Florida to inspect the car and the crash site and pull the complete vehicle logs from the car, and it was not until the last week of May that Tesla was able to finish its review of those logs and complete its investigation. When Fortune contacted Tesla for comment on this story during the July 4th holiday, Fortune never asked any of these questions and instead just made assumptions. Tesla asked Fortune to give it a day to confirm these facts before it rushed its story to print. They declined and instead ran a misleading article."
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  • Jul 14, 2016
    bhzmark
    Yeah, because when people make stuff up they are always very general.

    Only the police report puts the Tesla's speed at 65 mph.

    http://documents.latimes.com/tesla-accident-report/

    upload_2016-7-14_4-35-0.png
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  • Jul 14, 2016
    Vitold
    As you can see, the police report shows that 65mph was an estimated rate of speed. I'm pretty sure NTSB and NHTSA investigators will get their information from Tesla logs.
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  • Jul 14, 2016
    Vitold
    He may not have been using AP when passing the car earlier but it suggests reckless driving - if true.

    You right, devices by themselves, especially when found off don't mean anything. However, if laptop was open or DVD plugged in with Harry Potter movie loaded I would call it pretty strong clue. Also, some claim that driver had hacking abilities to display movies directly on Tesla center display.

    There is so little information and so much speculation is surrounding all of accidents with AP (supposedly) enabled that I'm actually happy that NTSB and NHTSA are investigating.
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  • Jul 14, 2016
    Gerardf
    Lets keep an eye on what matters here.

    I have trouble understanding how the fact a DVD player playing or breaking speed limit are relevant to an SEC investigation.

    How can Tesla ever be held responsible for a driver choosing to watch a DVD while driving ? (no proof he was doing that).
    How can Tesla ever be held responsible for a driver choosing to break speed limit ? (no proof he was doing that).

    Deaths as a result of speeding and drivers distracted by (e.g. their phone- or tablet- ) screens while driving are unfortunately daily events (on a worldwide scale). And often these cars will have driver assist features. It is clearly a driver's responsibility not to do these things.

    This case is no different. Would these events ever get considered 'material events' for share holders, you can expect the filing of several SEC reports per day from car manufacturers, making the whole process useless anyway.
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  • Jul 14, 2016
    bhzmark
    There is no SEC investigation. WSJ was lied to by a short seller.
    Sorry. not even close to true. In this sort of alleged 10b5 case the only thing to investigate is to interview and review documents from the issuer itself. How else do they conduct any investigation? Read these forums? Read seeking alpha? Ask stockholders "Don't you wish you knew about the car crash sooner?" No. The only way to investigate this sort of allegation is to contact the issuer. What did they know, when did they know it.

    Tesla has gone on record saying that they haven't been contacted. So then they likely have to disclose if they ever are contacted about this. They haven't done so. The SEC wouldn't be sitting on their hands this long.

    Therefore I think it now looks like there is no SEC investigation and the WSJ was lied to and didn't fact check their source and probably got taken by a now squeezed short seller.

    If the SEC is investigating anything, it is likely investigating attempted (but laughably unsuccessful) market manipulation by the short-seller who made a complaint to the SEC and tried to get the WSJ to publish that as an investigation.
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  • Jul 14, 2016
    msnow
    I know we disagree on this issue and I'm not going to debate your points which may indeed be correct but based on my own experience I would offer this; the government is slow and plodding.
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  • Jul 14, 2016
    Drivin
    You state that as a fact. How do you know that there is no SEC investigation? How do you know that the WSJ did not do their job by vetting their source?

    While they are at it, they can investigate people who post on websites assertively that there is no investigation in an attempt to prop up the stock since they are long or are fans of the company.
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  • Jul 14, 2016
    3Victoria
    Government may be slow, but the rimour of a SEC investigation is harming the stock value. Therefore, SEC has an obligation to make a statement as to their intentions. Unless Tesla lied in their statements, they did not know whether AP was in use or not until too late to inform SEC.
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  • Jul 14, 2016
    Eclectic

    You may not like it, but this is how the SEC (and government) works. I've represented issuers that have had SEC investigations hanging over them for YEARS. If you think that a week or two is too long for the SEC to wait before moving forward, or making public disclosure of what they are looking at, then you have a different experience in dealing with the SEC than I have.

    I am no special pleader for the SEC. I think that like many government agencies, they are not worth the money and time they take up. They tend to be politicized and, for lack of a better word, arbitrary. If they exit to protect investors and ensure fair financial markets, they do a very poor job. I would be happy to see them prevented from going on fishing expeditions and witch hunts (they do it all the time).

    With all that said, they exist, they're not going away, they're only getting more powerful and this is how they work. And Elon Musk should know better than to taunt them, as that only makes things worse. And as much as many people want to impose their own definitions of materiality on this situation, or confuse damages with materiality, the law is pretty clear on the definition of materiality and the fact that the incident may lead to a curtailment of the functionality of AP or even new government regulations on AP like activities is pretty clear evidence of materiality. Not damages, not certainty, not facts, just materiality.

    I will go out on a limb here and predict that the next time Tesla has a filing that includes a Risk Factors section, there will be revised disclosure that focuses more on the risks of AP and regulation of AP.

    There's nothing more I can say, as a securities law practitioner, on what has happened, so this will be my last post on the topic.
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  • Jul 14, 2016
    bhzmark
    sure investigations can take a long time. But there has to be some kind of Investigation. in this kind of case the only thing to investigate would involve contacting the issuer. They haven't contacted the issuer. So there is no investigation . there is nothing else to investigate except to contact the issuer.
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  • Jul 15, 2016
    JC86
    There are plenty of things that the SEC can do as part of the investigation without contacting Tesla. The SEC can be fact checking and investigating the timeline of events based on Tesla's disclosures and public statements since the accident.

    If the investigation is ongoing, eventually the SEC will need to contact Tesla but it is not unreasonable for the SEC to want to gather information first without tipping off the subjects of their investigation to avoid witness and evidence tampering if violations did occur.

    On the flip side, it's also not unreasonable to assume that the SEC leaked information of an investigation to the press as a warning shot to Tesla and Elon Musk even though they have no plans to pursue a serious investigation.

    The fact that Tesla hasn't been contacted yet does not mean they're not under investigation. They could be and simply just don't know about it yet.

    My biggest question on this whole timeline of events publicized to date is still why it took Tesla almost two weeks, and a day after their offering closed, to send their engineers out to Florida to download the logs for the car. Was this a conscious decision for plausible deniability on the severity of the accident to push it off and avoid negatively affecting their offering? The timing is awfully convenient for Tesla.
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  • Jul 15, 2016
    3Victoria
    My understanding is:
    May 7th accident
    May 18th data log collection from wreck
    May 18 and 19th stock offer
    May 31st analysis complete, determined AP involved.

    Please correct if any error.
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  • Jul 15, 2016
    bhzmark
    An important date that is missing is when Tesla even learned it was a fatality. The cell antenna likely came off with the roof so the car wouldn't have reported an accident. I don't think first responders call the car mfrs when they find cars in an accident. When did Tesla even first learn of the accident, and then when did it learn that auto pilot was even on or not? Probably didn't learn that autopilot was engaged until their tech downloaded the data log from the car on the 18th at the very earliest.

    "warning shot" ? What is that even supposed to mean? Is the gov't agency involved in 19th century longship warfare -- Master and Commander style?

    The only factual investigation that is relevant is what did Tesla know and when did they know it. You can't learn that unless you contact them.
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  • Jul 16, 2016
    3Victoria
    I agree, it is not clear when Tesla knew these things. I suspect learning AP was involved was the 18th at the earliest.
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  • Jul 16, 2016
    mkjayakumar
    What I am inferring from Eclectic and a few other posts is that, Koch brothers and other influential old fossil fuel related industry heavy weights, can and will absolutely use SEC to shut Tesla down. This 'shot across the bow' is technically from those who want to see Tesla close shop.

    SEC is just one of the tools they have in their hands. NTSB is another. WSJ, LAT and NYT is another. Not one of them will bring down Tesla on their own, but death by thousand cuts.

    That is what I see happening here. High level of scrutiny for things that won't even be on the radar for other manufacturers. Blown up charges. Trumped up charges.

    Coming up next: IRS audit on Elon's finances. Is Tesla using child labor in Ghana's copper mines?
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  • Jul 16, 2016
    msnow
    @Eclectic was just speculating that it was *possible* the SEC was reacting to Elon's statements minimizing the various filing processes such as "boilerplate" and other off hand statements he made. You're taking that mean there is some grand conspiracy going on here. There isn't.
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  • Jul 16, 2016
    bhzmark
    If by "inferring" you mean "totally imagining in my irrational delusion" then yes I agree.
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  • Jul 16, 2016
    Krugerrand
    Ok, let's go with the 'just speculating' :rolleyes: then and keep the same nonchalant attitude - to be fair - and also say mkjayakumar was also 'just speculating'. Now we can all be friends.
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  • Jul 16, 2016
    msnow
    Of course we are still friends and we are all speculating. This place wouldn't exist if we didn't. :)
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  • Jul 16, 2016
    MitchJi
    Great information about the SEC in this MC interview:


    Mark Cuban interview. Good opinions on BREXIT, Trump and particularly on the SEC and insider trading.
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  • Jul 17, 2016
    TheTalkingMule
    I love how he characterizes Phil Mickelson paying off gambling debts with clear insider trading profits as him "getting caught up" in a vague system of SEC investigations. We need a major regulatory overhaul now that Reaganomics can officially be deemed dead. Liz Warren?
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