Tesla Model 3 orders probed by SEC
The U.S. Securities and Exchange Commission probed Tesla’s reservations for and public statements about the Model 3 sedan before deciding in May not to take any enforcement action, according to documents posted online Thursday.
The documents, obtained by the investor research service Probes Reporter, show federal investigators demanding in June 2016 that Tesla turn over information on Model 3 reservations, cancellations and refunds, as well as the company’s plans for spending the money.
Commission investigators also demanded copies of the company’s public statements about Model 3 delivery timelines. And they wanted information about a Goldman Sachs analyst’s upgrade of Tesla stock that was published hours before Tesla announced a $1.7 billion stock offering underwritten by that investment bank.
Probes Reporter, which focuses on uncovering SEC investigations, argues that Tesla should have disclosed the federal probe to investors. As of August, 455,000 people had placed reservations for the car, putting down $1,000 apiece. Tesla started deliveries of the Model 3 in July.
“Investor focus on the Model 3 has been intense this past year, with (CEO Elon Musk) and his crew fanning the flames,” Probes Reporter wrote, in an article posted online Thursday. “With this backdrop, we think investors most certainly would consider an SEC probe that asked a lot of questions about the Model 3 to be material and, therefore, would have wanted to know about it.”
Probes Reporter also noted that the SEC refused to hand over some Tesla documents the research service request-
ed, citing “law enforcement grounds” as the reason. “That gives suggestion there is at least one other unresolved SEC probe,” the service reported.
Tesla on Friday declined to comment.
Bill Selesky, senior analyst with Argus Research, said that some companies will disclose such investigations and others won’t, particularly when a probe doesn’t lead to any enforcement action.
“It just depends on the management philosophy,” he said. “Some company executives like to talk about things like that so they can get it out of the way. Others don’t. I’ve seen it both ways, so it’s hard to say they’re wrong about it.”
A June 7, 2016, SEC document ordering the investigation said the commission had information suggesting Tesla may have made “false statements of material fact” about the Model 3, or failed to disclose material facts that would have been important to investors. In addition, the commission also suspected that someone was disclosing insider, non-public information about Tesla to others.
To that end, a subpoena sent to Tesla on June 15, 2016, demanded the identities of everyone who knew about the company’s May 2016 stock offering in advance. It also called on Tesla to turn over supporting documents for the company’s public claims about the number of Model 3 reservations, even asking for customer names and credit card numbers.
The 15 pages of documents posted online by Probes Reporter do not include any of Tesla’s responses to those data requests. They do, however, include a brief note the commission sent Tesla on May 30, 2017, saying the investigation had concluded. “Based on the information we have as of this date, we do not intend to recommend an enforcement action by the Commission against Tesla Motors, Inc.” the note read.