Mask’s statement on Tesla’s production raises questions

Detroit (AP) — Tesla CEO Elon Musk is once again scrutinizing his company’s vehicle production status for suspicious comments made to Wall Street analysts.

At a conference call on January 27, discussing Tesla’s fourth-quarter earnings, Musk said the company is producing new versions of its oldest models, the S sedan and the X large SUV. He added that a high-performance version of the Electric S “plaid” will be available in February.

In fact, Tesla did not produce either model during the quarter, according to delivery and production figures released late last week. Instead, all of Tesla’s approximately 180,000 vehicles manufactured from January to March were other models, three small sedans and a Y small SUV.

Experts state the gap between Mask’s statement to analysts and the number that has shown zero production risk, which has attracted the attention of Mask’s long-time enemy, the US Securities and Exchange Commission. .. For years, agencies have been wrestling with musk over suspicious statements on Twitter that affected Tesla’s stock price.

Anthony Sabino, a lawyer and law professor at St. John’s University, said: “These are pretty straightforward statements. They are pretty obvious.”

Professor John C. Coffee, Jr. of Columbia University, a leader in securities law and corporate governance, said Musk’s claim sounds more like a statement of fact than just a prediction of Tesla’s future production. .. Coffee could initiate an investigation if the SEC agreed.

At the same time, Coffee said Tesla could claim that Musk’s remark was just a prediction, not a declaration of fact, but something later changed that prediction. If regulators agree, Musk’s statement will be protected by Tesla’s standard disclaimer of uncertainty regarding future prospects, Mr Coffee said.

The SEC declined to comment. The message left to Tesla, which disbanded the press office, could not be answered.

This isn’t the first time Musk has asked a question about Tesla’s vehicle production claims. In 2017, the SEC investigated a statement he made about Tesla’s production of the Model 3 at its Fremont, California plant. According to Tesla’s 2020 annual financial report, the agency took no action and closed the investigation in 2019. The Justice Department also asked for production information. The status of the inquiry is unknown.

“As far as we know, no government agency has concluded that fraud has occurred in an ongoing investigation,” Tesla’s report said.

In 2018, the SEC charged Musk with securities fraud, saying on Twitter that it had the funds needed to keep Tesla private. This is a controversy that has pushed Tesla’s stock price up. In fact, Musk did not secure the money. The problem was resolved, and Musk and Tesla each paid a $ 20 million fine and agreed to hire someone to review before sending Musk’s tweet.

Musk has not revealed the secret of his contempt for the SEC. Distorting the meaning of the agency’s acronym, he named the SEC the “Short-Seller Strengthening Committee” (a short-seller betting that stock prices will fall) and said in a television interview that he would not respect the committee.

There is no doubt that Musk said in a conference call that Tesla manufactures the Models S and X.

“We are very pleased to announce that the new Model S and Model X plaids are currently in production and will be delivered in February,” Musk said on the phone. “So we were able to move the model S and X of the plaid ahead of schedule. The model S will be delivered in February and the model X will be delivered a little later. The plaid of the model S, we are actually in production now. , Will be delivered next month. “

Even if Musk’s allegations are protected by a disclaimer on production estimates, legal experts say they expect the SEC to at least investigate the issue and perhaps begin investigating it.

“The power of individuality of certain corporate leaders and the potential market impact of their statements can cause concerns about regulatory scrutiny,” said a former SEC operating at Dickinson Wright in Washington. Jacob Frenkel, executive lawyer and former federal prosecutor, said.

Frenkel said whether the SEC would consider Musk’s remarks to be “important,” that is, important to a reasonable investor in deciding whether to trade a company’s stock. He said he was heavily dependent on.

“Production disclosure can be considered important,” says Frenkel.

Frenkel also said the SEC is taking new leadership in President Joe Biden’s elections and may “have a different view of accountability” than under the Trump administration.

It happened that Musk’s allegations did not benefit Tesla’s stock. The day after the conference call, stock prices fell 3%. Since then, brilliance has fallen by more than 20% as it has run out of tech and electric vehicle inventories. However, throughout 2020, Tesla’s share price surged by more than 700%.

Before the company announced its numbers last week, analysts expected Tesla to offer around 13,000 S and X models in the first quarter.

At a conference call on January 27, Tesla Chief Financial Officer Zach Kirkhorn responded to Mask, saying the company is producing S and X models, but Kirkhorn is moving to a new version. Warned that production would be low due to the transition.

Kirkhorn added that the company is trying to manage the global shortage of semiconductors. This shortage plagued the entire auto industry and forced many automakers to cut production. Some analysts attribute Tesla’s Zero S and X production to a chip shortage.

“I think they’ll track him if there’s a legitimate problem or problem,” Coffee said.

But Mr Frenkel said Tesla’s disclaimer may not help.

“We cannot deny false statements or omissions to disclose material facts,” Frenkel said. “Otherwise, it would not give credibility to a company’s disclosure.”