DETROIT (AP) – Elon Musk, CEO of Tesla, is re-examining the dubious comments he made to Wall Street analysts, this time with the state of his company’s vehicle production.
At a Jan. 27 conference call to discuss Tesla’s fourth-quarter earnings, Musk said the company was producing new versions of its older models, the S-sedan and the oversized SUV. He added that a high-performance “Plaid” version of the electric S would be available in February.
In fact, Tesla did not produce either model during the quarter, according to delivery and production figures the company released late last week. In contrast, all of the approximately 180,000 vehicles Tesla manufactured from January to March were from its other models, the small 3 sedan and the small Y SUV.
Experts say the disparity between Musk’s statement to analysts and figures showing zero production risks draws the attention of Musk’s old enemy, the U.S. Securities and Exchange Commission. For years, the agency has been suing Musk over questionable statements he made on Twitter affecting the price of Tesla shares.
“I think I could have problems with the SEC,” said Anthony Sabino, a lawyer and law professor at St. Louis University. John’s. “It simply came to our notice then. They are quite unequivocal. “
John C. Coffee Jr., a professor at Columbia University who is a leading authority on securities law and corporate governance, said Musk’s statement sounded like a statement of fact and not just a projection of the future production of Tesla. If the SEC agrees, Coffee said, it could initiate an investigation.
At the same time, Coffee noted, Tesla could argue that Musk’s statement was only a prediction and not a statement of fact, and that something later happened to alter that prediction. If regulators agree, Musk’s statement would be protected by Tesla’s standard disclaimers about the uncertainty of forward-looking statements, Coffee said.
The SEC declined to comment. The messages they left to Tesla, which has dissolved its press office, went unanswered.
It’s not the first time Musk has asked questions with a statement about Tesla’s vehicle production. In 2017, the SEC investigated statements it had made about Tesla production of the Model 3 at its factory in Fremont, California. According to Tesla 2020’s annual financial report, the agency closed the investigation in 2019 without taking action. The Justice Department also requested information on the production. The status of his research is unknown.
“To our knowledge,” the Tesla report said, “no government agency in any ongoing investigation has concluded that any misconduct has occurred.”
In 2018, the SEC accused Musk of securities fraud for statements he had made on Twitter saying he had the funding he needed to deprive Tesla, a dispute that raised the price of Tesla shares. In fact, Musk did not have the money insured. The matter was resolved, with Musk and Tesla agreeing to pay a $ 20 million fine and hire someone to review Musk’s tweets before they were sent.
Musk has made no secret of his contempt for the SEC. Distorting the meaning of the agency’s acronym, he has labeled the SEC the “short sellers enrichment commission” (short sellers bet it will lower the stock price) and said in a television interview that it does not respect the commission.
There is no doubt that Musk stated in the conference call that Tesla was producing the S and X models.
“We are very excited to announce that the new S and Model X Plaid models are already in production and will be delivered in February,” Musk said in the call. “So, we have been able to advance the Plaid Model S and X: the Model S will be delivered in February and the Model X a little later. The Model S Plaid, we’re actually in production now, and we’ll deliver it next month. “
Even if Musk’s claim is protected by disclaimers of production estimates, legal experts say they expect the SEC to at least look into the matter and perhaps open an investigation.
“Sometimes, the personality strength of certain corporate leaders and the potential impact of their statements on the market increases regulatory control,” said Jacob Frenkel, a former SEC enforcement attorney and ex- federal prosecutor practicing with the firm Dickinson Wright in Washington.
Frenkel said it depends on whether the SEC considers Musk’s statements to be “material,” meaning something a reasonable investor would find important in deciding whether to trade shares in a company.
“Production disclosures could be considered important,” Frenkel said.
In addition, Frenkel noted, the SEC is under new leadership with the election of President Joe Biden and may “have a different view of accountability” than with the Trump administration.
As it happened, Musk’s claim did not benefit Tesla’s shares. The share price fell 3% the day after the conference call. Since then, it has fallen more than 20%, as the brilliance has worn out the stocks of electric and technology vehicles. However, throughout 2020, Tesla shares rose more than 700%.
Before the company announced its numbers last week, analysts had expected Tesla to deliver about 13,000 S and X models during the first quarter.
At the Jan. 27 conference call, Tesla chief financial officer Zachary Kirkhorn echoed Musk, saying the company was producing S and X models, although Kirkhorn warned that production would be low due to the transition to new versions.
Kirkhorn added that the company was trying to manage a global shortage of semiconductors, a shortage that has affected the entire automotive industry, forcing many manufacturers to reduce production. Some analysts have attributed Tesla’s zero S and X production to chip shortages.
“I doubt they would prosecute him if there was any legitimate problem or issue,” Coffee said.
But Frenkel said Tesla’s responsibilities might not help.
“A false statement or omission to reveal a material fact cannot be rejected,” Frenkel said. “Otherwise, it would not give credibility to the disclosure of companies.”