Tesla Motors Inc has been under tremendous pressure lately after the first reported death in a Model S Autopilot crash was reported. The NHTSA is looking into the crash to learn whether Autopilot or the driver is to be blamed for the crash. The NTSB also stepped into the fray earlier this week to determine if Tesla’s Autopilot tech is worthy of the name. On top of that, Germany has expressed serious doubts about the reliability of Autopilot with the KBA refusing to approve the use of beta-phase self-driving tech on German roads.
Tesla seems to be courting a lot of displeasure and angst lately and it seems that Elon Musk’s charm might not be enough to bail the firm out this time around. Now, the SEC has launched a probe into why the firm didn’t disclose the fatal crash.
SEC has questions for Tesla Motors
The Wall Street Journal reports that the SEC wants to find out whether the firm broke laws by its failure to disclose the crash to investors. Sources close to the matter said the SEC probe is still in its early stages. However, the fact that the firm didn’t disclose the crash in its May 18 securities filling raises red flags – Tesla sold almost $2B worth of stock and Elon Musk sold almost 2.8 million shares.
Last week, news broke that Tesla Motors knew about the fatal crash shortly after the event, but regulators were not informed until two weeks later, and the public didn’t hear about the crash for about two months. There was a war of words in which Musk was blamed for not telling investors about the crash before going ahead with its public stock sale in which it raised at least $1.46B.
Musk in his response noted that it wasn’t hiding information from investors and that the crash was not of “material to the value of Tesla”. Critics however noted that the wrongdoing here is that “Tesla and Musk did not disclose the very material fact that a man had died while using an auto-pilot technology that Tesla had marketed vigorously as safe and important to its customers.”
Family of Autopilot crash victim hires personal injury law firm
In an interesting plot twist, the family of Joshua Brown, the deceased in the fatal Autopilot crash has hired a high-profile personal injury law firm. The family has employed Landskroner Grieco Merriman to explore the possibility of filing a lawsuit against Tesla. Landskroner also revealed that other drivers who have had accidents while using Autopilot have contacted his firm. Hence, Tesla might be looking at a class-action lawsuit.
The SEC could have a field day stressing Tesla Motors out in its investigation. The firm has already shot itself in the foot in its recent quarterly report in which it noted that a 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.” Without much ado, the EV maker is in a rough patch in its history, Jack Nerad, executive market analyst with Kelley Blue Book observes that “anything that spooks investors, and this could spook investors, is going to be a big negative for the company.”