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Tesla Motors Inc (TSLA) Management Tries to Hide “Immaterial” Report Blunder

Tesla Motors Inc (TSLA) Factory Freemont, California

Tesla Motors Inc’s annual report created a big stir as the result of accounting issues related to the valuation of the firms supercharger network. On Friday, Tesla management admitted that the mistake made things even worse, says a report from the Seeking Alpha by Bill Maurer.

Tesla Motors Inc (TSLA) Factory Freemont, California

Management calls the error “immaterial”

Tesla filed an 8-K, detailing on its 10-K filing. “…the net book value of the Supercharger network as of December 31, 2015 should have been stated as $166.6 million. This error was limited to the section of the Form 10-K referenced above, and did not impact the consolidated financial statements or the notes included in Item 8, Financial Statements and Supplementary Data. Management has determined this error to be, immaterial” the filing read.

In its 10-filing earlier, the EV firm stated “As of December 31, 2015 and December 31, 2014, the net book value of our Supercharger network was $339.2 million and $107.8 million and as of December 31, 2015 included 584 locations globally.”

The size of the mistake is really big i.e. of $172.6 million. Such an amount means a lot to many, and the size of the error is even larger than the new book value of the supercharger network. So, management saying it as “immaterial,” is surely a big mistake again.

Tesla tried to hide the issue

Also, Maurer believes Tesla Motors Inc management did not want this issue to gain publicity. And, despite the issue being discussed heavily on Seeking Alpha, the firm filed the 8-K after 5 pm on Friday. “If you are looking to bury news, especially if it is bad, after the close on Friday usually is a good time to do so,” says Maurer. This suggests the mistake was not an honest one as if would have been an honest one, the management would have issued the acknowledgment anytime during the week.

Such errors and efforts to cover it does not show good of the management, who has been questioned several times before. An important point to note is, this mistake came under the new CFO. So, by giving the answer, the management has given us one more reason to question its credibility. “Not only did the company try to bury the news late on a Friday, but it called the error immaterial, despite the fact that the size of the error was larger than the new book value,” said Maurer.

Meanwhile, Adam Jonas of Morgan Stanley believes the road ahead for Tesla Motors Inc might be rough in the short-term. Jonas maintained an Overweight rating on the EV firm, but he did lowered the price target to $333 back in February. The analyst notes that the sharp drop in the oil prices over the months was one of the primary driving forces.

On Friday, Tesla shares closed up 1.13% at $207.50. Year to date, the stock is down almost 14% while in the last one-year, it is up over 7%.

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Aman is MBA (Finance) with an experience on both marketing and Finance side. He has work as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, playing PC games and cricket.

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