Tesla Motors Inc was in the eye of the storm last week after news broke about a fatal Model S crash broke. The news was jarring because the car was in Autopilot mode and the crash led to the death of the driver. The crash happened on May 7 but the news didn’t hit the newsstands until last Friday, July 1. The public might not have heard about the news if the NHTSA had not commenced a probe into the crash.
However, what many people didn’t know was that Tesla was aware of the “shortly” after it happened. Yet, the firm did not inform the NHTSA until a good 9 days had elapsed after the crash – the public didn’t hear about the news for almost two months after the event.
Tesla wasn’t hiding information from regulators
In all fairness, Tesla Motors is not under obligation to report every crash involving its cars. The firm reported the crash to regulators nine days after the crash even though it could have waited until the end of the third quarter before reporting the incident. A Tesla spokeswoman observed that the firm was not being secretive and that it “provided NHTSA with additional details about the accident over the following weeks as it worked to complete its investigation, which it ultimately concluded during the last week of May.”
The firm also issued a statement saying, “Tesla does not find it necessary, nor does any automaker, to share the details of every accident that occur in a Tesla vehicle. More than a million people die globally every year in car accidents, but automakers do not disclose each of these accidents to investors, let alone before those investigations are complete and without regard to what the results of those investigations end up being.”
Was Tesla lying to the public by omission?
Tesla Motors didn’t do anything wrong in waiting for more than a week before informing NHTSA about the crash. However, given the peculiar nature of the crash – it involved Autopilot and someone died, many people believe that the public deserved prompt and full disclosure from Tesla. . Peter Henning, a law professor at Wayne State University in Detroit observed that “the materiality issue is not about the death itself, but more about the circumstances of the crash and calling into question a technology that’s important to Tesla‘s future.”
The nature of Tesla’s silence about the fatal crash is magnified by the fact that the firm went ahead with a scheduled stock offering a couple of days after the crash. The firm raised at least $1.46B from its stock offering sale that took place between May 18-19 – you’ll remember that the fatal crash happened on May 7. It is doubtful that the firm would have raised up to $1.46B from its stock offering if the public were aware that a Model S Autopilot crash had claimed its first fatality.
For one, the stock of Tesla eventually fell by more than 4% after news of the crash broke two months after the event. Hence, one could assume that the stock would have record bigger loses if the public knew about the fatal crash while it was it still fresh.