TESLA AND THE SEC. Another Investigation for Tesla. “Tesla and its executives could face sanctions if regulators determine they misled investors..” By Todd Horwitz, Bubba Trading


Securities regulators began investigating last year whether Tesla Inc. misled investors about its Model 3 car production problems, according to people familiar with the matter. The Securities and Exchange Commission subpoenaed a parts supplier for the auto maker as part of the probe, one of the people said, well before the regulators began looking into Elon Musk’s tweet last week about taking the company private.

Regulators have also subpoenaed Tesla’s directors seeking to learn what they knew about Mr. Musk’s plan to take Tesla private, according to another person familiar with the matter. The Wall Street Journal reported in October that the Tesla assembly plant’s body shop wasn’t fully installed until around September and that major portions of the Model 3 were being hand built weeks after Musk announced production had begun in July 2017. As production started, he claimed about 1,600 cars would be made in the third quarter of 2017 before reaching 20,000 in December.

Those forecasts were far below what he predicted roughly a year earlier, when he said as many 200,000 Model 3s would be made in the second half of 2017. Instead, Tesla made 2,700 Model 3s during 2017. The sedan, priced to start at $35,000, is designed to propel the luxury electric-car maker into the mainstream.

Under U.S. securities law, Tesla and its executives could face sanctions if regulators determine they misled investors about the cause or extent of production delays. SEC probes can last months or even years, and sometimes end without the regulator charging a target with wrongdoing.

Brad Bennett, a lawyer at Baker Botts LLP, said the SEC has brought enforcement actions in the past against companies over operational projections. They are hard claims to prove, he said, because they require digging into the details of what a company is building.

“You would have to prove the speaker didn’t believe those things, or there was no rational basis for it,” said Mr. Bennett, who was formerly director of enforcement for the Financial Industry Regulatory Authority.
Tesla already faces private litigation in a San Francisco federal court, where a group of investors alleged the company misled investors about how quickly it could ramp up Model 3 production. Tesla has argued for the class-action lawsuit to be dismissed, saying it disclosed production problems in a timely fashion.

Todd “Bubba” Horwitz


Financial Markets & Political Commentary



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Todd Horwitz - Author of “Average Joe Options“. Todd began his trading career in 1980 at the CBOE. He was one of the original traders in the OEX & helped start the SPX. He is a member the CME where he trades S&P futures as well as foreign currencies & is a regular contributor to CNBC, Bloomberg, BNN, Fox & many other major news networks.