Musk statement on Tesla production raises questions
Tesla CEO Elon Musk is once again drawing scrutiny for questionable comments he made to Wall Street analysts, this time involving the status of his company’s vehicle production
April 9, 2021, 5:03 PM
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After 17 years, the electric car company showed a net profit of over $720 million in 2020.
The Associated PressDETROIT -- Tesla CEO Elon Musk is once again drawing scrutiny for questionable comments he made to Wall Street analysts, this time involving the status of his company’s vehicle production.
On a Jan. 27 conference call to discuss Tesla's fourth-quarter earnings, Musk stated that the company was producing new versions of its oldest models, the S sedan and X large SUV. He added that a “Plaid” high-performance version of the electric S would be available in February.
In reality, Tesla produced none of either model during the quarter, according to delivery and production figures that the company released late last week. Instead, all the roughly 180,000 vehicles that Tesla made from January through March were of its other models, the 3 small sedan and the Y small SUV.
Experts say the disparity between Musk's statement to analysts and the figures that showed zero production risks drawing the attention of Musk’s longtime nemesis, the U.S. Securities and Exchange Commission. For years, the agency has grappled with Musk over questionable statements he has made on Twitter that affected Tesla's share price.
“I think he might have himself into a bit of trouble with the SEC,” said Anthony Sabino, an attorney and law professor at St. John's University. “These are fairly direct statements. They are fairly unequivocal.”
John C. Coffee Jr., a Columbia University professor who is a leading authority on securities law and corporate governance, said Musk’s assertion sounded like a statement of fact and not merely a projection of Tesla’s future production. If the SEC agrees, Coffee said, it could initiate an inquiry.
At the same time, Coffee noted, Tesla could argue that Musk's statement was only a prediction and not a declaration 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. Messages left for Tesla, which has disbanded its press office, went unanswered.
This is hardly the first time Musk has raised questions with a claim about Tesla's vehicle production. In 2017, the SEC investigated statements he had made about Tesla's production of the Model 3 at its factory in Fremont, California. The agency closed the inquiry in 2019 without taking action, according to Tesla's 2020 annual financial report. The Justice Department also asked for production information. The status of its inquiry is unknown.
“To our knowledge," Tesla’s report said, “no government agency in any ongoing investigation has concluded that any wrongdoing occurred.”
In 2018, the SEC charged Musk with securities fraud for statements he had made on Twitter saying that he had the funding he needed to take Tesla private — a contention that drove up Tesla's share price. In fact, Musk did not have the money secured. The matter was settled, with Musk and Tesla each agreeing to pay a $20 million fine and to hire someone to review Musk's tweets before they are sent.
Musk has made no secret of his disdain for the SEC. Distorting the meaning of the agency's acronym, he has branded the SEC the “shortseller enrichment commission” — short sellers bet that a stock price will fall — and said in a television interview that he doesn't respect the commission.
There is no doubt that Musk stated on the conference call that Tesla was producing the Models S and X.
“We're super excited to announce the new Model S and Model X Plaid are in production now and will be delivered in February,” Musk said on the call. “So we have been able to bring forward the Plaid Model S and X – Model S will be delivered in February and Model X a little later. The Model S Plaid, we’re actually in production now, and we’ll be delivering next month."
Even if Musk's assertion is protected by disclaimers about production estimates, legal experts say they expect the SEC to at least look into the matter and perhaps open an investigation.
