Tesla Autopilot, SolarCity and an SEC Investigation

There’s a lot going on in the Tesla world these days. Allow me to highlight the events that have today culminated into a reported SEC investigation.


On May 7th, an accident involving a Tesla and a 18-wheel semi-truck ended in the fatality of the Tesla driver.  Any accident, in any vehicle, that includes a fatality is a tragedy that could have been avoided.  In this case, the Tesla owner was using Autopilot and this has causes a lot of media focus on whether Autopilot is safe. The National Transportation Safety Board (NTSB)  is investigating the crash.

The question posed is why didn’t Autopilot recognize the truck passing in front of the vehicle and prevent the accident.  This is a good question and I’m sure Tesla will be looking into improving Autopilot based on this terrible incident.  However, it’s fairly clear that the software, still in beta form, should not be entirely relied upon.  The driver still has the responsibility to keep their eyes on the road and avoid anything the software may not recognize.

I drive about 90 miles a day and tend to avoid using Autopilot.  The main reason is because the lines on the road I use are not obvious enough to be easily recognized by the software.  However, when traveling longer distances on roads that are in better shape, I do use it simply to see how well it functions and to get a slight break from driving.  While traveling 400 miles south, Autopilot drove approximately 350 of those miles.  However, during the time Autopilot was engaged I had my hand on the wheel and my eyes on the road.  I don’t fully trust Autopilot yet even though it improves safety, it doesn’t make me as comfortable as I feel when I’m in total control. (Did you just call me a control freak?)  Sometimes it gets confused as you go past an exit and moves a bit right, or when passing a large vehicle it doesn’t move over to the left to give it more clearance like humans tend to do.  I’m confident these issues will be improved in future versions.

Stock Offering

On May 18th and 19th, Tesla offered about $2 billion in stock for sale.  The assumption was that this was done to increase the cash position to help Tesla increase manufacturing volume.  Elon Musk sold approximately 2.8 million shares which was reportedly triggered by tax requirements.


On June 21st, Tesla made an offer to buy SolarCity.  For those of you that don’t think of Tesla at least once an hour, like I do (my wife may claim it’s more often than that), SolarCity is a residential solar installer that Elon Musk, the CEO of Tesla, owns stock in and is the Chairman of the Board.

Due to the dual ownership, people have raised concerns about a conflict of interest and whether the purchase of SolarCity was really a bailout for SolarCity as they continue to burn through money.  This has also occurred at a time that Tesla is trying to ramp up production and doesn’t need any distractions pulling attention from what seems to be a very difficult endeavor.


Announcement of the accident

Tesla, on June 30th, publicly disclosed the May 7th crash in a company blog post and said that Autopilot was in use at the time of the accident. The National Transportation Safety Board disclosed their investigation of the crash on the same day.

SEC Investigation

Today it was announced that the SEC is investigating Tesla for possible securities law breaches.  It appears this is mainly due to the fact that they did not disclose the traffic death prior to announcing and selling additional shares.  Tesla stated that the accident did not require disclosure as it was not a material event.

Here comes the opinion portion of the blog

If the accident was material, in a manner that required disclosing it prior to the stock sale (negatively affecting the stock price), the announcement of the accident and the death should have moved the stock down – no matter when it was disclosed.  So, let’s look at the stock performance since the disclosure has occurred.

On June 30th, the date of the disclosure, Tesla shares were valued at $212.28.  Today, July 11th, Tesla closed at $224.78, an increase of almost 6% since the news of the accident and investigation was released.  Apparently, in the short term, it’s not material and therefore would not have affected the price of the additional shares.  Granted, perhaps Tesla didn’t know it wouldn’t negatively affect the stock, but clearly, based on their statements, they felt it wasn’t material.

It’s possible that the NTSB says Autopilot is unsafe and can no longer be used but that would be a very short-sited decision.  Manufacturers continue to add features to help prevent accidents.  If we reviewed every accident and looked at what safety features were being relied upon during the accident and removed those features because they didn’t prevent the accident or save the person’s life, we’d no longer have cruise control, air bags or seat belts.  People die everyday while using those safety features, features that they rely on to improve the likelihood that they’ll avoid an accident or survive a crash.  Autopilot is no different.  Autopilot is the latest safety feature that helps prevent accidents and save lives.  A driver in a Tesla is considerably less likely to be involved in an accident if they have Autopilot active and are paying attention to the road ahead of them.  To even consider removing or disabling the feature would be a terrible and illogical decision.

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