Tesla Shares Drop After Hours Due To SEC Investigation
Zacks Investment Research | Jul 11, 2016 09:04PM ET
Shares of Tesla Motors, Inc. (NASDAQ:TSLA) fell around 1% in after-hours trading on Jul 11 on reports that the U.S. Securities and Exchange Commission (SEC) is investigating the fatal crash of a Model S that took place on May 7. The SEC is examining whether Tesla made a potential securities law breach by not informing its investors about the crash which resulted from the inefficiency of its Autopilot system, according to the Wall Street Journal.
Tesla had alerted the National Highway Traffic Safety Administration (NHTSA) about the incident immediately on May 16. The automaker also sent its own investigator to the crash site on May 18. However, it did not inform investors about the crash in the securities filing submitted to the SEC on the same day. The filing mainly dealt with the company’s plans to sell $2 billion worth of shares.
Tesla confirmed that it has not received any information about the investigation from the SEC. Automakers generally do not inform shareholders about fatal auto accidents involving their vehicles. Thus, the decision of the SEC is uncertain at this point.
Tesla said that the vehicle was driving on a divided highway and the Autopilot was functional when a tractor trailer came across, perpendicular to the Model S. The Autopilot as well as the driver did not notice the white side of the tractor trailer due to the glare of the sun and hence, the brake could not be applied. Thus, the Model S passed under the trailer with its bottom hitting the car’s windshield.
The Autopilot function is a semi-autonomous technology which facilitates driving in lanes. Tesla’s Autopilot is a new technology that is in public-beta phase or test mode. Also, the Autopilot feature requires the driver to keep his hands on the wheels all the time, to take over whenever needed.
The company is focusing on improving the Autopilot which is not perfect as yet. The driver needs to be attentive while using the system. Tesla said that the Autopilot should be used as a backup and not as a replacement for the driver.
The electric carmaker is already facing a preliminary evaluation by the NHTSA for the performance of its Autopilot system due to the fatal crash of a Model S on May 7. In addition, NHTSA is examining a crash involving Tesla’s Model X that occurred on Jul 1 in Pennsylvania. The agency is keen to determine whether the vehicle’s Autopilot system was operational when the crash took place.
The two recent crashes have raised questions about the safety of self-driving technology.
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