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The U.S. Securities and Exchange Commission (SEC) is reportedly investigating Tesla Motors, after the American electric carmaker failed to notify investors of a fatal accident that occurred in May while the driver was allegedly using the car’s Autopilot semi-autonomous technology, The Wall Street Journal reports.
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The SEC is investigating the fact that Tesla Motors did not disclose the May 7 fatal accident to investors (or the public) until the end of June. The crash, which occurred in Florida, is believed to be the first fatal incident involving Tesla’s semi-autonomous technology.
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As The Wall Street Journal reports, “the SEC is scrutinizing whether Tesla should have disclosed the accident as a ‘material’ event, or a development a reasonable investor would consider important, according to a person familiar with the matter.”
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Tesla CEO Elon Musk called the fatal accident “not material” to shareholders, defending the automaker’s decision not to publicize the fatal accident until June 30th. Notably, Tesla and Musk sold more than $2 billion in Tesla Motors stock at $215 a share in a public offering on May 18—eleven days after the crash that killed Tesla driver Joshua Brown, and 43 days before Tesla and the National Highway Traffic Safety Administration announced that the fatal crash was being investigated.
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The inquiry is in a very early stage, an unnamed source tells The Wall Street Journal, and may not lead to any enforcement action from regulators.
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As Fortune writer Stephen Gandel pointed out, Musk’s claim that the crash was immaterial to investors seemed to contradict language in a previous SEC filing from Tesla, stating that a fatal Autopilot incident would be a material event to “our brand, business, prospects, and operating results.” The disclosure said Tesla could face liability claims in the event of “failures of new technologies that we are pioneering, including autopilot in our vehicles,” explaining that “product liability claims could harm our business, prospects, operating results and financial condition.”
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What followed was a bizarre and, for the auto industry, unprecedented Twitter slap fight between Tesla CEO Elon Musk and Alan Murray, an editor at Fortune magazine:
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Seems pretty material to me….. https://t.co/mionSHmgWo
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— Alan Murray (@alansmurray) July 5, 2016
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@alansmurray Yes, it was material to you — BS article increased your advertising revenue. Just wasn't material to TSLA, as shown by market.
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— Elon Musk (@elonmusk) July 5, 2016
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@alansmurray If you care about auto deaths as material to stock prices, why no articles about 1M+/year deaths from other auto companies?
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— Elon Musk (@elonmusk) July 5, 2016
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Since the fatal accident in Florida, Autopilot has been blamed for two more Tesla crashes—one in Pennsylvania and one in Montana, although neither involved injuries.
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Tesla Driver Involved in Fatal Crash While Using “Autopilot” Semi-Autonomous Mode
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Semi-Autonomous Cars Compared: Model S vs. BMW 750i, Infiniti Q50S, Mercedes S65
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Tesla Offers Free One-Month Autopilot Trial to Owners
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In a statement, Tesla says it “has not received any communication from the SEC regarding this issue.” In an unrelated tweet sent before the SEC’s actions were announced, Musk reaffirmed that Autopilot is still in the beta-testing stage and will remain so until it has logged data from one billion miles of real-world driving at the hands of Tesla owners.
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This story originally appeared on Road & Track.
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