WASHINGTON -- The Securities and Exchange Commission is probing Tesla Motors Inc. for a possible breach of securities law stemming from the company’s decision not to inform investors of a May 7 fatal crash involving an Autopilot automated driving system, according to a newspaper report.
The Wall Street Journal reported the SEC probe Monday, citing a person familiar with the matter.
The SEC is scrutinizing whether Tesla should have disclosed the accident as a "material" event, or a development a reasonable investor would consider important, the paper said.
An SEC spokeswoman declined to comment.
A Tesla spokeswoman said the company “has not received any communication from the SEC regarding this issue," adding a recent blog post "provided the relevant information about this issue."
Tesla shares fell 1.1 percent to $222.30 in after-hours Nasdaq trading in New York as of 7:59 p.m. ET.
The reported probe heightens scrutiny of Tesla’s handling of the May 7 fatal crash, in which a Model S crashed into a tractor trailer while the sedan’s Autopilot automated driving system was engaged. The driver of the Model S, Joshua Brown, died from injuries sustained in the crash.
The Journal reported the SEC probe is in a “very early stage” and may not lead to any regulatory enforcement action, citing a person familiar with the situation.
Tesla reported the crash to the National Highway Traffic Safety Administration on May 16, the company said last week. At that point, Tesla had “barely” begun its investigation into the crash, and sent its first investigator to inspect the car and crash site in Florida on May 18, the company said.
NHTSA opened a preliminary evaluation on June 28 into the design and performance of the automated driving aids in use at the time of the crash, and announced the probe on June 30, making it public. The National Transportation Safety Board has also opened a probe into the crash, according to a spokesman.
Stock offering
As Tesla’s investigation was getting underway, it raised about $1.46 billion through a stock sale that concluded on May 19.
James Spindler, a law professor at the University of Texas at Austin, says the timing of Tesla’s stock sale may raise eyebrows because of the heightened risks of non-disclosure that typically accompany stock sales. At the same time, he said the fact that Tesla’s stock rose in the first day of trading after NHTSA announced the crash and investigation could lead experts to believe investors viewed the event as non-material.
“It isn’t necessarily dispositive, but that would tend to indicate that it wasn’t perceived that horribly negatively,” by investors, Spindler said.
In its July 6 blog post, Tesla said a crash involving Autopilot was a “statistical inevitability.” Tesla also said it was the first fatal collision in more than 100 million miles driven with Autopilot engaged and that its users are “statistically safer” than drivers without the system.
“Given the fact that the 'better-than-human' threshold had been crossed and robustly validated internally, news of a statistical inevitability did not materially change any statements previously made about the Autopilot system, its capabilities, or net impact on roadway safety,” Tesla said.
Pioneer image
The timing of Tesla's disclosures about the accident has become an issue for the company in part because Autopilot is key to its image as a pioneer in automotive technology. No other automaker has released to the public a system in which a person can drive with hands off the wheel for an extended period while a car is in motion.
Tesla has said Autopilot should be used as a backup and not as a replacement for the driver, who should keep hands on the wheel all the time, and it has cautioned that the system is in beta, or test, mode.
Musk last week used his Twitter account to mount a defense of Tesla's decision not to disclose the accident to the public until June 30, when NHTSA said it was launching its investigation.
NHTSA said last week that it was also looking into a July 1 crash in Pennsylvania of a Tesla Model X SUV to determine whether Autopilot functions were engaged at the time of the accident.
Tesla also said on Monday that it was looking into a crash in Montana. In that crash, according to a report on Electrek, a clean technology transport news website, a Model X driver said Autopilot was engaged when the car slammed into a guardrail. Tesla did not provide any further details.
Lawyers for the family of Brown said they are investigating the circumstances of the crash, and awaiting conclusions from police and federal agencies. Paul Grieco, one of the lawyers for the Brown family, told Reuters his firm has received calls from other Tesla owners involved in accidents, some involving autopilot and others not.
Reuters contributed to this report.
