The Securities and Exchange Commission is investigating Tesla after it failed to disclose the fatal crash of a Model S cruising on Autopilot immediately to investors, the Wall Street Journal reports. Tesla sold $2 billion worth of stock in the days following the crash, and has argued that the crash was not material to the financial wellbeing of the company.


The crash, which killed Joshua D. Brown, occurred on May 7th. The stock sale began on May 18th.

Tesla has said that it notified the National Highway Traffic Safety Administration on May 16th, nine days after the incident, and before it was aware that Autopilot was active during the incident. Tesla sent its own investigator to Florida, where the crash occurred, on May 18th. It completed its internal review of the data from the crash during the last of week of May, though exactly what the company knew and when still has not been disclosed.


NHTSA handles road safety-related matters, as well, not financial matters. Tesla informed the public of the crash on June 30th, in a blog post titled “A Tragic Loss.”

The crux of the SEC investigation, then, will be what is considered “material” to investors. Under current federal law, companies must disclose all “material” information – that is, information that can substantially affect the value of a company – to all investors at the same time. In other words, you can’t strategically leak information to some investors, while leaving others in the dark, because that’s how insider trading happens.

But the issue that appears to be at hand is whether or not the knowledge of a fatal Autopilot crash, with Autopilot being a major selling point of Tesla’s Model S and Model X vehicles, would be considered material to investors.


Fortune was the first to note the discrepancy, but Tesla CEO Elon Musk implied that the information was not material in an awful tweet, which also implied that Fortune published the story to enhance its own coffers:

(As an aside, the story likely did not increase Fortune’s advertising revenue, because that’s not how the media business works.)



Tesla’s argument here appears to be that because its share price didn’t suffer, the crash was therefore not material. On May 6th, 2016, the day before the crash, Tesla’s shares traded at $214.93. At close of trading today, they were at $224.78.

It’s unclear where the SEC investigation will shake out right now. What is or is not considered “material” is often defined by corporations themselves, and a decision on whether or not something is material is often decided by a court after an angry investor sues. But no investor lawsuits are flying just yet, this one is all federal investigators.

We’ve reached out to Tesla for comment on the report, and will update when we hear back. More on this as we get it.


UPDATE 5:06 PM ET: A Tesla spokesperson had this to say about the report:

Tesla has not received any communication from the SEC regarding this issue. Our blog post last week provided the relevant information about this issue.