Official Documents Reveal SEC Probed Tesla Over Model 3 Reservations

Red Tesla Model 3 at handover event


Tesla Model 3

Elon Musk with one of the first production Tesla Model 3 vehicles at the initial handover event

Probes Reporter, an investment research service, posted documents revealing a previous, ongoing U.S. Securities and Exchange Commission (SEC) investigation surrounding the Tesla Model 3.

The probe began well over a year ago, in June of 2016. Apparently, the case was closed in May of 2017, however, Probes Reporter believes there may still be at least one SEC probe that has yet to be resolved.

The initial probe was in regards to Model 3 reservation details, including any cancellations or refunds, as well as how Tesla planned to spend the money. It also involved a Tesla stock upgrade via Goldman Sachs that strangely came ahead of Tesla announcing a multi-billion dollar stock offering, which was underwritten by the same bank. Additionally, the probe requested Model 3 delivery timelines.

Tesla Model 3

Inside the Tesla Model 3

“A June 7, 2016, SEC document ordering the investigation said the commission had information suggesting Tesla may have made false statements of material fact’ about the Model 3, or failed to disclose material facts that would have been important to investors. In addition, the commission also suspected that someone was disclosing insider, non-public information about Tesla to others.

To that end, a subpoena sent to Tesla on June 15, 2016, demanded the identities of everyone who knew about the company’s May 2016 stock offering in advance. It also called on Tesla to turn over supporting documents for the company’s public claims about the number of Model 3 reservations, even asking for customer names and credit card numbers.”

Probes Reporter asserts that all of this information should have been made readily available to investors. However, Tesla doesn’t choose to disclose such information, and it’s not the only company that functions this way. Probes wrote:

“Investor focus on the Model 3 has been intense this past year, with (CEO Elon Musk) and his crew fanning the flames. With this backdrop, we think investors most certainly would consider an SEC probe that asked a lot of questions about the Model 3 to be material and, therefore, would have wanted to know about it.”

Nonetheless, it doesn’t really matter what Probes believed. Tesla didn’t have to hand over the information and the SEC was also unwilling to assist Probes by sharing whatever it had previously obtained. The SEC cited law enforcement grounds as its reason for concealing any documents. Probes feels this may imply that there is still some ongoing, unresolved issue. However, there is no proof of such.

The information that Probes shared online doesn’t include any of Tesla’s responses to the SEC, though it does show a note sent to Tesla that officially concluded the investigation without any enforcement action. It reads:

“Based on the information we have as of this date, we do not intend to recommend an enforcement action by the Commission against Tesla Motors, Inc.”

So, whatever the SEC did uncover was obviously not enough to warrant any consequences. While Probes Reporter insists that there’s more to the story, perhaps the SEC is just not at liberty to divulge Tesla’s information, especially since nothing came of the investigation.

Sources: Probes Reporter via San Francisco Chronicle, Mercury News

Categories: Tesla

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55 Comments on "Official Documents Reveal SEC Probed Tesla Over Model 3 Reservations"

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Is this like being investigated for hiding the costs of emissions equipment?

No, it’s like Tesla being investigated for how they handled the money they got for the reservations.

No, it is like the SEC finding that Tesla did nothing unlawful with how they handled the money they got for the reservations.

The letter explicitly states that it is *not* a statement that Tesla did nothing unlawful. Perhaps you could consider reading it.

You desperate Tesla longs are too much. Buy at the high, did you?

If you want to get pedantic, it is the “Presumption of Innocence” under our system of law that says that when when combined with a decision by the proper authorities that there is no need to act is the very definition of being cleared of wrong-doing under our system of law.

Fortunately we still live in an “innocent until proven guilty” system (at least for now).

Do we, really? Maybe in the juridical sense but these days reputations get destroyed on the open internet way before the courts cast their judgments.

Yup. It’s bad enough that the news media is free to destroy anyone’s reputation before they have been convicted of a crime; they can repeat any accusation they like so long as they occasionally throw the word “alleged” into their accusations. But now it’s gotten even worse, with people being summarily fired because of allegations of harassment, not only without any due process of law, but without even having a chance to defend themselves in any formal process! Welcome to a new era of “witch hunts”. In the McCarthy era, it was people accused of being communists and the House on Un-American Activities Committee; these days, it’s people accused of sexual misconduct, without any differentiation being made between those who are actually sexual predators and those who, like Senator Al Franken, merely showed bad judgement. Mere accusations result in being tried, convicted, and sentenced in the media, with all too many companies cravenly going along with public pressure to fire people who have not had any chance to confront their accusers, nor defend themselves before a judge or jury. Under U.S. law, everyone is presumed innocent until proven guilty in a court of law. That is one of the founding… Read more »

Franken is a politician, and therefore his career is by definition and by choice a popularity contest. His undoing is the result of an image problem arising entirely from his own irresponsible behavior. He reaped what he sowed.

You can do a lot better in finding an example of presumption’s destructive effect on a person or society.

With the exception of the IRS. Then, you are guilty until proven innocent.

Ah, serial anti-Tesla shorter troll and pretend Tesla owner “concern” troll 4E once again screws the pooch on the basic facts concerning a Tesla matter.

No big surprise there.

I could see a problem if they said they had more reservations than they had before the stock offering.

Thanks for posting this here.

For curiosities sake I went over to Electrek to see what they had to say and there isn’t any mention of it. Not surprising I guess considering the financial investment they have in Tesla, but it makes them look really bad when the write about everything else Tesla.

@Steve said: “For curiosities sake I went over to Electrek to see what they had to say and there isn’t any mention of it…it makes them look really bad…”

Lol… So @Stevy thinks Electrek looks bad for not reporting a non-story … that SEC looked into some Tesla reporting and found nothing needing action taken.

TSLA Shorters have gotten to be like Flat Earthers… divorced from reality.

This isn’t a non story, there are two stories. The later, which is investigated for insider trading is about as serious as it gets.

You guys don’t like it so you start with the ‘short’ nonsense. I wouldn’t gamble my money with Tesla, long or short. You sound like a complete dummy, especially when you don’t even discuss the topic.

Both investigations were closed with no action required. The didn’t find anything that was actionable. Do you have information otherwise?

If you were actually informed about electrek, you would know they rarely publish articles on the weekend. Probably something about living life outside the office. Go look back a few weeks and you will notice they publish only 1-2 articles, if any on s weekend.

This story was first reported on Thursday or Friday…

And don’t think for a second that the guys over at electrek weren’t aware of it.

It is Sunday. Typically on Sundays there are between zero and 1 new stories posted on that site. It isn’t active on Sundays. Besides, it was around 6 AM on the west coast when you posted. And you are trying to read in some implication based upon there not being any story on that site?

This is the exact problem with these sorts of accusations. You are implying something without support, purely out of YOUR bias, not upon any underlying facts. I’m sure we will see much more of this same type of mental illness in the responses to this story.

if you’d bothered to follow the sources insideevs provided you’d see the story has been out since friday. since you’re so inclined to ask others — what’s your handicap?

I know exactly what the dates are, but you’ve lost the plot. The OP complained that by 6 AM PST Sunday, that since Elektrek hadn’t written a story “it makes them look really bad”

If you say it isn’t about Sunday, like I posted about, the only other day left in the timeline is Saturday. Are you claiming that not posting something within ONE day (by Saturday), that it makes an EV website look bad for not covering it?

Not only is that even sillier than the OP’s claim, but you are also implying that it also makes Insideev’s “look really bad” because they also didn’t run a story on it on Saturday either, just like the other site.

All you have done is successfully point out how ABSOLUTELY silly the OP’s post was.

I stick 100% behind my comments about a Sunday 6 AM standard being silly. If you think Sunday isn’t the issue and you want to move the goalposts and make it about Saturday, go ahead and post your justification.

Steve wrote another Tesla hating post:

“Not surprising I guess considering the financial investment they have in Tesla, but it makes them look really bad when the write about everything else Tesla.”

Wow! You have certainly mastered the “art” of accusing others of your own faults, haven’t you?

What about your own financial investment against Tesla, hmmm? How much money have you lost just this year betting for Tesla to fail, by shorting the stock?

Of course, you won’t answer; Tesla haters almost never admit they are shorting the stock, despite their obsession with Tesla’s finances, often made painfully obvious in their posts.

Your posts are laughable, the fact you don’t see the difference between someone posting on a message board and a publication says all that really needs to be said. And for the last time, I wouldn’t gamble my money long or short on Tesla. Period.

Steve, I have no personal opinion of you at all.

I would find this to be more of a news story if the SEC found some “irregularities” in Tesla’s handling of the Model 3 reservations. If they didn’t find any, or if there is an on-going investigation, I don’t really see that being particularly newsworthy, especially since we are supposed to be presumed innocent until proven guilty.

To be honest, the reservation investigation isn’t as big deal to me. The insider trading is a bigger deal to me. And I’m also interested to see who else found out about the leaked announcements and who might gain the most from that information.

Every little thing is a news story with Tesla, like Elon having hot dogs and whiskey on the roof of a giga factory is a ‘story’. Of all things that should be reported, this relates to a public company and could effect shareholders and reservation holders. The picking and choosing by some publications makes me wonder what info they get, what they chose to disseminate, and how they might profit off it in either direction (positive or negative news).

They closed both investigations with no chargers. What part of this do you not understand?

“Jun-2016 to 31-May-2017, the SEC conducted a formal investigation of Tesla Motors …. The probe ended on 31-May-2017 with no enforcement action recommended.”

Gee, I can’t wait to see all the bonehead posts whining about the SEC finding that Tesla did absolutely nothing illegal. The SEC is mandated to investigate all complaints it receives, whether the complaint has merit or not. In this case they found there was no merit to the complaints.

Some TSLA shorters complain to the SEC. The SEC investigates because they are required to investigate all complaints, and finds no violations. Now shorters are trying to make hay out of Tesla having been investigated. Sick

As a shareholder I would like to hear Tesla’s official response to the inquiry.

What exactly do you “need” to hear from Tesla? There are no charges being filed. What exactly are they supposed to tell you about something that the SEC found that they didn’t do?

A postmortum, and a plan for reducing even the appearance of impropriety would he a good start.

Heck, I can give you that.

Step 1: Stop listening to the trolls who short Tesla who fabricate new false accusations on a daily basis.

Step 2: Go back and repeat Step 1.

Funny how them being cleared and having no charges makes folks like you start talking about the appearance of impropriety. You are doing exactly what I said in my other post. Shorters made accusations that turned out to be false, then trolls like you try and and spin the accusations being determined to be false into an excuse to mumble about impropriety.

What is it about the SEC investigating and finding no reason to take any actions that leads you to talking about “impropriety”.

Because here is what the Probes Reporter has been forced to put at the bottom of every single page on their site:

“no conclusion of wrongdoing should be inferred from the fact that an investigation has been initiated by the SEC.”

As I understand it, the SEC looked in to whether Tesla really had taken in x number of Model 3 reservations. My concern was and continues to be, why won’t Tesla be straight with shareholders about just how many Model 3 depositors it has. The bigger question is, why is Tesla so coy about reporting its production numbers for not just cars, but for power walls, power packs, solar panels, solar roofs, and all the other stuff it builds and sells. Their financial reports are pretty sketchy in this regard.

The SEC obviously did not find anything criminal, but seriously, why the cloak of secrecy???

Why does it matter what the Probe believes or insists?

Tesla was “fanning the flames” by anti selling the Model 3?

Golly, some have no understanding of high volume manufacturing. They think post production rework is abnormal. They think companies don’t provide volume forecasts to their supplies. They think production delays don’t occur at other companies.

Heck, they don’t research at all. Even Bloomberg’s Salim Moorsy (new MBA) thinks industrial electricity rates are $1.00/kWh!

Moorsy didn’t say industrial rates are $1/kWh. He said demand charges cause Tesla to pay that much. I don’t know if that’s true, but it’s plausible for low usage/high peak profiles like most Superchargers.

Say a Supercharger gets 10 cars/day on average but has 4 cars charge at 100 kW simultaneously on a Sunday evening. Usage is 300 charges * 50 kWh average = 15,000 kWh, with a peak of 400 kW. The bill might be:

15,000 kWh * 0.10/kWh = $1500

400 kW * 25.00/kW = $10,000

That’s $11,500 for 15,000 kWh, almost 80 cents/kWh before we count connection charges, taxes, etc.

Moorsy also explained they can reduce demand charges by installing Powerpacks to smooth the profile. This only makes sense at higher volume locations, though.

See? They just won’t do any research and they will even back each other’s nonsense with yet more nonsense.

Go look at Russell Graves’s blog on this very topic. Better yet, find out for yourself how industrial electricity billing works.

Due process is meaningless in the era of fake news.

Due process has been an issue for as long as I can remember.

What a laugh.

“The SEC cited law enforcement grounds as its reason for concealing any documents. Probes feels this may imply that there is still some ongoing, unresolved issue.”

The SEC has repeatedly warned Probes Reporter NOT to make those sorts of implications. The SEC even made them post this:

“The SEC reminds us that its assertion of the law enforcement exemption should not be construed as an indication by the Commission or its staff that any violations of law have occurred with respect to any person, entity, or security.”


Tesla investigated for shady business practices? Color me shocked!

I think the only remotely shady thing they’ve done is non-GAAP reporting. Follow that with the ZEV credit program in California.

I think it was reasonable for the SEC to investigate, but I saw the line at my Service Center of people making 1 or 2 reservations, on DAY 1. I have already chatted with an existing Model III owner, and a buddy of mine is maybe getting his today or tomorrow. I probably know 50 people who do not already own a Tesla who have reservations for one. Do I think there was cause for concern? Not in my sample space.

Someone go investigate the pre-orders of the Nikola One.

Every time Tesla has released non-GAAP numbers, they also publish the GAAP numbers and the details on exactly what the adjustments are between GAAP and non-GAAP.

non-GAAP is a 2-fer. The company is providing double the financial information that companies who just provide GAAP give to investors. You get all the same GAAP data, plus the non-GAAP numbers.

I’ve never understood people complaining about getting all the same GAAP data they get with every company, PLUS additional non-GAAP data that simply provides more info on top of GAAP.

Tesla wants to have it both ways:

1) treated like a small boutique auto manufacturing to play the David vs Goliath card.

2) play fast and loose with the non-disclosure of information (reservation deposits, actual production targets, etc.).

NOTHING prevents Tesla from putting reservation deposits in an escrow account to ensure the consumer the money will be available should the company go belly-up. However, Tesla can claim it as Tesla asset and use the money (to show additional cash reserves)

Grow Up Tesla – Put Your Big Boy Pants On

1) Tesla IS a small “David” sized car maker. They would fall towards the bottom of this list:

2) Tesla discloses their customer deposits every single quarter right on their website under:

Current liabilities
–> Customer deposits 686,084

3) Nothing Tesla is doing is forcing you or anybody to put down a deposit. If you don’t like how Tesla does deposits, wait for an Inventory car that you like to come up and buy it without a deposit. By the way, if you go down right now to nearly any ICE car dealership and put down a deposit on a special order, IT DOES NOT GO INTO ESCROW!!! It is (by law) booked as income for the dealership just like with Tesla, and then accounted for as a liability. The dealership owes taxes on that income, etc.

Put your own big pants on, and quit complaining about Tesla handling deposits for special orders exactly according to industry standards, and in 100% accordance with the law.

“NOTHING prevents Tesla from putting reservation deposits in an escrow account to ensure the consumer the money will be available should the company go belly-up.”

I don’t know that you actually intended to write a Tesla bashing post, MagnaCarta, but this certainly does fit the pattern of serial Tesla bashers pointing to perfectly standard business practices and trying to paint them as “strange” or “bad” just because Tesla is doing them.

If you can point to other auto makers putting deposits on cars into escrow, then do so. But I seriously doubt you can find any evidence of that being a common practice. Auto makers generally treat deposits as income, period.

@bro1999 likely thinks this also warrants investigation… looks fake:

“Tesla investigated for shady business practices? Color me shocked!”

GM fanboi’z crack me up. Getting investigated, and being cleared with absolutely no charges is bad? Wrong.

Want to know what is bad? When the investigation ends with nearly a Billion dollar fine after conceding to criminal charges involving 124 deaths, where they admit that it failed to disclose a safety defect to NHTSA and misled U.S. consumers about that same defect. Like GM:

How could you not see this coming before you posted? Did you really seriously think that as a GM super-fanboi that you could throw rocks from your glass house? Do you INTENTIONALLY post with the plan of making a fool of yourself, or are you completely incapable of predicting the outcome of your own actions?

Serial anti-Tesla troll GM fanboy/employee MadBro lamely tries to throw shade on Tesla, Color me shocked!

“Probes Reporter asserts that all of this information should have been made readily available to investors. However, Tesla doesn’t choose to disclose such information, and it’s not the only company that functions this way.” I’m not a business investor nor a stock investor, nor am I a “financial guy”. But I was exposed to a lot of discussion among investors in the years I spent on TheEEStory Forum (now defunct), as well as some months spent reading Tesla-related blog posts and comments in the cesspool known as “Seeking Alpha”. (I exposed myself to that to follow the old adage of “Know thine enemy.”) Nothing has surprised me more in learning about how companies operate, and how they treat their investors, than in how very little information is publicly disclosed by supposedly “public” companies. That is, companies which are publicly owned and therefore at least in theory, stockholders are the owners of those companies. I really cannot understand why companies routinely get away with withholding most of the information, the overwhelming majority of info, that anyone would want to know before deciding to make an investment. But the fact is that they can and do; they hide that sort of information… Read more »

Whats interesting is you agree with me and then go off on ‘short’ and ‘anti-tesla’ rants when someone posts critical info about the way Tesla is operated. Interesting psychology really.

Wow, the douchebaggery is strong in the comments on this article. Who woulda guessed!

Crap, now I’m all confused. I thought I was on Electrek..

What is more interesting that in coincides with Tesla going to junk bond sale instead of regula share sale last time it run out of money. New share sale is supposed to be complicated by pending SEC investigation.

It may get interesting if there is still another undisclosed SEC investigation pending. Junk bonds may be not a manageable option anymore with higher interest rates and deteriorating ratings.