Tesla, the maker of high-performance electric vehicles, has associated its name with high technology and the future. In its May 4, 2016 First Quarter 2016 Shareholder Update letter, it discussed its plans for its Model 3 vehicle, saying, “In the first week of taking deposits for Model 3, we received more than 325,000 reservations despite no advertising or paid endorsements. This implies about $14 billion in future sales, making the Model 3 introduction the biggest consumer product launch ever.” Yet more than a year later, a Wall Street Journal article claimed that in the third quarter of 2017, the company had made only 260 Model 3s—or an average of three per day. Had the company painted a wildly inaccurate picture of its prospects? The complaint for this class action alleges exactly that.
The class for this action is all those who acquired common shares of Tesla, traded on the NASDAQ, between May 4, 2016 and October 6, 2017, and were damaged because of the alleged corrective disclosures.
After touting the 325,000 first-week reservations for the Model 3, the May 4 letter went on to say, “We are on track to achieve volume Model 3 production and deliveries in late 2017.”
On August 5, 2016, in its Q2 Form 10-Q, Tesla again claimed to be “on track to achieve volume production and deliveries of Model 3 in late 2017. … We … are targeting an overall vehicle production level of 500,000 vehicles, including Model S, Model X and Model 3, in 2018.” It repeated the same claim in its Q3 Form 10-Q.
On May 10, 2017, in its Q1Form 10-Q, it said that “preparations at our production facilities are progressing to support the ramp of Model 3 production to 5,000 vehicles per week at some point in 2017…” This statement was made nearly halfway through 2017.
On an August 2, 2017 earnings call, Elon Musk, the company’s CEO and co-founder, said he believed the company remained on track to produce 5,000 vehicles a week by the end of the year.
All these statements, the complaint alleges, were false, misleading, or made in reckless disregard of the facts. The complaint alleges that the company “had severely inadequate inventory and was woefully unprepared to launch Model 3 Sedan as anticipated.”
According to the complaint, the truth began to emerge only when the Wall Street Journal published an article on October 6, 2017, entitled “Behind Tesla’s Production Delays: Parts of Model 3 Were Being Made by Hand” which exposed the company’s three-a-day average production in the third quarter.
In response, Tesla’s stock price fell 3.91%.
The complaint claims that Tesla and those in control of it violated the Securities Exchange Act of 1934 by making untrue statements or omitting material facts and attempting to defraud or deceive shareholders as to Tesla’s true situation and prospects.
Article Type: LawsuitTopic: Securities
Most Recent Case Event
Tesla Misleading Production Projections Securities Complaint
October 10, 2017
Tesla, the maker of high-performance electric vehicles, has associated its name with high technology and the future. In its May 4, 2016 First Quarter 2016 Shareholder Update letter, it discussed its plans for its Model 3 vehicle, saying, “In the first week of taking deposits for Model 3, we received more than 325,000 reservations despite no advertising or paid endorsements. This implies about $14 billion in future sales, making the Model 3 introduction the biggest consumer product launch ever.” Yet more than a year later, a Wall Street Journal article claimed that in the third quarter of 2017, the company had made only 260 Model 3s—or an average of three per day. Had the company painted a wildly inaccurate picture of its prospects? The complaint for this class action alleges it has done exactly that, in violation of the Securities Exchange Act of 1934.
tesla_misinformation_securities_complaint.pdfCase Event History
Tesla Misleading Production Projections Securities Complaint
October 10, 2017
Tesla, the maker of high-performance electric vehicles, has associated its name with high technology and the future. In its May 4, 2016 First Quarter 2016 Shareholder Update letter, it discussed its plans for its Model 3 vehicle, saying, “In the first week of taking deposits for Model 3, we received more than 325,000 reservations despite no advertising or paid endorsements. This implies about $14 billion in future sales, making the Model 3 introduction the biggest consumer product launch ever.” Yet more than a year later, a Wall Street Journal article claimed that in the third quarter of 2017, the company had made only 260 Model 3s—or an average of three per day. Had the company painted a wildly inaccurate picture of its prospects? The complaint for this class action alleges it has done exactly that, in violation of the Securities Exchange Act of 1934.
tesla_misinformation_securities_complaint.pdf