Tesla Motors Inc (NASDAQ:TSLA) has been under pressure for several weeks now, with TSLA stock underperforming since its April highs.
But investors in Tesla stock have bigger worries than just its share price, based on recent headlines.
Dispatching with the rule of law appears to be America’s new trend. I’m not just talking about the FBI’s revelations about Hillary Clinton, but another government agency — the National Highway Traffic Safety Administration, which helped covered up a fatal crash from one of Tesla’s self-driving cars.
Fortune recently reported that a Tesla Model S crashed, killing its operator while the vehicle was driving autonomously on May 7. But TSLA stock and Elon Musk allegedly reported the incident to the NHTSA on May 16. Then, on May 18, TSLA raised $1.46 billion in a secondary offering, and then acquired Solarcity Corp. (NASDAQ:SCTY), but never disclosed the crash to the public.
The NHTSA stayed mum on the entire matter until June 30.
Musk claims the fatal crash “isn’t material” information.
Riiiiight.
TSLA issued this statement: “Tesla does not find it necessary, nor does any automaker, to share the details of every accident that occur in a Tesla vehicle. More than a million people die globally every year in car accidents, but automakers do not disclose each of these accidents to investors, let alone before those investigations are complete and without regard to what the results of those investigations end up being.”
Notice how perfectly parsed the statement is, as Tesla engages in classic smoke and mirrors.
TSLA attempts to turn the accident into an everyday event so it can dismiss it. However, given the weight that TSLA places on the future revenue stream of a self-driving car, one would think that it is unquestionably material. Because numerous federal agencies will need to approve and regulate these kind of vehicles, accident histories — particularly fatal ones – are intrinsically relevant.
That is, of course, unless the rule of law ceases to have meaning. For those who think that crony capitalism is irrelevant to the markets, think again.
TSLA received a $465 million loan from the federal government’s Department of Energy and also has a Obama fundraiser as a major backer. That’s a man by the name of Steve Westley. Tesla then turned around and paid the money back to the DOE nine years early. Why pay it back so soon? The loan was used to establish Tesla as a credible operation. With the full faith and credit of the federal government, it made it much easier for Elon Musk to then able to obtain private financing.
Obama had a private dinner with Elon Musk in February of 2015.
Oh, and SolarCity also picked up a $344 loan guarantee from the Department of Energy.
What else might raise some eyebrows? That Musk donated $5,000 in 2012 to the SolarCity Corporation PAC, $35,800 to the Obama Victory Fund 2012, and $30,400 to the Democratic National Committee.
Anybody else see a pattern here? I’m SURE it’s all just a coincidence.
Wait a second. The NHTSA sat on this news for 8 weeks, despite its adminstrator have earned a reputation very quickly as an aggressive regulator. He brought the hammer down on General Motors (NYSE:GM) early on after the ignition switch recall in the recent past.
Why did he suddenly go weak with Tesla?
That should give shareholders of TSLA stock plenty of comfort. Tesla doesn’t have to actually make money. Tesla doesn’t have to report material information. TSLA stock has a Crony Capitalism floor that will protect both its share price and its management.
As of this writing, Lawrence Meyers did not hold a position in any of the aforementioned securities. He is president of PDL Broker, Inc., which brokers financing, strategic investments and distressed asset purchases between private equity firms and businesses. He also has written two books and blogs about public policy, journalistic integrity, popular culture, and world affairs. Contact him at pdlcapital66@gmail.com and follow his tweets at @ichabodscranium.
