Tesla’s Slow Response to the SEC

Posted by Angie Goertz on Nov 30, 2016 9:17:29 AM


While Tesla’s cars can accelerate from zero to 60 miles per hour in mere seconds, the company’s communication with the Securities and Exchange Commission over its accounting took months. 

According to a Market Watch report, after Tesla filed a joint proxy statement and prospectus announcing its proposed acquisition of Solar City Corp on Aug. 31, the SEC reached out regarding the company’s accounting. Several letters between the SEC and Tesla’s lawyers overseeing the acquisition, five amendments to the original registration filing and at least one conference call followed. As the report cleverly states, the company got the memos, but not the message.

In mid-September, the SEC listed specific concerns with the company’s use and presentation of non-GAAP measures, including “individually tailored measurement” and unacceptable “boilerplate” language. Instead of responding to the SEC’s recommended changes, Tesla stated that it was either reviewing the updated guidance or would make changes later. No dice, said the SEC. They wanted answers. This prompted a more committed response later on in the month.

Tesla was willing to retitle “cash flow from core operations” to language that differentiates it from a measure of operating cash flows. Tesla also agreed to a non-GAAP measure label.

Per Market Watch, how the company measures and informs investors about its cash flow is significant because it hasn’t engaged in positive operating cash flows over the last couple years.

 Finally, on Oct. 12, the SEC approved the registration statement and, zooooom, closed the matter.

Topics: Compliance, SEC, Tesla