Sounding Alarm, Investor Demands Tesla’s Books

(CN) — Urging a court to let him inspect Tesla’s books, an investor says the electric car manufacturer offers contradictory explanations for missed sales goals, amid “troubling” executive turnover.
     Shahid Haque brought the Aug. 12 complaint in Delaware Chancery Court against Tesla Motors Inc., of Palo Alto, Calif.
     Haque says the company’s promise of a future dominated by electric vehicles has attracted “an almost cult-like following among investors and car buyers alike.”
     Aware that investors “pore over” its earnings reports, the complaint says, Tesla “fuels excitement amongst its shareholders by setting for itself ambitious targets.”
     One such target, Haque says, includes a plan, announced this May, to produce 500,000 all-electric vehicles in 2018. But the complaint notes that Tesla has produced only a little over 100,000 since its initial public offering in 2010.
     Indeed, “since 2014, Tesla has frequently missed its own sales guidance, and has been forced to revise its guidance on several occasions,” according to the complaint.
     For instance, Tesla sold only 14,820 out of a projected 16,000 vehicles in the first quarter of 2016, and only 14,370 out of 18,345 vehicles in quarter two, the complaint says.
     Yet Tesla and its executives “have repeatedly assured investors that there is no problem with demand for its vehicles, and offered numerous excuses for sales shortfalls,” the complaint continues.
     “Among other excuses, Tesla has blamed production constraints, such as factory shut-downs to give workers ‘rest,’ ‘parts shortages’ and production ‘ramps.’ Tesla has also blamed sales misses on the fact that customers were absent and unable to take delivery due to holidays; Tesla being unable to complete deliveries because of winter storms; or Tesla being unable to complete deliveries because of shipping problems.”
     But Haque says those explanations “either contradict the company’s own prior statements, are patently implausible, or can be shown to have been used by the company in the past to mislead investors.”
     Plus, the “troubling departures of key senior executives from Tesla’s finance, production and communications departments in just the past year” indicate further wrongdoing, according to the complaint.
     Haque says his June 2015 demand to inspect Tesla’s books and records turned up little.
     He says he made another demand last month, after Tesla “produced reams of irrelevant data.” With Tesla having refused to comply, Haque wants the court to intervene.
     “There is a credible basis to question Tesla’s policies and procedures regarding its reporting of financial information to shareholders and to infer that shareholders have not received the true picture concerning demand for the company’s vehicles and the purported existence of capacity constraints,” the complaint says.
     Haque is represented by Craig Springer with Andrews & Springer in Wilmington, Del.
     Tesla did not return a request for comment Tuesday.

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