Tesla Motors is facing scrutiny of its disclosure practices after failing to report a fatal crash involving its autopilot technology when it sold shares in May.
The May 7 accident in Florida killed Joshua Brown, 40, while he was driving a Tesla Model S on autopilot. The automaker disclosed June 30 that the National Highway Traffic Safety Administration had opened an investigation into the performance of the self-driving technology during the crash.
But in the prospectus for its May 18 offering of more than 9.5 million shares, Tesla did not mention the crash. The offering raised more than $2 billion.
“To put things baldly, Tesla and Musk did not disclose the very material fact that a man had died while using an auto-pilot technology that Tesla had marketed vigorously as safe and important to its customers,” Fortune said in an article Tuesday.
Musk responded to the article by saying the accident was “not material to the value of Tesla.”
“Indeed, if anyone bothered to do the math (obviously, you did not) they would realize that of the over 1M auto deaths per year worldwide, approximately half a million people would have been saved if the Tesla autopilot was universally available,” he told Fortune in an email.
“We face inherent risk of exposure to claims in the event our vehicles do not perform as expected resulting in personal injury or death,” the filing said. “We also may face similar claims related to any misuse or failures of new technologies that we are pioneering, including autopilot in our vehicles.”
A product liability claim, the company added, “would have [a] material adverse effect on our brand, business, prospects and operating results.”
John Coffee, a law professor at Columbia University, said he believes Tesla should have disclosed the accident earlier, and the fact that its stock didn’t fall following the news of the crash doesn’t prove the event wasn’t material.