Tesla / SolarCity: Governance Conflicts, Disclosure Shortcomings


Tesla Motors – TSLA / SolarCity - SCTY

Tesla / SolarCity: Governance Conflicts, Disclosure Shortcomings

Analyst Summary:  In the past we wrote of undisclosed problems found each at Tesla and SolarCity.  Even if since resolved, which is not necessarily clear in the case of Tesla, some of the key players remain. To our view, prior undisclosed activities leave open the risk for governance conflicts and potential disclosure weaknesses today. With a proposed transaction on deck, revisiting upon our earlier reports all the more pressing.  We include two of them here; one on Tesla, the other on SolarCity.  We also include the disclosures regarding “Related Party Transactions” that appeared in the Tesla Proxy filed 15-Apr-2016.  The overlap between Tesla and SolarCity is so significant as to reduce the term “arms-length” to little more than an unpersuasive, if not cynical, talking point.   

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Notes: The SEC did not disclose the details on investigations referenced above. The SEC reminds us that its assertion of the law enforcement exemption should not be construed as an indication by the Commission or its staff that any violations of law have occurred with respect to any person, entity, or security.  New SEC investigative activity could theoretically begin or end after the date covered by this latest information which would not be reflected here.

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