Three disgruntled Tesla Inc. (TSLA) shareholders continue to add details to a lawsuit alleging that the electric automaker misled investors about its Model 3 manufacturing capabilities, according to reports from websites Law360 and The Street.
Plaintiffs Kurt Friedman, Uppili Srinivasan and Gregory Wochos amended their original class action securities lawsuit last month, adding that their investments had been hurt once again by the negative market reaction to Tesla’s production update in November. The investors initially filed a lawsuit against Tesla, CEO Elon Musk, current CFO Deepak Ahuja and former CFO Jason Wheeler in October 2017.
They alleged that Tesla, Musk, Ahuja and Wheeler “misrepresented to investors the then-current state of affairs” of Model 3 production. According to the plaintiffs, while the trio told markets that the company was on track to 5,000 Model 3s per week before the end of 2017, they were separately being told by Tesla executives that this was an impossible goal.
The plaintiffs stated that Musk and Ahuja regularly visited the company’s Fremont plant and therefore should have known that the production schedule they fed to investors was based on lies. They also said that Tesla lied about fully automating its assembly line in August 2017. In September 2017, they claimed that major portions of the Model 3 were “still being banged out by hand.”
"Beginning on May 3, 2017 and continuing throughout the class period, [the] defendants misrepresented to investors the then-current state of affairs with respect to whether the company was on track to mass produce the Model 3 in 2017, and whether progress had been made supporting [the] defendants claims that 5,000 Model 3s per week would be produced before the end of 2017,” the plaintiffs said, according to The Street. “[The] defendants statements were false."
They added: "Serious supply chain and production problems existed by the beginning of the class period, including incomplete and/or non-existent automated production lines, causing unresolved bottlenecks at both the Company's Fremont, California assembly line and at Tesla's gigafactory, its purportedly state of the art, Nevada battery manufacturing facility. These issues rendered mass producing the Model 3 in 2017 impossible. Defendants knowingly or recklessly misrepresented the then-existing facts on the ground, and misrepresented the company's ability to mass produce the Model 3 by the end of 2017." (See also: Tesla 'On The Verge' of Bankruptcy: Vilas Capital.)
Tesla’s shares have fallen about 28% since hitting a high of over $385 in June 2017. (See also: Tesla Overtakes Apple As Most-Shorted US Stock.)