Tesla, Inc. publishes updated vehicle production and delivery data several times at the end of each quarter. These numbers change frequently and raise questions about the quality of the company's accounting function as sales in the department grow.  The changing numbers also give electric vehicle manufacturers executives and boards the opportunity to trade in advance with key information that often influences the stock price, according to an expert.
TSLA, + 4.71%
will release a press release shortly after the end of the quarter with a brief update of the number of cars produced and delivered in the last three months. This press release also indicates the number of vehicles being transported to the customer, and often the cumulative totals for these key figures, on an annualized basis.
When Tesla later officially announces quarterly earnings, usually one month after the end of the quarter
For example, on January 2, 2019, Tesla issued a press release on production and the fourth quarter delivery update, which saw the delivery of 245,240 vehicles in 2018 announced. Tesla also provided a breakdown for the 2018 total delivered models 3 (145,846) and the total delivered models S and X (99,394).
In the press release of 2 January, deliveries for 2018 were broken down into models. However, these figures showed that 236 more models were delivered 3 and 84 more models S and X for the year, as reported in full year-over-year (244,920).
When the press release for the fourth quarter of 2018 was released on January 30, the total number of S and X models shipped in 2018 was higher again, up 99,475 vehicles, or 81 more vehicles than on January 2.
Tesla's 2018 10-K with the auditor's report was only filed with the SEC on February 19, just three weeks after the announcement of the unaudited fourth quarter and full-year results. At the end of the year, the 10K has another new delivery number, 266 vehicles above the figure announced on 2 January and 32 more than at the time of announcement of the result. This corresponds to a new delivery number of 245,506 vehicles.
See also: Tesla short sellers continue to sow doubt, but the numbers support the result
This type of change also occurred in other periods, as the graph shows.
The majority of Tesla's automotive revenue is recognized when control is transferred to customers upon delivery. At an average price of $ 57,000 for the Model 3 and $ 72,750 for the Model S and X, this difference represents approximately $ 19.5 million more revenue for the year announced on January 2, 2018, than for each of the years four quarters of the year was announced cumulatively.
$ 19.5 million of additional revenue represents only 0.11% of the $ 17.6 billion in revenue that Tesla would expose for full-year 2018. This is much less than the rule of thumb, which accounts for 5% of revenue viewed as a significant difference to investors.
Still, these numbers are important when investors believe they are – and Tesla shares often react to news from the company.
Josepha, Assistant Professor of Accounting at Indiana University, told MarketWatch, "Information is important when you're there is a significant likelihood that a sane person thinks it's important. While differences in delivery volume may not be material to the annual accounts, any message from Tesla often seems to have an excessive impact on investor perceptions of the future of the company.
A Tesla spokesperson told MarketWatch that the company's production / delivery press release indicates that numbers may change slightly.
The spokesman said the company does not believe that these differences are a matter of control, but rather the final validation of all papers, and that the differences are insignificant. According to MarketWatch, the delivery figures could vary slightly.
Schroeder told MarketWatch, "Companies expect rounded figures for submissions and press releases, but as the year-end differences accumulate into something more important, they have the potential to change how users interpret information. For this reason, it is important for companies such as Tesla to invest in strengthening controls in reporting and disclosing key data to ensure consistent financial reporting. "
A close follower of the company said Tesla expects production and delivery to be different than other automakers.  "There is growing evidence that Tesla is failing to meet the standards of production and delivery monitoring and reporting standards that are commonplace among major manufacturers. This allows Tesla maximum flexibility in this phase of its development as an industrial enterprise, "said EW Niedermeyer, senior editor for mobility technology at TheDrive.com.
Niedermeyer told MarketWatch that Tesla is a new automotive company and feels it has a duty to provide detailed information on production and delivery progress.
"Tesla wanted to show that they are capable of ramping up Production of Model 3 from 2017 onwards. This is not a problem when the big automakers introduce a new model. They barely disclose vehicle delivery data, and regular production data at model level is almost gone, "said Niedermeyer.
CEO Elon Musk and Tesla are bound by a settlement agreement with the SEC in September 2018, the CEO and the company allegedly using false and misleading statements about a possible transaction to privately take Tesla by tweet.
Musk again caught the SEC's attention in February 2019 for inefficiently controlling material nonpublic information, including production and supply data. After markets closed on February 19, Musk tweeted an obvious update to the guidelines on car production:
Several hours later, Musk released another tweet to correct the earlier one:
SEC officials again asked Musk and Tesla if Musk's new February 19 tweets will be ready for the Tesla pre-clearance process required by the September 2018 agreement respected. Musk and Tesla lawyers confirmed that Musk's guidance on production figures was not approved in advance by company lawyers.
In a rewrite of the original settlement of September 2018, Judge Alison instructed Nathan Musk and Tesla on April 27 to obtain prior approval from an experienced Tesla securities attorney for any written communication containing information on various financial issues, "production figures, or Sales or delivery figures (whether actual, forecasted or forecast) that have not been previously released via pre-approved written communications issued by Tesla or that differ from previously published official company policies.
Tesla has also achieved significant bookkeeping and finance sales over the past three years. Dave Morton, the company's chief accounting officer, left the company on September 4 after just one month. According to CNBC.com, Morton was reportedly determined to take over Deepak Ahuja as CFO.
According to the company, after retiring in 2015, Ahuja returned to the position of CFO and announced in January of this year that he would retire. Tesla has appointed Zachary Kirkhorn, who has been with Tesla since 2010 and has been vice president of finance, financial planning and operations since last December, CFO in March. Vaibhav Taneja, previously the company's corporate controller, was also named Tesla's new Chief Accounting Officer.
Tesla's Insider Trading Policy, as described in its most recent proxy, does not provide details of trading restrictions during the lock-out period. A Tesla spokesman said that Tesla has blocking periods prior to delivery release, which continue until after the result. As with many listed companies, Tesla has trade deadlines that are enforced and its executives may also have pre-determined 10b5-1 plans.
A plan under Rule 10b5-1 is a written plan for securities trading which, if created in good faith, if that person is not aware of material non-public information, will provide a defense against allegations of insider trading. This is true even if the transactions are done while the individual may be aware of material, nonpublic information.
Read: Executives and Directors Trade Insider Information on Exam Questions, New Study Results
Schroeder of Indiana University, co-author of the new paper "Examination Process, Private Information, and Insider Trading versus MarketWatch:" To the extent that Tesla's production and sales reports are material, it is important that important insiders do not trade before publishing this information. These messages appear shortly after the end of the quarter. Insiders must therefore ensure that transactions made before the end of the quarter do not violate the trade ban on material nonpublic information.