The Truth About Cars » SEC http://www.thetruthaboutcars.com The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. Mon, 31 Aug 2015 20:30:59 +0000 en-US hourly 1 http://wordpress.org/?v=4.2.4 The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars no The Truth About Cars editors@ttac.com editors@ttac.com (The Truth About Cars) 2006-2009 The Truth About Cars The Truth About Cars » SEC http://www.thetruthaboutcars.com/wp-content/themes/ttac-theme/images/logo.gif http://www.thetruthaboutcars.com Elio Unbans Facebook Critics, Has $17 Million Pledged From Small Investors http://www.thetruthaboutcars.com/2015/07/elio-unbans-facebook-critics-17-million-pledged-small-investors/ http://www.thetruthaboutcars.com/2015/07/elio-unbans-facebook-critics-17-million-pledged-small-investors/#comments Thu, 09 Jul 2015 13:00:20 +0000 http://www.thetruthaboutcars.com/?p=1109801 Businesses aren’t the only groups of people who try to influence what we publish here. TTAC has been getting emails from a number of people who put deposits down on the yet-to-be-produced Elio trike, only to become disillusioned after production has been pushed back a number of times. There are at least a couple of Facebook […]

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Businesses aren’t the only groups of people who try to influence what we publish here. TTAC has been getting emails from a number of people who put deposits down on the yet-to-be-produced Elio trike, only to become disillusioned after production has been pushed back a number of times.

There are at least a couple of Facebook pages devoted to disaffected Elio enthusiasts that accuse Elio Motors and Paul Elio of misleading people. In addition to the delays, most of the complaints seem to center around the fact that the company is promoting and taking deposits for a $6,800 vehicle when Elio hasn’t yet raised enough money to start production of a car that Paul Elio admits doesn’t yet meet their advertised price point.

The company has been using social media to promote the enterprise and its critics have seized on Elio Motors’ Facebook page as a venue to express their displeasure. Words like “liars” and “scam ” have been tossed around. Consequently, a number of those critics say they have been banned from that page by Elio Motors.

TTAC managing editor Mark Stevenson and I looked into the complaints and we spent some time going through the critics’ own Facebook pages. We came to the same general conclusion: most of the furor was being generated by the same half dozen or so unhappy prospective customers, making the same complaints about missed deadlines, a lack of financing to get to production, and skepticism that the trike will be delivered at the promised $6,800 MSRP. What concerned me more than these pretty well known issues was the charge that Elio (the company, not the man) was censoring its critics by banning them on Facebook.

Whether spurred by their complaints or by my own inquiry about the bannings, Paul Elio told TTAC a couple of weeks ago that at least some of the the bannings were “a mistake” even though he claimed they were mostly due to people using abusive language. At the time he told me he was considering a blanket unbanning.

While banning people from a company’s Facebook page can be spun as censorship, just about anyone who has ever created online content knows how abusive internet commenters can get, so I have some empathy for Paul Elio. It’s not his job to provide a forum for people to say bad things about him.

This was all transpiring against the background of Elio getting ready to announce that, due to substantial interest, they were going to be opening up their enterprise to smaller individual investors. In February, the company announced that it was going to be using the statutes in the 2012 JOBS act to offer equity stakes to accredited investors (those with 7 figure assets and incomes of greater than $200k/yr). Funds raised from those investors are currently being used to fabricate the final pre-production P5 prototype that will be using Elio’s own engine and a production spec transmission from Aisin. Elio Motors says that subsequent to announcing opportunities for accredited investors, they were inundated with inquiries about investment opportunities for smaller investors.

Now, investors with fewer assets and smaller incomes will also be able to take an equity stake in the company, investing as little as $250.

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At the time I spoke with him about the Facebook issue, Paul Elio asked me to hold off writing about the Facebook unbannings until the investment opportunity was announced. While I’m happy to have the good rapport that I have with Paul and his team, I’m not on that team and we publish things at TTAC based on our judgment of their newsworthiness, not based on what’s most helpful to a story’s subject. As it remained to be seen what would happen on Facebook, we’ve delayed this post until now.

So far it looks like Elio has been true to their word and unbanned all of their critics, though it appears that they’re reserving their right to re-institute bans based on what Paul Elio describes as bad behavior. As I expected, being unbanned hasn’t really mollified the critics. Just about the only thing more passionate than a convert is a convert who has renounced their faith.

In the meantime, Elio Motors has gone ahead with their crowdfunding effort directed at small investors, and they’ve announced that there has been significant interest. In less than three weeks, more than 5,000 small investors have “expressed non-binding interest” in putting up over $17 million, via the startengine.com website. What that means is that per the Security and Exchange Commission’s rules, while no money has yet changed hands, those investors have indeed pledged that amount of money — though they can opt out, hence the “non-binding” part. When the enrollment period ends at on July 31, Elio will then present documentation of the investors’ interest to the SEC and, if granted approval, Elio will then make those investors a formal offer.

The company is hoping to raise a total of $25 million through this route. Elio says those funds will be used to build 25 pre-production validation vehicles. All along, I’ve felt that the most legitimate criticism of the Elio enterprise is whether or not the company will be able to raise the $200 million that it says it will need to start production. While it’s only a fraction of the amount needed, $25 million is a good start.

At the same time, the automotive history buff in me knows that Preston Tucker was prosecuted by the Securities and Exchange Commission over how he raised money from investors. The infamous Dale’s Liz Carmichael was also prosecuted for fraud relating to investments in the company. While Elio Motors needs to find investors, I think that taking on grassroots investors creates another potential issue for the company’s critics.

Ronnie Schreiber edits Cars In Depth, a realistic perspective on cars & car culture and the original 3D car site. If you found this post worthwhile, you can get a parallax view at Cars In Depth. If the 3D thing freaks you out, don’t worry, all the photo and video players in use at the site have mono options. Thanks for reading – RJS

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Tesla Loses $38 Million In Q3 http://www.thetruthaboutcars.com/2013/11/tesla-loses-38-million-in-q3/ http://www.thetruthaboutcars.com/2013/11/tesla-loses-38-million-in-q3/#comments Wed, 06 Nov 2013 11:00:22 +0000 http://www.thetruthaboutcars.com/?p=643385 After reporting a net loss of $38 million in its Q3 filings earlier today, Tesla suffered a loss of over 12% in afterhours trading. The stock, which has grown nearly 80% since the beginning of the year shot down almost $22 since the markets closed on November 5th. In my last look at Tesla in […]

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After reporting a net loss of $38 million in its Q3 filings earlier today, Tesla suffered a loss of over 12% in afterhours trading. The stock, which has grown nearly 80% since the beginning of the year shot down almost $22 since the markets closed on November 5th.

In my last look at Tesla in Q1 of 2013, the company had posted its first net income, a tidy $11 million. However, analysis revealed that the company’s profitability, which garnered praise from across the industry, could not be attributed to the OEM’s main objective, the production and subsequent sales of its automobiles. Rather, Tesla’s profit was derived from “Other Income,” which is accounting jargon for money that is made outside of the scope of the company’s normal operations.

Two fiscal quarters later, and the profitability structure of Tesla is steadily improving, with Tesla exhibiting signs of strong operational profitability. This is attributable to Tesla’s increase in gross margin to 24%, from 17% at the beginning of the year. The company reported a gross profit of about $103 million for the quarter. What this means is that by simply taking all of Tesla’s sales, less the costs of goods sold,  the company is in the black. Contrast that from a year ago, when Tesla’s gross loss was almost $9 million.

This is quite an encouraging figure, especially considering the steady decline of ZEV credit revenues. Back in Q1, ZEV credits were responsible for 12% of Tesla’s revenue, while it now equates to about 2% of total sales. Additionally, Tesla’s Statement of Cash Flows reports positive cash flows from operations of $102 million.

One thing that has not changed for the company is its struggle to manage its operating expenses. With a total of $133 million for the quarter, Tesla’s fixed costs effectively wipe out any profitability achieved on the top line. For the past two quarters, Tesla’s operating expenses equaled about 30% of sales. While gross margin has improved, there is simply not enough unit contribution to cover the remaining costs when costs of sales are 86% of revenue. The recipe to profitability is simple. Tesla must either bring down its fixed costs, or continue to improve its margins. A combination of both is the best case scenario.

In its letter to shareholders, Tesla remarks that R&D costs are up due to work on a right hand drive configuration for the Model S, and development work on the Model X. Selling General and Admin (SG&A) also increased, as the company is pushing its global expansion and growing its Supercharger network. Both of these expenses are key to Tesla’s future success. Continued development and innovation of new and existing technologies is essential for the electric automaker to diversify its product offerings while also continuing to make them more practical and accessible to the larger population. As a result, a reduction in operating expenses seems unlikely in the near future.

One of the primary responsibilities of any publicly traded company is to deliver value to its shareholders. With an earnings per share figure of $-2.09, Tesla has not done a great job of doing so to date. While it is still too early to tell whether the hype is real for Tesla, it is clear that after today’s results, some of the luster has been lost. I am no investment advisor, but I am a fan of history, and historically, Tesla’s poor profitability has remained a constant.

All figures taken from Tesla’s SEC Filing

Graeme Kreindler is an HBA Candidate at the Richard Ivey School of Business at The University of Western Ontario. 

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Politically Connected EV Startup GreenTech Automotive Subject of SEC Investigation http://www.thetruthaboutcars.com/2013/08/politically-connected-ev-startup-greentech-automotive-subject-of-sec-investigation/ http://www.thetruthaboutcars.com/2013/08/politically-connected-ev-startup-greentech-automotive-subject-of-sec-investigation/#comments Sat, 03 Aug 2013 22:02:42 +0000 http://www.thetruthaboutcars.com/?p=498056 NBC12.com – Richmond, VA News Electric car startup GreenTech Automotive, which set up a factory in Horn Lake, Mississippi to manufacturer their low speed neighborhood EV called MyCar, is being investigated by the U.S. Securities and Exchange Commission for the way it solicited foreign investors. GreenTech Automotive was co-founded by Virginia gubernatorial candidate Terry McAuliffe, […]

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Electric car startup GreenTech Automotive, which set up a factory in Horn Lake, Mississippi to manufacturer their low speed neighborhood EV called MyCar, is being investigated by the U.S. Securities and Exchange Commission for the way it solicited foreign investors. GreenTech Automotive was co-founded by Virginia gubernatorial candidate Terry McAuliffe, who is a former chairman of the Democratic National Committee. McAuliffe resigned as chairman of GreenTech in late 2012 when he started his campaign.

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According to the Washington Post, the SEC subpoenaed documents relating to GreenTech and Gulf Coast Funds Management, a sister company that shares a McLean, Virginia address with GreenTech. Gulf Coast Funds is run by Anthony Rodham, whose sister, is former U.S. senator and secretary of state, Hillary Rodham Clinton. The Commission is looking into allegations that the company guaranteed returns to foreign investors that GreenTech sought out by using the federal EB-5 program that will grant foreigners visas to the United States if they invest half a million dollars or more to create jobs in this country. GreenTech has a strategic partnership with China’s JAC Motors.

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SEC officials declined comment and a spokesman for McAuliffe’s campaign said he “has no knowledge of any investigation.” GreenTech and Gulf Coast representatives confirmed the subpoenas and said the companies would cooperate with the SEC investigation. The investigation came to light when internal Department of Homeland Security documents and emails were obtained by Sen. Charles Grassley (R-Iowa), a critic of the EB-5 visas. Some of the documents raised the possibility of “fraud”.

McAuliffe originally said he would build a factory “right in the heart of Virginia,” but after getting incentives from state and local governments in Mississippi, GreenTech located their factory in Horn Lake. Republican Gov. Haley Barbour attended the July 2012 ribbon cutting ceremony, along with McAuliffe’s close friend, former president Bill Clinton.

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When he was still with the company, McAuliffe said last that GreenTech could build 10,000 cars in 2013 and that the factory would be hundreds of people at their Mississippi factory. Actual production has been much smaller, as has hiring. GreenTech won’t release any production figures but Autoblog reported that 2012 production would be closer to 1% of that figure vehicles, 110 vehicles earmarked for Denmark.

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One former employee at the Horn Lake plant told the NBC affiliate in Richmond, Virginia that it was all for show. “They would take everybody and put them out on the line and we would stand over the car with tools in our hand and look like we were doing something to the car, but we wasn’t doing anything.” A company spokesman denied that and described the activities there as “a training build”. A neighbor recently said that the plant is quiet and that nobody he knew who applied there had gotten jobs.

Memphis, Tennessee’s WMC-TV Action News 5 (auto start video) says they’ve found no evidence of significant car production at the Mississippi facility. GreenTech allowed WMC-TV cameras in the factory but wouldn’t let them close to the production line.

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SEC Inquiry Into Fisker Fundraisers http://www.thetruthaboutcars.com/2012/03/sec-inquiry-into-fisker-fundraisers/ http://www.thetruthaboutcars.com/2012/03/sec-inquiry-into-fisker-fundraisers/#comments Tue, 13 Mar 2012 14:00:35 +0000 http://www.thetruthaboutcars.com/?p=434743 The U.S. Securities and Exchange Commission is investigating the principals of a private equity firm that has raised a significant amount of the private financing for Fisker Automotive, says Crain’s Chicago Business. Though nothing on the public record has tied the investigation with Fisker, the National Legal and Policy Center, a politically right of center […]

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The U.S. Securities and Exchange Commission is investigating the principals of a private equity firm that has raised a significant amount of the private financing for Fisker Automotive, says Crain’s Chicago Business. Though nothing on the public record has tied the investigation with Fisker, the National Legal and Policy Center, a politically right of center think tank, points out that the commission has recommended administrative proceedings “in connection with a private offering in 2009″. Advanced Equities has been raising private investment funds for Fisker since at least 2009. They established Clean Tech LLC in 2010, which is 40% invested in Fisker, and in Feb. 2011, they invested an additional $150 million in the automaker.

Advanced Equities Inc.’s founders Keith Daubenspeck and Dwight Badger were served by the SEC with so-called Wells Notices in January. A Wells Notice indicates that the recipient is under investigation by the SEC, it informs them of the preliminary results of the investigation, and indicates that a full hearing before the commission is likely. It also gives the subjects of the investigation an opportunity to respond to the preliminary report before a formal hearing takes place. In nearly identical disclosures, Badger and Daubenspeck each said, “I am addressing the (SEC) staff’s concerns, and I am prepared to aggressively defend myself should it become necessary”.

It’s not known if there’s a connection to the SEC investigation, but in February, Fisker and Advanced Equities were sued by an investor, Daniel Wray, for fraud and failure to act as a fiduciary should. Wray says that he bought $210,000 worth of preferred Fisker stock between 2009 and 2001, through Advanced Equities. His lawsuit claims that in January of 2012, around the time that Fisker’s fiscal situation started to deteriorate due to loans that the Dept. of Energy froze, the EV maker and Advanced Equities demanded from him an additional $83,000 “due to Fisker’s urgent need for equity capital”. Wray alleges that he was threatened with dilution of his stock value and the loss of other privileges due to early investors if he didn’t pony up the additional investment.

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SEC Seeks Three-Year Securities Work Ban On Rattner http://www.thetruthaboutcars.com/2010/06/sec-seeks-three-year-securities-work-ban-on-rattner/ http://www.thetruthaboutcars.com/2010/06/sec-seeks-three-year-securities-work-ban-on-rattner/#comments Wed, 02 Jun 2010 15:03:18 +0000 http://www.thetruthaboutcars.com/?p=357852 Somewhere under a “Mission Accomplished” banner on an aircraft carrier, former car czar Steve Rattner is starting to get a bit lonely. Reuters reports that the Securities and Exchange Commission is seeking a three year ban on Rattner that would prevent him from working in the securities field. The ban stems from a recently-settled investigation […]

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Somewhere under a “Mission Accomplished” banner on an aircraft carrier, former car czar Steve Rattner is starting to get a bit lonely. Reuters reports that the Securities and Exchange Commission is seeking a three year ban on Rattner that would prevent him from working in the securities field. The ban stems from a recently-settled investigation into kickback allegations at Rattner’s former investment firm Quadrangle Group (involving a distribution deal for his brother’s low-budget movie “Chooch,” no less).

Quadrangle has admitted that it engaged in inappropriate quid-pro-quo kickbacks in order to land a $100m investment from New York’s state pension fund. Quadrangle has publicly “disavowed” Rattner’s role in that scheme, indicating that (non-admission of guilt settlement aside) the illegal kickbacks were his work. If approved, the ban would prevent Rattner from managing New York City Mayor Michael Bloomberg’s fortune. Luckily, Rattner is far too busy patting himself on the back for his auto bailout brainchild to be bothered with such trivialities, although according to Reuters, Rattner has “fiercely resisted” the SEC ban.

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