California Court to Test Limits of Due Diligence Research in $TSLAQ Case

Tesla Quarterly

Tesla (NASDAQ:TSLA) is asking a California court to grant a permanent restraining order against due diligence researcher Randeep Hothi, whom it accuses of setting up secret cameras to monitor company employees, trespassing on its property, hitting a security guard with its vehicle, and following a Tesla vehicle that was filming a promotional video in a dangerous fashion.

Hothi is part of a short seller group known as $TSLAQ on Twitter and crowd blog SeekingAlpha. Short-sellers bet against a company stock, making money when the price falls. This particular group believes there’s a significant gap between the claims Tesla CEO Elon Musk makes about the company and the real-world capabilities of Tesla and its vehicles.

Tesla’s allegations of trespassing stem from an incident where Hothi was photographing and counting the number of cars in a lot near Tesla’s factory. For his part, Hothi says he — and his cameras which he sometimes left unattended — were on public property. After the incident, when a security guard noticed Hothi’s vehicle near a Tesla showroom, where Hothi was also counting cars and customers, a security guard confronted Hothi and he sped off. Tesla says that the guard’s knee was struck by Hothi’s car and the guard received “minor injuries”. Fremont police reviewed the case and concluded it did not meet the elements of a hit and run.

Later, Tesla alleges that its film crew was followed by Hothi’s vehicle for a half-hour while filming on a highway. Hothi said the footage being captured by the film crew was to be used for Tesla’s Autonomy Investor Day, where Tesla would demonstrate the vehicle’s self-driving ability. Hothi wanted his own footage to test these claims.

Tesla says that Hothi swerved around the car, at one point triggering the car’s automatic crash detection system. These allegations, however, are strongly denied by Hothi, and his attorney has asked the court to compel Tesla to deliver recordings taken by the car’s embedded eight cameras.

Musk vs. Tesla Shorts

It’s no secret that Musk is openly contemptuous of short-sellers, frequently calling them out in earnings calls and on Twitter. One of Hothi’s fellow shorts, Lawrence Fossi, better known as the pen name Montana Skeptic on Seeking Alpha, was doxxed and Musk contacted his employer to ask him to stop writing. It later came out that Fossi was employed by a firm heavily invested in the oil industry — though that doesn’t necessarily prove causation.

While Tesla shorts have been known to spread a high ratio of FUD-to-signal, (FUD is an acronym for fear, uncertainty and doubt), perhaps out of personal disdain for Musk, Tesla, and Musk both need to grow a thicker skin and know when to separate legitimate shorts from the trolls. Musk is known for his extravagant claims, some of which have gotten him in hot water with the SEC. He is also known to not take criticism well and has been said to refuse to be questioned or challenged.

But having a public company means questions, and challenges, from the public. It means dealing with friends and foes, longs and shorts. While some of Tesla’s loudest critics are doing so out of malice, there are also legitimate shorts that, with proper research, can present a well-reasoned claim challenging the company. Should the court toss out Tesla’s case against Hothi, it would be a reaffirmation of shorts’ rights to do their research — let’s hope they use it responsibly.

The post California Court to Test Limits of Due Diligence Research in $TSLAQ Case by Sam Reynolds appeared first on Wccftech.



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