Read on Twitter
1/ I have outlined possible reasons that $TSLA has not yet tapped the capital markets. Such reasons included 1) it is imminent, 2) don& #39;t need capital, 3) stock price too high (bro)...while all possibilities are still on table, I am going to elaborate on a less understood one.
2/ To limit their liability under the Securities Act, underwriters are required to perform a reasonable investigation (due diligence) to ensure there are no material misrepresentations or omissions in the offering documents, including those docs incorporated by reference.
3/ With respect to the financial statements that are included in the offering docs, underwriters can rely on a "comfort letter" from the accountants who sign off as experts on the financials and assume liability. For audited financials this is rather straightforward.
4/ For instance, in the last $TSLA equity offering, the audit was just completed as the year had ended. There were very few unaudited financials in the prospectus, or incorporated by reference. @PwC would therefore assume the diligence risk on all of the financial info.
5/ Interim financials found in the 10-Q are unaudited. This provides additional risk to an underwriter, as the auditors will not be as willing to provide comfort. An underwriter must conduct a “reasonable investigation” of the unaudited financial information to have defense.
6/ So IF (and I am not stating as a fact, only a possibility), as many here including @davidein have suggested, Tesla made very aggressive accounting entries in Q1 to improve margins, make a profit, etc., and such items ultimately need to be corrected/reversed in future quarters,
7/ this creates enormous risk for an underwriter in any future lawsuits. On a related side note, I am still not sure why the proxy hasn& #39;t been filed, although I don& #39;t think that would necessarily hold up an offering, unless it is being delayed to postpone a mat& #39;l disclosure.
8/ So in summary, the theory is $TSLAQ wants/needs to do an offering, underwriters dug in deep on the 10-Q to protect themselves, found issues that prevented them from moving forward (unless corrected), and there is an impasse with the company. all jmho and speculation.
