Market Overview

Tesla Says 'Public Health Epidemic Originating In China' A 'Risk Factor' For Its Business

Tesla Says 'Public Health Epidemic Originating In China' A 'Risk Factor' For Its Business

Tesla Inc. (NASDAQ: TSLA), in its regulatory filing with the Securities and Exchange Commission on Thursday, acknowledged the novel coronavirus as a "risk factor" facing its business and operations.

What Happened

The electric vehicles maker didn't mention the virus by its name but referred to a "public health epidemic originating in China" that started late last year, as noted first by CNBC.

"[Beginning] in late 2019, the media has reported a public health epidemic originating in China, prompting precautionary government-imposed closures of certain travel and business," Tesla said in the filing.

"It is unknown whether and how global supply chains, particularly for automotive parts, may be affected if such an epidemic persists for an extended period of time."

The company's Shanghai "gigafactory," as it refers to its manufacturing plants, was closed for about two weeks from January 29 to February 10 due to the outbreak.

"We may incur expenses or delays relating to such events outside of our control, which could have a material adverse impact on our business, operating results and financial condition," the automaker added.

Why It Matters

Tesla's stock is up about 92% year-till-date by Thursday, mostly on the back of its rapid progress in China. The company has so far downplayed the impact of the outbreak on its business.

During an investor call, earlier this month, Tesla chief financial officer Zach Kirkhorn said that it isn't "aware of anything material" when it comes to the impact of the virus on its supply chain for the Fremont "gigafactory."

Kirkhorn also added that the impact of the Shanghai "gigafactory" shutdown on its earnings would be limited as "the profit contribution from Model 3 Shanghai remains in the early stage," CNBC noted.

In the same filing, Tesla announced a $2 billion common stock offering after CEO Elon Musk earlier said that raising capital "doesn't make sense."

Price Action

Tesla's stock traded slightly lower at $800 after closing the regular session 4.78% higher, at $804.


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