Goldman Sachs Group Inc. dramatically downgraded Tesla Motors shares Thursday, even after co-managing a $1.4 billion stock offering the company made in May.
David Tamberrino, a Goldman analyst, reclassified the electric vehicle maker’s holdings from “neutral” from “buy” in a note, adding that the SolarCity merger was one of the reasons for the downgrade. The fusion of the two Elon Musk-chaired companies makes Tesla an extremely risky bet.
The bank ratcheted down its price target to $185 from a loftier $240, which helped send Tesla shares tumbling by as much as 4 percent.
The downgrade couldn’t have come at a worse time for Tesla, as the company nears putting the SolarCity deal to a vote with shareholders. Another one of Tesla’s underwriters, Morgan Stanley, also dropped its “buy” ratings since the last offering.
If shareholders approve, the fusion of the two Musk companies would dramatically increase the size of Tesla’s workforce to 30,000 employees. It’ll help create a unique combination of solar, storage and transportation.
“We now see incremental risk to the business related to management’s willingness to deploy capital for M&A, and we believe that any delay in the company’s timeline to launch its new Model 3 will be detrimental to the shares,” Tamberrino wrote in the report.
Research and the decision to downgrade by Goldman was done independently from its underwriting responsibility, according to spokeswoman Leslie Shribman.
“We followed all of our standard policies and procedures with respect to our research publication today,” she said.
Still, one tech investment firm is not so sure.
Salome Gvaramia, the COO of tech-analyst firm Devonshire Research Group (DRG), told The Daily Caller News Foundation that the move by Goldman Sachs is startling considering the history it has with Tesla. DRG has consistently etched out a bearish position on Tesla.
“What is of particular concern, and we hope the SEC takes notice,” Gvaramia told TheDCNF, “is Goldman’s actions and the timing of those actions during and shortly after Tesla’s secondary offering back in May.”
Gvaramia also suggested Goldman’s move smelled like a classic “pump and dump,” which happens when a firm encourages investors to buy huge shares in a company to inflate its price, and then sells the shares when the price gets high. The investment bank underwrites much of Tesla’s sock offerings.
“Goldman had upgraded Tesla to a ‘buy’ (rating) the day of the secondary offering and kept it at a buy while GS fund managers were dumping stock,” she said. “This certainly looks like an egregious and blatant pump and dump scenario.”
Analysts believe Musk will need $2 billion to make the merger work. Shares fell more than 10 percent June 22, the first trading day after Tesla announced the proposed merger.
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