Morgan Stanley (MS) analyst Adam Jones this morning downgraded Tesla (TSLA) to ‘Equal Weight’ and lowered the name’s price target to $245 from $333. The surprise acquisition of SolarCity (SCTY) may have long-term commercial and strategic rationale, but investors may not be adequately compensated for the added risk or cash consumption, Jones writes, noting that SolarCity does not make Tesla better at making cars. The analyst believes the merger will exacerbate cash burn, and will not improve access to the capital markets.
Separately, discussing in a CNBC interview Tesla’s $2.8 billion bid for SolarCity, Citron’s Andrew Left reiterates his negative stance on the merger, saying Tesla stockholders should vote against the acquisition as the carmaker’s offer to acquire the beleaguered solar energy project contractor is an “aberration of corporate governance,” and “the worst” that Wall Street has to show. Left also said Elon Musk’s touting the proposed deal as a ‘no brainer’ is an insult to investors.
Asked where Tesla stock goes from here, Left said he sees the name “going a lot lower, a lot faster.” The short-seller also said that if you put that question to someone in business school, they would say it’s going to zero.
Asked whether SolarCity is the next SunEdison (SUNEQ), Left said flatly, “Oh yeah. Yes,” explaining that the company’s bleeding balance sheet tells investors all they need to know.