Tesla (TSLA) Stock in Free Fall Over Musk’s Delisting Plan

JPMorgan reverts back to valuing Tesla stock on the basis of fundamentals alone. Slashes ticker's price target by more than a third.

Tesla TSLA Stock

Tesla‘s (NASDAQ:TSLA) stock price accelerated again to the downside in early Monday trading, after JP Morgan (NYSE:JPM) analyst Ryan Brinkman slashed his price target on the name to $195 from $308, telling clients that Elon Musk’s privatization proposal “appears much less developed.”

In his note, Brinkman pared his TSLA year-end price target back to where it stood on Aug. 8, before Musk’s now famous Aug. 7th going-private tweet, saying he reverted to valuing the stock on the basis of fundamentals alone given that financing for any type of transaction appears to not have been finalized despite Musk’s claim that the funding had been secured.

“Our interpretation of subsequent events leads us to believe that funding was not secured for a going private transaction, nor was there any formal proposal,” said Brinkman, specifically referring to Musk’s blog post on Aug. 13, which said the Saudi Arabian Sovereign Wealth Fund (PIF) was asking Tesla for details on how the company would be taken private. The analyst reiterated his ‘Underweight’ rating for the electric carmaker.

Meanwhile, Vertical Research analyst Gordon Johnson told investors that a go-private fully debt-funded deal for Tesla would require about $49 billion, or more than two times the amount Elon Musk projected. The analyst said he sees such a transaction as likely “nearly impossible” to garner interest at present.

What seems to make Musk’s current situation even more complicated is an exclusive Reuters Sunday report which suggested PIF is in talks to invest in aspiring Tesla rival Lucid Motors. Citing anonymous sources familiar with the matter, the publication said the fund and Lucid Motors, a California-based startup, have drawn up a term sheet under which the Saudis could invest more than $1 billion in Lucid Motors and obtain majority ownership.

It goes without saying that Reuters’ report will attract additional scrutiny on Musk’s “funding secured” tweet, as questions about the legality of the claim and whether investors were misled, remain. In fact, short-sellers have sued Musk, and The Securities and Exchange Commission is currently investigating the situation.

Tesla Stock Action

Tesla shares broke back below the $300 level, dropping nearly 6% to $288.20 in early trading on Monday, but recovered to close in positive territory. The shares, at Monday’s $308.44 close, are now red 8.2% year-over-year.

The name hit almost $380 on Aug. 7 following Musk’s tweets, but have continued to fall since then.

Tesla richly priced shares, which including debt are valued at 108x expected earnings, are almost flat year-to-date, while the S&P 500 has gained 6.6%.

The stock is up 1.45% at $312.90 in pre-market hours.

References: CNBC, The Fly

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