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Tesla keeps sliding on doubts Musk has the money to go private

Aug 20 2018 16:24
Esha Dey, Bloomberg

Tesla plunged further on Elon Musk’s acknowledgment of the hurdles standing in the way of his effort to take the company private and the emergence of another electric-car company attracting interest from a key investor.

The stock tumbled as much as 7.6% before the start of regular trading on Monday, as JPMorgan scrapped any modelling in its price target for the possibility that Musk will buy out some investors at $420 a share.

Analyst Ryan Brinkman, who rates Tesla the equivalent of a sell, said such a deal is “potentially far from even being formally proposed.”

The bearish analysis followed a report on Sunday that Saudi Arabia’s sovereign wealth fund - the very investor that Musk has described as a linchpin of his plan to take Tesla private - was considering buying a stake in another US electric-car company.

The Saudis’ Public Investment Fund, which recently purchased almost 5% of Tesla, is in talks for a separate $1bn investment in Lucid Motors that would give the fund control of that fledgling automaker, Reuters reported.

The news is combining to extend the trauma of last week, when Tesla shares slumped 14%, the steepest drop since February 2016. Musk, 47, gave an alarming interview to the New York Times in which he said no one reviewed his tweet about taking the company private - and his claim about having the funding secured to do so - before he posted it.

His description of prescription-drug use to sleep and the toll that leading Tesla has taken on his personal life also raised questions about the well-being of the larger-than-life chief executive officer.

Tesla shares pared their decline closer to the start of regular trading and were down 4.9% to $290.43 as of 9:10 am in New York.

Brinkman, who had hiked his price target on Tesla to $308 after Musk’s initial take-private tweet on August 7, dropped it back to the earlier level of $195. He cited the CEO’s August 13 blog post in which he said the Saudi PIF had asked for more information about how the transaction could be pulled off.

“We now believe that such a process appears much less developed than we had earlier presumed,” Brinkman wrote in a note to clients.

Taking Tesla private may be “more along the lines of high level intention” than a firm plan, the analyst said so formally incorporating it into valuation analysis “seems premature at this time.”  

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tesla  |  elon musk  |  ict  |  companies


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