The brief uptick in share price Tesla enjoyed after beating production estimates this week was swiftly erased by a newly critical Goldman Sachs Group.
The investment bank downgraded the company on Thursday, sending its stock back down the hillside, Bloomberg reports. It’s bad news for CEO Elon Musk’s fundraising plans.
Goldman was spooked by Tesla’s $2.6 billion acquisition of solar energy company SolarCity. The bank, which managed the automaker’s $1.4 billion May stock offering, scrapped Tesla’s “buy” rating, replacing it with “neutral” after assessing the extra risk taken on by the automaker. It also cut Tesla’s price target from $240 per share to $185.
Naturally, Tesla’s stock bounced off the ceiling, reaching a five-week low. The stock started the week at $214.40, but ended it at $196.61. Another bank, Morgan Stanley, downgraded the company back in June.
Buying SolarCity is Musk’s way of realizing his goal of a company that can sell you the complete green lifestyle, but the acquisition sparked a harsh investor backlash. Too much risk at the wrong time being the chief complaint.
Musk wants extra money in the bank by the end of the year to help complete his battery-producing Gigafactory and prepare for Model 3 production. SolarCity’s need for cash to cover debt payments could weaken Tesla’s financial footing. Meanwhile, the Goldman downgrade threatens the automaker’s ability to raise more cash through future stock offerings.
Musk still needs shareholder approval to complete the SolarCity deal.[Image: Tesla Motors]