After one of its worst days on the stock market in a long time last Friday, Tesla’s (TSLA) stock appears to still be in free fall as it opened down 5% this morning.
The correction is seemingly due to Wall Street’s doubts regarding the take-private deal and lawsuits piling up over it.
Update: Tesla’s stock has since partly recover from its earlier loss, but it’s still down about 10% over the past two business days.
We went into much of that “craziness” in the latest episode of our podcast on Friday, but there are new factors affecting Tesla’s stock this morning.
Mainly a new note from JP Morgan analyst Ryan Brinkman who is slashing his price target on Tesla from $308 to $190.
The analyst interpreted the latest news around the take-private deal as meaning that the funding is really not 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,”
It’s unclear why that would lead to such a massive revision of his valuation of the company, but his new price target has been felt on the market today as Tesla’s stock opened up 5% down.
The biggest issue with the funding not being secured is that it is already leading to lawsuits from investors and an inquiry by the SEC.
Ryan Brinkman is one of the highest-ranking analysts on TipRanks: #353 out of 4,856 Analysts. He has a success rate of 64% and an average return of 13%, but he has historically given poor recommendations on Tesla’s stock:
As usual, let me preface this by saying that I am not a stock market expert and you shouldn’t base market investments on my advice.
That said, the way I see it, if you are confident that despite all the doubt on Wall Street Elon Musk is really going to take Tesla private, all this hurt for TSLA on the market is actually a gift since he set the price at $420.
As I have previously said, I actually put the chances of this happening fairly high.
The logic behind it makes sense and I think it will get shareholder support, the biggest question remains the funding and yes, it’s true that things are murky with the Saudis, but I would never bet against Musk securing funding.
He has done it in way tougher times.
Keep in mind, this thing will still take months. If Tesla managed to turn a profit for Q3 in the meantime, it will be a completely different ball game.
What do you think? Let us know in the comment section below.