- Elon Musk tweeted late Monday that he was "excited to work with Silver Lake and Goldman Sachs" in his plan to take Tesla private.
- However, Bloomberg reported Goldman had no mandate on Tesla at the time, potentially indicated no formal hiring of the bank.
- Goldman Sachs' analyst is one of the most bearish Tesla analysts on Wall Street, with a "sell" rating and $210 price target — 40% below where shares are trading.
- Companies generally favor banks whose analysts rate them favorably.
- Musk is no stranger to hating Tesla bears, and interrupted two analysts with "sell" ratings on the company's first-quarter conference call.
- Follow Tesla's stock price in real-time here.
Elon Musk hasn't been one to hide his disdain for Tesla skeptics on Wall Street.
But when it came time to hire bankers to advise him on taking the company private, the Tesla CEO enlisted a bank home to one of the most bearish Tesla analysts on Wall Street. Goldman Sachs' automotive analyst David Tamberrino has had a "sell" rating on the stock since February 2017.
Even Goldman's most optimistic scenario for Tesla doesn't even reach Musk's tweeted goal of $420.
"Our current valuation framework looks at potential upside scenarios where Tesla achieves mass market volumes —in the 2 million to 3 million vehicle range in 2025, versus our base case forecast for approx. 800k," Tamberrino wrote earlier in August. "In those upside scenarios, we ascribe valuations (discounted back to early 2019) for the overall company that average to approx. $414 per share."
Despite the blue-sky scenario, his price target remained $210 — a 45% discount to where shares were trading at the time. "Of course, our base case valuation implies a much lower potential value per share for Tesla —given the slower growth rate and forecasted lower margin profile," he said.
The dichotomy isn't unusual for Wall Street. Most brokerages and banks have a research arm attached, which writes and disseminates reports on stocks in order to win trading business for the firm as clients decide to buy or sell based on the notes.
Technically, there is a "firewall" between these two businesses — and any business relationships are disclosed at the bottom of every research report — but human nature can still cloud decisions, a professor told Business Insider.
"Human nature being what it is, no CEO is likely to throw business to a bank whose analyst is negative on the CEO's company," Erik Gordon, a professor at the University of Michigan's Ross School of Business, told Business Insider in a recent interview.
"There are examples of analysts reiterating 'buy' ratings 30 days before a company went under," he continued.
In addition, "sell" ratings are rare. The research firm FactSet said last year that only 6% of about 11,000 recommendations on stocks in the S&P 500 were sell (or equivalent), according to The Wall Street Journal.
Here's what Goldman's disclosure looked like on its latest Tesla note, which was published on August 8:
Goldman Sachs has received compensation for investment banking services in the past 12 months: Tesla Inc.
Goldman Sachs expects to receive or intends to seek compensation for investment banking services in the next 3 months: Tesla Inc.
Goldman Sachs had an investment banking services client relationship during the past 12 months with: Tesla Inc.
Goldman Sachs had a non-securities services client relationship during the past 12 months with: Tesla Inc.
Goldman Sachs makes a market in the securities or derivatives thereof: Tesla Inc.
It wouldn't be the first time Goldman has provided services to Tesla. The bank was the left lead on Tesla's 2010 initial public offering, and has subsequently lead the company's capital raising rounds of both debt and equity.
However, the tweet is further complicated by a Bloomberg report Tuesday which said at the time of the tweet, Goldman's analyst had no mandate on Tesla. Analysts are typically "mandated" — or temporarily suspended from covering a company — when a bank is doing investment services for a company that may cause an appearance of a conflict-of-interest. Goldman Sachs declined to comment to Business Insider.
Still, the potential choice of Goldman Sachs is significant due to Musk's loudly voiced disdain for Wall Street skeptics. On an earnings call in May (one that he has since apologized for) he interrupted two analysts, calling their questions "boring" and "boneheaded."
His explanation on Twitter after the contentious call was that the "the 'dry' questions were not asked by investors, but rather by two sell-side analysts who were trying to justify their Tesla short thesis." He added: "They are actually on the *opposite* side of investors. HyperChange represented actual investors, so I switched to them."
Tesla surged to fresh highs last week after Musk's snap announcement of taking the company private, but had given up all of their gains by Tuesday, showing a lack of confidence from investors that the deal will actually get done. The stock is currently trading at $355 — 18% below the $420 price where Musk said he would take the company private.
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