(TSLA 300.86, -4.64, -1.52%)
is extending last week's slide in early trade.
This morning, JPMorgan cut its target on the stock to $195 from $303. The analyst acknowledged that despite CEO Elon Musk's tweet to the contrary on August 7, funding is not secured for a going private transaction. Elon Musk referenced discussions with the Saudis after shocking markets with a tweet regarding plans of a going private transaction at $420/share on August 7. His new target removed a 50% chance baked in the valuation that the company could be taken private.
Over the weekend, Reuters reported that the Saudi sovereign wealth fund PIF was in talks to invest in a smaller electric vehicle rival Lucid Motors. The Saudis have an almost 5% stake in Tesla.
The stock closed at an eleven-month high that day but has since fallen more than 20% as it became clear that funding was not actually secured. The SEC has reportedly subpoenaed the company because Mr. Musk did not follow standard protocols.
The stock fell 9% on Friday after an interview Elon Musk gave the New York Times shed light on underlying issues with the company's overworked Chief Executive.
The Model 3's ‘production hell' has evidently taken its toll on Elon Musk. He acknowledged that friends were concerned about his health but defended efforts to take the company private, even saying his private firm SpaceX could help fund a transaction. The Board has reportedly been in damage control mode and intensified efforts to find a Chief Operating Officer to lighten the burden on Musk. The New York Times also reported the Board was concerned about his use of sleep-aid Ambien.
Last week, some analysts were out positive regarding the company's Model 3 production pace. Still, investors will be focused on whether Tesla will hit its goal of being free cash flow positive and achieving GAAP profitability in the third and fourth quarters.
Elon Musk has consistently missed lofty targets but the achieving profitability would go a long way in disproving skeptics and be a significant milestone for the company. While reviews and demand for the Model 3 are strong, short sellers continue to highlight potential quality issues.
Taking the company private would certainly help the Tesla by not having to please Wall Street by hitting targets every three months, but it would also make raising fresh capital more difficult thereafter, something Tesla will clearly have to do to fund its plans to further disrupt the transportation sector.
Skeptics think Elon Musk is trying to take the company private in a last-ditch effort to avoid a much less favorable outcome. Taking the controversial company with an enterprise value near ~$70 billion private seems like a tough task but is not completely out of the realm of possibilities.
The stock is back testing the critical $300 support level which has been a 'line in the sand' technically for well over a year.
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