Tesla Inc. shares fell nearly 4 per cent on Monday as a US$113 cut in JPMorgan Chase Co.’s price target for the electric-car maker added to growing doubts among market players about a plan to take the company private.
Slashing its price target for Tesla Inc from US$308 to US$195, the brokerage said it did not believe chief executive Elon Musk had funds for a plan announced by a tweet that said “funding secured” two weeks ago.
Analysts from the U.S. bank had upped their forecast from US$198 to US$308 after a roughly US$100 surge in Tesla stock following Mr. Musk’s tweets on Aug. 7, but the note on Monday was the latest evidence of skepticism about the deal on Wall Street.
People familiar with the matter said on Sunday that the Public Investment Fund (PIF), the Saudi Arabian sovereign wealth fund that Mr. Musk says had been pressing to help fund the buyout, is in talks to invest in aspiring Tesla rival Lucid Motors Inc.
“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,” JPMorgan analyst Ryan Brinkman wrote in a client note.
“Tesla does appear to be exploring a going-private transaction, but we now believe that such a process appears much less developed than we had earlier presumed, suggesting formal incorporation into our valuation analysis seems premature at this time,” Mr. Brinkman said.
JPMorgan now targets the stock, which it continues to value at underweight, back at US$195, versus Friday’s close of US$305.50. The median price target of the Wall Street analysts covering Tesla is US$336.
Tesla shares touched a three-month low of US$285 in premarket trading before recovering to trade around US$290, reducing its market value back below that of General Motors Co. as the biggest U.S. car maker.
An interview with The New York Times, in which Mr. Musk said he was under major emotional stress in the “most difficult year” of his life, on Friday added to investors’ concerns over his leadership after a series of social media spats.
A person with direct knowledge of the matter told Reuters last week that the U.S. Securities and Exchange Commission has opened an inquiry related to Mr. Musk’s tweets on the buyout, and the billionaire is also facing a class-action lawsuit from investors who lost money in the share moves.
“The lack of process to [Mr. Musk’s] announcement has now caused governance and competency concerns, which are starting to snowball,” said Tigress Financial Partners analyst Ivan Feinseth.