Goldman and Tesla's $2B Equity Offering

etx's picture
Rank: Senior Gorilla | banana points 797

On Wednesday, before the stock market opened in New York, Goldman Sachs analyst Patrick Archambault upgraded shares of Tesla. Archambault put a "Buy" rating and a $250 per share price target on the stock due to what he sees as the market's failure to "fully [capture] the company's disruptive potential."

On Wednesday, after the market closed in New York, Tesla said it would sell $2 billion worth of stock, $1.4 billion of which would be issued by the company.

Running the book? Morgan Stanley and Goldman Sachs

What does everyone think?

Relevant articles:
http://www.zerohedge.com/news/2016-05-19/goldman-r...
http://www.businessinsider.com.au/goldman-sachs-te...

Comments (29)

May 19, 2016

Latest iteration of the Ponzi scheme

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May 19, 2016

Concerned over the legitimacy of the Chinese wall? Or is it just a coincidence?

May 19, 2016

Elon Musk is making out like a fat Raneiri.

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May 19, 2016

Sell-side research is marketing. If the fund raise goes well, it will be successful. He should have thrown a caveat in there that the shares Goldman floats have more upside.

May 19, 2016

I'm shocked I tell ya.

In my investments class, we would always talk about how BS analyst recommendations are. They're doing their best not to piss off the company and so you inflate your words, and your valuation, so you get the business.

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May 19, 2016

Not going to argue that sell side research is BS or a marketing tool, or whether analyst recommendations are valuable, etc.

But I don't think this move is suspicious at all. Analysts upgrade/downgrade stocks all the time, and companies issue equity all the time. Sometimes those are going to happen in close proximity to each other.

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May 19, 2016

Fair enough, I don't see a firm like GS making a rookie error like this. For some, it is a bit too close for comfort though.

May 19, 2016

Let the retailers gobble that shit right up

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May 19, 2016

Convenient timing to help prop up the stock while the 2B in issuance should be causing ~6-7% drop/sh

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Best Response
May 19, 2016

In fairness, if you're stupid enough to buy stock based off an analyst's recommendation, especially without reading the reasoning, then you deserve to lose (if you do lose). Does Patrick Archambault have some special skill in divining the future? If not then his opinion about Tesla's "disruptive" ability is as good as the opinion of anyone else.

May 19, 2016

That's how equity research and S&T works...... That's why generally when upgrades occur by the BB's the stocks rip higher... S&T team's call the PM's and tell them the story and let them know about the upgrade and if they are interested they will place an order through the desk....

Interesting that you were awarded for "best answer" lol

May 19, 2016
BEAST MODE TRADER:

That's how equity research and S&T works...... That's why generally when upgrades occur by the BB's the stocks rip higher... S&T team's call the PM's and tell them the story and let them know about the upgrade and if they are interested they will place an order through the desk....

Interesting that you were awarded for "best answer" lol

I know that's how it works. And people and portfolio managers who take analysts at face value and buy stocks on those opinions without critical evaluation have only themselves to blame if the pick goes wrong. Where am I wrong?

May 19, 2016

The real question is what's GS's historical relationship with the firm. Do they lend? Have the historically led Tesla's deals? If they've gone from bottom right to Global Preeminent Leading Bookrunner Manager that might raise some eyebrows but the context is important and frankly, it's really not worth the risk for this fee.

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May 19, 2016

GS was a lead UW on their IPO and all three of their previous FOs. So i doubt this will raise too many red flags

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May 19, 2016

I would argue no red flags at all. Everyone likes to be alarmist but all that happened was GS led another deal for a company that they have a good relationship with. Anyone who thinks that an analyst bumping their target is going to have an impact on a $2B order book is delusional.

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May 19, 2016

if you're not long on whatever Elon Musk is doing you're living in the past, we need to nurture the younger generation as to encourage more people to push through the challenges and work on BIG ideas that will change the world for the better. speaking of, who here knows about http://singularityu.org/ ? the idea (as i remember it) is to work on an idea that will better the lives of a billion people

What is the answer to 99 out of 100 questions?

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May 19, 2016

The actual price targets and recommendations are bullshit but the ideas aren't necessarily. Remember, it's not just about getting deals for these guys, is also about trading revenues, which are helped by good ER. Also, in situations where the analyst chooses to cover a company (not this situation), they generally won't choose to cover one that they can't in good conscience call a "buy".

May 19, 2016

Musk is selling 600mm of his own shares. If you don't think there's motivation for Goldman to put the price up to help him get the best price possible then your delusional IMO. Funny how they timed the two announcements too.

Actually pretty funny, I was bullish ST leading into yesterday's close and TSLA was one of the best performers yesterday due to the upgrade. I bought a couple calls in TSLA into the close. They announce the 2bn secondary offering (600mm of which is Musk's) and stock immediately goes from 211 to 203 after hours then snaps back to flat. Then it actually opened up today and closed positive. I was happy to dump my calls right at the open and not lose any money. Again, if you don't think this looks rigged, lol, stop riding your fantasy BB so hard

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May 19, 2016

The red flag is that the company needs the money to survive

May 19, 2016

Or that Tesla has great ambitions for the Model 3

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May 19, 2016

May have came off strong in that last post, you can get great skills doing equity research on the sell side as well, I'm just talking about the nature of the business. I worked in equity sales & trading for a little over a yr before I moved on, im just saying what I witnessed first hand

May 21, 2016

There is no doubt the shares were 'conveniently' upgraded as GS ran the follow on. However, I'd like to touch on some of the comments: many analysts are forced to upgrade shares for the sole reason of keeping the banking client - this is why there are so many sector perform ratings out there. There are companies analysts would love to downgrade, but cannot in order to keep the company as a banking client, or even worse, a potential banking client. This holds true for a lot of banks, but it highly depends on how an analyst runs his/her franchise. There are analysts that value their reputation and rate the companies in their universe on the direction where they believe the stock is going regardless if the company is a banking client or not. The analysts that do this get a lot of heat from the bank, but it is encouraging to see analysts respecting their business and not leading investors into a false opinion.

Also, analyst price targets are not BS - they are calculated from expected future earnings. Clients on the buy side do not want to see new price target changes every week that is the reason you may believe some of the targets out there are BS.

May 22, 2016
vdubben:

There is no doubt the shares were 'conveniently' upgraded as GS ran the follow on. However, I'd like to touch on some of the comments: many analysts are forced to upgrade shares for the sole reason of keeping the banking client - this is why there are so many sector perform ratings out there. There are companies analysts would love to downgrade, but cannot in order to keep the company as a banking client, or even worse, a potential banking client. This holds true for a lot of banks, but it highly depends on how an analyst runs his/her franchise. There are analysts that value their reputation and rate the companies in their universe on the direction where they believe the stock is going regardless if the company is a banking client or not. The analysts that do this get a lot of heat from the bank, but it is encouraging to see analysts respecting their business and not leading investors into a false opinion.

Also, analyst price targets are not BS - they are calculated from expected future earnings. Clients on the buy side do not want to see new price target changes every week that is the reason you may believe some of the targets out there are BS.

You really think GS would be that dumb? The timing will without a doubt cause the SEC to look into this.. they'd have to have 0 IQ to have done anything improper here

"My dear, descended from the apes! Let us hope it is not true, but if it is, let us pray that it will not become generally known."

May 19, 2016
Illuminate:

You really think GS would be that dumb? The timing will without a doubt cause the SEC to look into this.. they'd have to have 0 IQ to have done anything improper here

Goldman Sachs owns the government. There's a revolving door between Goldman Sachs and the Treasury, SEC, and other regulators.

May 21, 2016

Want a grt way to find out who on here is a fraud and doesn't work in the industry? They think ER matters... It's only good for corporate access, no one on the buy side cares about ratings, dgs, ugs, etc.

May 21, 2016

doesnt tesla need additional money to finance the construction of all those preordered model 3

May 19, 2016

They need it so as to not go bankrupt

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May 19, 2016
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