Elon Musk is losing some of his Wall Street cheerleaders just when he needs them the most. Goldman Sachs Group Inc., one of Musk’s top bankers, has reversed course and cut its recommendation on the entrepreneur’s flagship Tesla Motors Inc., following a similar move by another big booster, Morgan Stanley.
Goldman’s decision, announced Thursday, comes as Musk is under growing pressure to rally investors for a new fundraising round. While the banks are subject to strict rules designed to separate their research and underwriting, the downgrade underscores how Musk’s Wall Street enablers have played multiple, even conflicting roles as he’s chased ambitions — from electric cars to solar power — where profits are hard to come by.
“I am sensing that some Tesla cult members think he’s not as brilliant as they thought he was,” said Barclays Plc analyst Brian Johnson, who has advised selling the shares for the past year. “He will be able to raise money but maybe they have to do it at a discount.”
Both Goldman and Morgan Stanley have been big owners of the stock. Their analysts have, on occasion, recommended the shares right around the time that the firm’s underwriters were lead managers on a new round of funding.
In addition to underwriting Tesla stock offerings, Goldman and Morgan Stanley have loaned Musk $275 million, and $200 million respectively, according to regulatory filings. Some of the loans were used to buy Tesla stock, the filings said.
Tesla representatives didn’t respond to requests for comment.
In August of last year, the company hired Morgan Stanley as one of the managers of a $783 million offering, priced at $242 a share. Three days after the announcement, Morgan Stanley analyst Adam Jonas raised his estimated future price for the stock to $465 from $280.