
Tesla (TSLA) Stock Closed Sharply Lower After SolarCity Bid, Downgrade
NEW YORK (TheStreet) -- Tesla Motors (TSLA) - Get Report stock closed down 10.45% to $196.66 on heavy trading volume Wednesday after the electric car maker offered to acquire SolarCity (SCTY) for $2.8 billion and was downgraded to "perform" from "outperform" by Oppenheimer.
About 23.69 million of Tesla's shares changed hands today compared to its average volume of 4.04 million shares per day.
"While we remain bulls on the solar industry, we do not view this acquisition as the best and highest use of TSLA's capital and human resources given the potential return on capital possible in the electricity industry (typically ~8%-9%) versus the potential leverage of the TSLA auto platform which we believe could demonstrate ROIC of 15%-20%+," Oppenheimer wrote in an analyst note earlier today.
The firm also removed its $385 price target on Tesla as it believes uncertainty around the acquisition and the resulting corporate structure will weigh heavily on shares.
"We expect a robust shareholder fight over this acquisition centered on corporate governance," Oppenheimer added.
After yesterday's closing bell, Tesla offered to pay $26.50 to $28.50 per share for the solar energy company, which represents a premium of 21% to 30% of SolarCity's closing price of $21.19 on Tuesday.
"We struggle to see the benefit to TSLA other than potential leverage on its retail stores," Oppenheimer said.
Shares of SolarCityclosed up 3.26% to $21.88 on heavy trading volume Wednesday. Roughly 26.2 million of the company's shares were traded today vs. its average volume of 6.27 million shares per day.
Separately, TheStreet Ratings Team has a "Sell" rating with a score of D+ on Tesla stock.
The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.
Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this article's author.
You can view the full analysis from the report here: TSLA










