econintersect.com
       
  

FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.



posted on 31 May 2016

You'll Never Believe How Goldman Manipulated Tesla Stock

from the Shah Gilani, Money Morning

Money Morning Article of the Week

"The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money."

The inimitable Matt Taibbi gets well-deserved credit for the exquisite description above of Goldman Sachs Group Inc. (NYSE: GS) from his April 5, 2010, Rolling Stone expose titled "The Great American Bubble Machine."

If you never read the piece, you owe it to yourself. The subtitle is an appropriate lead-in for this post:

"From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression -- and they're about to do it again."

Well, the Vampire Squid's at it again...

Not that it hasn't been at it all along - that was the point of Taibbi's warning, that Goldman is everywhere, always looking for the next opportunity.

This is just the latest...

Goldman Gives Tesla Stock an Unlikely Upgrade

tesla stock

Back on May 18, 2016, right before the market opened, Goldman Sachs analyst Patrick Archambault upgraded Tesla Motors Inc. (Nasdaq: TSLA) from "Neutral" to "Buy" because "there are admittedly fewer visible catalysts than before."

Huh!!! That's a reason for an upgrade?

No, of course not. There was possibly another reason for the upgrade. I'm not accusing the Squid here, just pointing out the obvious, that after the close that day, after the "Buy" recommendation had lifted the stock 3.2%, Goldman was named co-lead, along with Morgan Stanley, in a $2 billion secondary underwriting of Tesla stock.

Pure coincidence, no doubt.

The stock fell 3% in afterhours trading, erasing the fat gain Goldman engineered during regular trading hours.

So, what's the difference? The stock goes up, the stock goes down - it's all in a day's work.

There is no difference. Goldman Sachs, was, as CEO Lloyd Blankfein famously said, just "doing God's work" when it recommended the stock and later announced it was going to earn some fat fees selling more Tesla stock into the market.

This occurred at the exact same time that other analysts, myself included, were scratching their heads over Tesla's prior earnings announcement that they were moving up from 2020 to 2018 their promise to build 500,000 new Model 3 cars per year. That's a stretch, since they're only capable of making, at most, 100,000 cars a year right now.

But I digress.

The timing of the "Buy" recommendation in the morning and the timing of the secondary offering announcement after the close may appear like the jamming of a blood funnel into something that smells like money.

But I can assure you it wasn't.

How do I know there was no money-sucking nonsense, nothing unethical or utterly illegal going on there?

Goldman said so. A spokesperson for Goldman Sachs told MarketWatch,

"We followed all of our standard policies and procedures with respect to our research publication on Wednesday."

Don't you feel better?

Surprise: This Isn't the First Time

Incidentally, Archambault didn't change his price target, which he kept at $250. But how he got there again was interesting.

By my own calculations, not only will it be highly unlikely that Tesla will be able to produce 500,000 cars two years from now, but the net 373,000 online "deposits" they wrangled from potential customers can be cancelled at any time. As far as the cost of the new factories, including the big battery factory being built, they had to raise more money because they keep spending it and don't have the revenue to replace what they're burning through. They will be back for more.

I'm not the only person questioning Tesla's numbers and how Goldman's Archambault had to juggle his own version of Tesla's numbers to come up with his $250 per share price target.

Chuck Jones at Forbes wrote that Archambault's

"price target calculation is built on five scenarios that include Steve Jobs, Henry Ford, the Maytag Repairman, a Base case, and a Downside case. The first three scenarios have a 11.7% weighting, the Base case is at 45%, and the Downside one is 20%. I guess he backed into the 11.7% weightings after he used the 45% and 20% ones and divided by 3."

That's funny. Jones is saying the numbers don't even add up to $250. It makes sense... because nothing about this adds up.

This isn't the first time that Archambault has coincidentally raised his price target just as Goldman was about to underwrite a sale in Tesla stock.

Back on May 9, 2013, TSLA reported its first-ever (and still only) quarterly profit, and the stock jumped. That same day, Archambault raised his price target from $41 to $65. And a little more than a week later, Tesla sold $360 million in stock with, you guessed it, Goldman underwriting the sale.

Now, that $65 price target was much easier to swallow, especially since TSLA had just reported a quarterly profit and the stock would tack on 38% in the next two days.

I'm sure it's just another coincidence.

Partners in "Crime"

Goldman isn't alone in this sea of coincidences, of course. Not only do all of the big investment banks dabble in this kind of manipulation, Goldman's co-lead in the latest TSLA offering, Morgan Stanley (NYSE: MS), might be the worst of the bunch.

Adam Jonas, Morgan's TSLA analyst, has a history of being overly optimistic when it comes to TSLA's stock price - especially when his employer is directly involved.

In fact, he's doubled his price target for TSLA exactly twice:

  • On May 14, 2013, just days before Goldman Sachs and Morgan Stanley underwrote a convertible debt offering of $600 million.

  • On Feb. 25, 2014, just days before Goldman and Morgan underwrote a convertible debt offering worth $2 billion.

And here's something that might come as a shock - according to data compiled by Bloomberg (which has done a terrific job following this story), Archambault and Jonas are not among the five most accurate predictors of TSLA's stock price. Jonas' optimism, in particular, has proven to be consistently misplaced, as TSLA's stock price has never reached his lofty standards.

Of the analysts that cover Tesla, the most accurate have been Colin Langan of UBS and Ryan Brinkman of JPMorgan, who have slapped targets of $160 and $185, respectively, on TSLA.

Those are much more reasonable targets for a company that has only ever reported a single profitable quarter in six years, for a company that lost $889 million in 2015 (after losing only $294 million in 2014), for a company that just missed earnings estimates again and promised instead to push up their date for 500,000 cars produced to 2018 (from 2020).

But it's not funny that Goldman seems to have tripped over itself again.

I mean, that's what must have happened, because they are just too smart to get caught breaking some code of conduct some regulators somewhere put in place to prevent something like this happening and making companies like Goldman and Morgan look like a stain on the fabric of American capitalism.

Or maybe I'm just being naive.


Notes from Money Morning:

Follow Money Morning on Facebook and Twitter.

This Tiny Disruptor Will Soon Become a Fintech Giant: Financial technology is poised to change the world as we know it. As fintech revolutionizes everything from banking to trading to everyday life, this fledgling company will capture an outsize portion of the massive profits at stake. That's why we're watching it now, before it starts minting millionaires...

These Stocks Just Went "On Sale": Shah Gilani says we're in the formative stages of a "generational bull market" that will make the savviest investors rich. And that means the market is actually "marking down" stocks and creating some of the biggest profit opportunities he's ever seen. Shah identifies his most promising recommendations in a brand-new report. To access this free report and get all of Shah's research, click here.

>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical News Post Listing










Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, using Livefyre just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.



You can also comment using Facebook directly using he comment block below.





Econintersect Contributors


search_box

Print this page or create a PDF file of this page
Print Friendly and PDF


The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.


Take a look at what is going on inside of Econintersect.com
Main Home
Analysis Blog
The Expected Effects of Petitions to Improve the Monetary System
Energy and Falling Productivity
News Blog
The Dominant Forces In The U.S. Gun Market
69 Percent Of Americans Have Less Than One Thousand Dollars In Savings
Average Gasoline Prices for Week Ending 26 September 2016 Unchanged
Genetic Studies Reveal Diversity Of Early Human Populations - And Pin Down When We Left Africa
Earnings And Economic Reports: Week Starting 26 September 2016
TV Matches Aren't All That Important And Trump's Less Trusted
What We Read Today 26 September 2016
Why Mosquitoes Bite Some People
September 2016 Texas Manufacturing Survey Improves Further Into Expansion.
August 2016 New Home Sales Decline On Lower Median Sales Prices.
U.S. Real Wage Growth: Fast Out Of The Starting Blocks - Part 1 Of 2
Who Works More Hours Per Week: Rich Or Poor Countries?
Infographic Of The Day: How The World's Most Iconic Logos Evolve Over Time
Investing Blog
Monday Morning Call 26 September
We're Back Here We Started
Opinion Blog
Housing Inflation- A Simple Case Of Supply And Demand Exacerbated By Low Rates
Heading For A Fall? With Summer Over, Europe Must Face Up To Its Mounting Crises
Precious Metals Blog
War On Cash Turns To $20, $50, And $100 Bills
Live Markets
26Sep2016 Market Close: Wall Street Remained Down Ahead Of Tonight's Presidential Debate And OPEC's Meeting Later This Week, WTI Crude Falls Back To The 45 Handle, Gold Also Falls Off Session Highs
Amazon Books & More






.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government



Crowdfunding ....






























 navigate econintersect.com

Blogs

Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2016 Econintersect LLC - all rights reserved