Morgan Stanley halts Tesla research coverage

Morgan Stanley has halted equity coverage on Tesla hinting that it may be doing business with the carmaker as it considers going private.

The announcement follows close on the heels of Goldman Sachs's decision to drop its own coverage of Tesla during the week before with the investment bank confirming it would be acting as the company' financial adviser as it seeks the funding needed to go private.

"A Tesla LBO does not appear to be feasible, in our view, even with less than $10.0bn of incremental debt. However, if the decision is made to take the company private, an equity buyout (or EBO) may be a potentially viable option," Morgan Stanley analyst Adam Jonas said in a research note sent to clients on Friday.

To take note of, Jonas was one of the most widely-followed industry analysts on the Street.

"We believe Tesla could consider an auction for its shares in the private equity market, financed by existing shareholders, new strategics, divestiture of valuable captive assets (Tesla autonomous/shared), and possibly some help from SpaceX."

Coincidence or not, on Tuesday Morgan Stanley revised its recommendation on the shares from 'equal-weight' to 'not rated'.

Elon Musk has not provided any further details on the carmaker plans to go private or on how it plans to fund the move after tweeting his intention on 7 August.

A week ago, the Tesla CEO said he was in negotiations with Saudi Arabia’s sovereign wealth fund but recently it has been revealed the Saudis were also negotiating with rival Lucid Motors.

As of 1619 BST, stock in Tesla was advancing 2.63% to $316,55.