Let's just go ahead and assume that it was a harmless coincidence when, on May 18, 2016, Goldman Sachs' equity analysts decided to upgrade Tesla in advance of its new product launch – “putting in our reservation for the Model 3,” they enthused – just hours before a different desk at 200 West announced it would join Morgan Stanley in underwriting a $2 billion Tesla share sale necessary for producing that very same car. The synchronicity was so blatant that Goldman had to defend the independence of its research and bat away calls for regulators to get involved.
Evidently, this was not sufficient to mollify the concerns of the Securities and Exchange Commission. From a new note out over at Probes Reporter:
In what’s sure to be ammo for both Elon Musk fans and haters alike, we recently acquired documents that show from Jun-2016 to 31-May 2017, the SEC conducted a formal investigation of Tesla Motors that was squarely focused on the company’s Model 3. The probe was in-depth and got into a wide range of items similar to questions raised by company skeptics. It also named Goldman Sachs and looked at the timing of its analyst report upgrading Tesla ahead of the company announcing a $2 billion stock offering later that same day, in May-2016. Goldman and Morgan Stanley were the lead underwriters.
From the associated documents, it's clear that the probe focused primarily on Elon Musk's hyperbolic, sideshow-barker promotion of the Model 3, and not on Goldman's eerily timed upgrade. And since the investigation evidently ended in May of this year (just a few weeks after Jay Clayton was confirmed to lead the department, natch), it also seems that the SEC didn't come across anything worth sanctioning Goldman over.
Still, there remains the uncomfortable fact that the SEC saw fit to subpoena Tesla over “documents sufficient to identify all Persons who assisted with, were involved in, or had knowledge of the content of the May 18, 2016 analyst report by Goldman, Sachs & Co. concerning Tesla,” which likely wouldn't have been the case had the two events happened on different days.
If (as we're assuming) it was all a big silly coincidence, then the only plausible explanation was that this was a case of an investment-bank firewall working too well. The only way the timing could have been this egregious at such an otherwise careful bank was if Goldman's equities analysts were so perfectly insulated from Goldman's equity underwriters that each could make their biggest moves of the year on the same stock, on the same day, and have no idea it was going on.
In which case, kudos to Goldman's compliance department.