By Lucinda Shen
June 23, 2016

Elon Musk’s might be working hard to convince investors that the proposed SolarCity-Tesla deal is a good idea, but Wall Street isn’t biting.

Now, Tesla Motors (tsla) has even lost one of its biggest Wall Street advocates from over the past few years.

Morgan Stanley analyst Adam Jonas downgraded Tesla to “Equal-weight” or “Hold” from the equivalent of “Buy” a day after Tesla revealed plans to buy fellow Musk-owned company, SolarCity, for $2.8 billion. Jonas has maintained a “Buy” recommendation on the stock since 2012. He has been known for his outlandish and seemingly overly-optimistic predictions about Tesla, and was dubbed a Tesla “cheerleader” for his research notes in a 2015 New York Times op-ed.

“While there may be any number of lucid arguments supporting the strategic rationale of a combination, we believe many of the benefits could have been achieved through arm’s length/strategic partnership and without the risks inherent in exposing Tesla shareholders to the financial and capital markets risks faced by SolarCity,” Jonas wrote in a note to clients Thursday.

Jonas has also been largely bullish on the stock because he expects Tesla to introduce a ride-sharing app akin to Uber. Tesla’s management has not yet talked about such an app in development.

Jonas noted that fact, and reduced the stock’s 12-month price target to $245 from $333. He still says its likely an app will be announced within the next 12 to 18 months.

The stock is now trading at around $193 a share.

 

Critics have questioned Jonas’ “Buy” rating in the past. Morgan Stanley has been a lead underwriter for several Tesla offerings, including the company’s most recent round of fundraising in May. Nonetheless, Morgan Stanley has maintained that the bank’s underwriting and research divisions remain separate.

On Wednesday, Musk tried to sell the idea of a combined Tesla-SolarCity to shareholders and analysts. He called it a “no brainer,” and argued that the acquisition was relatively cheap, teasing that the combination could become the world’s first trillion dollar company.

But other details of the deal are also giving investors reason to pause. Namely, the two companies’ near-incestuous boards that seem to promise conflicts of interest when time comes to approve the deal.

In a separate Morgan Stanley note, analyst Stephen Byrd also downgraded SolarCity to the equivalent of “Hold.”

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