Tesla Plunges After a Bizarre Conference Call

Elon Musk told investors not to buy Tesla Inc. shares if they can’t stomach volatility. They got the message.

The comments -- part of a bizarre, heated conference call after the close Wednesday -- precipitated another plunge in the stock of Musk’s electric-car maker. Tesla fell as much as 8.1 percent Thursday after the chief executive officer rejected analyst questions on another quarter in which the company burned more than $1 billion in cash.

Musk, 46, may have backed Tesla into a corner. While he repeated that the carmaker won’t need a capital raise this year -- and said he specifically doesn’t want one -- even Tesla bulls harbor doubts about its cash position. The CEO demonstrated willingness to bite the hand that feeds by ridiculing representatives of Wall Street’s biggest banks, some of which have helped the company raise billions of dollars to fund his other worldly ambitions.

“He reiterated that he’s not going to raise cash. Now, no one believes that,” Ben Kallo, an analyst at Robert W. Baird & Co. with a buy rating on Tesla shares, said on Bloomberg Television. “His approach obviously didn’t go over well.”

At the end of March, Tesla had about $2.7 billion in cash on hand. The company blazed through about $3.9 billion during the trailing 12 months, according to data compiled by Bloomberg.

Tesla Doesn’t Burn Fuel, It Burns Billions of Dollars in Cash

Before the call Wednesday, Musk wrote to shareholders that Tesla will generate cash and profit in the third and fourth quarters. The stock’s initial rally petered out and turned into a rout after the CEO said an analyst was asking “boring bonehead questions” that were “not cool.”

“Investor feedback to the call was shock that a CEO would be dismissive and the general sentiment was that the defensiveness spoke volumes,” Joseph Spak, an analyst at RBC Capital Markets, wrote in a report to clients.

Tesla shares traded down 6.2 percent to $282.50 as of 10:25 a.m. in New York, after plummeting the most in a month. Its 5.3 percent notes due 2025 were down 2 cents on the dollar and were quoted at 87 cents, according to Trace bond-price data.

Moody’s Investors Service, which downgraded Tesla’s credit rating further into junk in March, still expects Tesla will need to raise about $2 billion selling equity, convertible bonds or debt, to offset the cash it burns this year and securities maturing through early 2019.

“Tesla’s results and Elon’s demeanor on the call definitely rattled investors,” said George Schultze, founder of Schultze Asset Management, which oversees about $100 million and is shorting the company’s stock. “The company’s cash position is becoming more and more tenuous.”

For more on Tesla, check out the Decrypted podcast:

— With assistance by Alix Steel, David Westin, Courtney Dentch, Esha Dey, Sophie Caronello, Taka Endo, and Brian Eckhouse

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