The steering wheel of a Tesla Inc. Model S P100D electric vehicle. (Photographer: SeongJoon Cho/Bloomberg)

Musk Says Don't Buy Volatile Tesla Stock; Investors Listen

(Bloomberg) -- 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 -- sent the electric-car maker’s stock plunging. Tesla fell as much as 8.6 percent Thursday after the chief executive officer rejected analysts’ questions on another quarter in which the company burned more than $1 billion in cash.

Musk Says Don't Buy Volatile Tesla Stock; Investors Listen

Musk, 46, may have backed Tesla into a corner. While he repeated that the carmaker won’t need more capital this year -- and said he specifically doesn’t want to raise any -- 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.

“Clearly, he seems fatigued and frustrated, and this is the wrong time to lash out at the investor community,” James Albertine, an analyst with Consumers Edge Research, said on Bloomberg Television. “It was a regrettable moment, to say the least, and the stock reflects that today.”

Read More on Tesla:

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. The company is going to need money to eventually build its first factory in China and to develop new vehicles, including a semi truck and the Model Y crossover, which it now expects will arrive in early 2020 instead of late next year.

“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 of Musk on Bloomberg Television. “His approach obviously didn’t go over well.”

‘Not Cool’

Before the call Wednesday, Musk wrote to shareholders that Tesla will be able to generate cash and profit in the third and fourth quarters if it doubles weekly output of Model 3 sedans in about two months. 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 7.8 percent to $277.56 as of 12 p.m. in New York and plummeted earlier by the most in a month. The company’s 5.3 percent notes due 2025 were down 1.5 cents on the dollar and were quoted at 87.5 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.

Rattled Investors

“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.”

Albertine, who has the equivalent of a buy rating on Tesla, said Musk doesn’t need to raise capital soon but may want to think about hiring a chief operating officer. The billionaire is also the CEO of rocket company Space Exploration Technologies Corp. and founded the tunnel-digging firm Boring Co.

Is he unhinged? And is our capital secure with Tesla?” Albertine said. “That’s the question people have.”

©2018 Bloomberg L.P.