There's growing concern over Tesla's finances — and Wall Street is convinced the company will need to raise money soon (TSLA)

Tesla has been a stock market darling ever since it went public back in 2010. The stock is up more than 1,500% since the company's initial public offering, and Elon Musk's electric-car company is now worth more than the old-guard automakers Ford and Fiat Chrysler. It trails General Motors by just a few billion dollars.

That valuation has been attained despite consistent losses and problems with production. The company produced 55,120 vehicles last year, compared with Ford's 2.46 million, while its newest car, the Model 3 sedan, grappled with production delays.

Now, with the company in a state of self-described "production hell," analysts and investors are starting to ask serious questions about Tesla's ability to fund its operations without raising additional capital. And with Tesla's bonds taking a hit and markets jittery, the availability and cost of that capital is also in question.

Here's why:

Tesla is burning cash like crazy

The company burned through $1.1 billion cash in the first quarter of 2018, regulatory filings show. That's a slower burn than in previous quarters, when the quarterly cash burn hit $1.4 billion, but it equates to a burn of $7,430 every minute, Bloomberg calculated.

That left Tesla with $2.7 billion cash on hand at the end of the quarter, much of which is tied up, according to analysts.

"Tesla has at least $2.6 billion in obligations coming due (~$750m in Gigafactory related accounting liabilities & ~$1.8 billion in maturing debt)," the UBS analyst Colin Langan said in a note to clients Thursday. "Also, of its $2.7 billion in cash, ~$880 million is abroad (may be difficult to access) and customer deposits of $1 billion will decline with higher deliveries."

Tesla says it wont need to raise cash, but Wall Street disagrees

"Tesla does not require an equity or debt raise this year, apart from standard credit lines," the company said in an April filing. That sentiment was echoed by Musk a few days later, when he tweeted that "Tesla will be profitable & cash flow+ in Q3 & Q4, so obv no need to raise money."

Wall Street disagrees.

The Goldman Sachs analyst David Tamberrino told clients earlier this month that Tesla may need $10 billion in fresh funding within 18 months to stay alive.

"Between its current operations, anticipated new product spend, and incremental capacity additions, we see Tesla potentially requiring over $10 billion in external capital raises and debt re-financing by 2020," he said. "We believe this level of capital transactions may be funded through multiple avenues, including new bond issuance (secured and/or unsecured), convertible notes, and equity."

And earlier this week, the UBS analyst Colin Langan said Tesla would need to raise capital in 2018.

"We forecast Tesla will need additional capital by Q418 to de-risk its balance sheet," he said.

Tesla is already saddled with the most debt of any S&P 500 company, at least according to one measure. The company's debt-to-EBITDA ratio sits at roughly 39 times, well above the next-closest firm in the benchmark index.

Its outstanding obligations total $1.8 billion, and issuing more debt could be tricky going forward.

Tesla's bond prices have fallen 9% this year, hitting an all-time low of 87.18 cents on the dollar in early April just after the credit-rating agency Moody's downgraded both Tesla's overall corporate rating and bond ratings, citing the "significant shortfall" in Model 3 production rates.

The latest yield on Tesla's 2025 bonds is 7.61%, up from a low of 5.4% shortly after they were issued, suggesting that if Tesla were to raise money in the bond market today, it would be much more expensive than it was in the past.

When analysts on Tesla's most recent earnings conference call tried to ask Musk about the possible need for a cash infusion, things only got worse.

The most unusual call I have experienced

Tesla bosses including Musk, the CEO, joined sell-side analysts for a conference call following the company's earnings report in May. These question-and-answer sessions are usually intended to give analysts an opportunity to get more context on the quarterly filings.

This call was different, however, leading the Morgan Stanley analyst Adam Jonas, previously a Tesla bull, to call it the "most unusual call I have experienced in 20 years on the sell-side."

Musk answered Jonas' question about the possibility of raising capital but had little patience for other questions about specific capital requirements.

"Excuse me, next," he said, interrupting Antonio Sacconaghi of Bernstein. "Boring, bonehead questions are not cool. Next."

The next question, from Joseph Spak of RBC Capital Markets, also prompted an interruption. "These questions are so dry. They're killing me," Musk said.

He then took seven questions from Galileo Russell, a self-proclaimed finance geek and retail investor whose "two biggest current fascinations are Tesla and bitcoin." None of the questions were about Tesla's financials.

Shares of Tesla sank 7% following the contentious call.

"I just left the call very frustrated," Rebecca Lindland, an analyst at Kelley Blue Book, said afterward. "Elon, you've got to grow up. You've got to stop looking at shiny objects and you've got to get on track. You have to take analyst questions, adult analyst questions, not fanboys, not retail analysts."

Bosses could be burning out amid production hell

Musk has repeatedly stated a production target of 5,000 Model 3's a week, a goal he most recently said the company hoped to reach by July. Based on the monthly reported numbers, however, Bloomberg estimates the latest output of Model 3's to be just 1,418 a week, less than half of the company's goal. Tesla just flew in six planes full of robots to speed up battery production.

At least nine executives have departed Tesla this year. The company's senior vice president of energy operations, Cal Lankton, was the latest to leave. He will be replaced by Sanjay Shah, who joins Tesla from Amazon. Additionally, Doug Field, a senior vice president of engineering, is on an indefinite leave of absence.

"Given the pace of departures of senior management in the past year and the stress placed on suppliers to meet production targets, we believe burnout is a legitimate concern," the Oppenheimer analyst Colin Rusch said on Wednesday. "Indeed, burnout could prove a significant challenge over the short and medium term."

Like most other sell-side analysts — who have a bullish average price target of $317 for shares to Tesla — Oppenheimer says the company will most likely need a cash infusion.

"We believe investors expect that Tesla will need more capital especially given management's acknowledgment of a China factory, another battery factory and the need for capacity to produce Model Y, the new Roadster as well as Semis," Rusch said. "We would view an equity raise as a positive catalyst."

Tesla is scheduled to report May vehicle deliveries alongside all other major automakers on Friday, when investors will be paying close attention to Model 3 numbers as well as any additional commentary from the company surrounding its impending cash crunch.

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