Tesla shares, bonds drop as CEO Musk snubs Wall Street

(Reuters) - Tesla Inc chief Elon Musk's refusal to answer "boring" Wall Street questions about the electric car maker's financial condition sent shares down as much as 7 percent on Thursday and spurred concerns about its ability to raise money in the future.

Tesla's bonds followed the shares lower and, with at least three brokerages cutting price targets for the stock and eight of 27 now recommending "sell", several wondered what it would now cost the company to raise more funds this year if need be.

In a conference call on Wednesday, Musk refused to answer questions from analysts on Tesla's capital requirements, saying "boring questions are not cool."

He instead took more than a dozen consecutive questions - unknown on such forums - from YouTube investment channel HyperChange TV, who had previously recommended buying Tesla shares.

Cowen analyst Jeffrey Osborne dubbed the call, in which Musk talked of "barnacles, flufferbots, and bonehead bears", surreal.

Morgan Stanley's Adam Jonas said it was the most unusual he had heard in 20 years in the business.

"Irrespective of the Tesla CEO's annoyance with the genre of questions he was receiving ... an important part of Tesla's success has been its relationship with the capital markets in funding its ambitious plans," Jonas wrote in a note to clients.

"The analysts on the call represent the providers of capital that Tesla has throughout its history depended upon."

Of 27 brokerages covering the stock, nine now have a "buy" or higher rating, 10 "hold" and eight have "sell" or lower.

The company's shares were down 6.8 percent at $280.82 shortly after midday in New York. They have lost more than a quarter of their value since touching a high of $389.61 in September, mainly due to reports of bottlenecks around production of the Model 3 sedan, seen as crucial to Tesla's profitability.

The call came after Tesla forecast lower capital spending for the year and reiterated it would turn a profit in the second half of the year.

But Musk was also bullish on the pace of some of its more expensive projects, promising he would make a decision on the construction of a new Model Y factory by the fourth quarter and announce the location of a Chinese Gigafactory soon.

He also pledged to cut costs by rationalizing the number of third-party contractors Tesla is using.

"(That) has really gotten out of control," Musk said. "So we're going to scrub the barnacles on that front. You've got barnacles on barnacles. So there's going to be a lot of barnacle removal."

NEGATIVE CASHFLOW

Tesla has consistently fallen short of its promises on car production and Bernstein analyst Toni Sacconaghi pointed to two occasions in 2015 and 2016 when executives promised the company would not need to raise funds in a year before having to do so.

The company has raised capital each year since its initial public offering in 2010 and issued debt twice in 2017.

Tesla's free cash flow, a key metric of financial health, widened to negative $1 billion in the first quarter from negative $277 million in the fourth quarter, excluding costs of systems for its solar business.

The company plans to reach its weekly goal of producing 5,000 Model 3 cars in two months, after revising the target several times.

Tesla's use of robots to assemble Model 3s has led to more complexity and delays, which Musk acknowledged last month.

"We believe that Tesla is essentially learning how to become a manufacturing company on the fly," said RBC Capital Markets analyst Joseph Spak.

"Investor feedback to the call was shock that a CEO would be dismissive and the general sentiment was that the defensiveness spoke volumes."

(Reporting by Supantha Mukherjee in Bengaluru; Editing by Anna Driver)