Autos

Betting on Tesla is a 'James Bond trade,' says portfolio manager

Key Points
  • Tesla is burning through cash and is dependent on the capital markets — and that should cause concern, investing expert Christian Hoffmann told CNBC on Wednesday.
  • "Capital markets can be fickle, and if the euphoria around this story changes … that could change very quickly," he said.
Tesla has burned over $5 billion: Portfolio manager
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Tesla has burned over $5 billion: Portfolio manager

Tesla is burning through cash and is dependent on the capital markets — and that should cause concern, investing expert Christian Hoffmann told CNBC on Wednesday.

"So far, capital markets have remained open. But capital markets can be fickle, and if the euphoria around this story changes … that could change very quickly," the portfolio manager at Thornburg Investment Management said in an interview with "Closing Bell."

He said the electric-auto maker has burned over $5 billion in the last couple of years.

"To believe in the story at this point you're making a James Bond trade. The company needs to dodge the avalanche, avoid the gunfire, ski off the cliff, pull off the ripcord on their parachute and glide to safety so that they can save the world," Hoffmann said.

Tesla revealed a new electric Semi truck and Roadster at an event last week. The first 1,000 Roadsters will cost $250,000 each, paid in full up front, with later models starting at $200,000.

Those deposits would put $250 million into Tesla's cash drawer today for a car that is likely to go into production in 2020. CEO Elon Musk did not offer details about how Tesla would generate additional funds to deliver its latest vehicles.

Colin Rusch, senior research analyst at Oppenheimer, said the deposits will help, but he expects Tesla to come to the markets to raise capital in the first quarter of 2018.

"The questions are what sort of terms are they going to end up with and what market are they going to tap — if they end up back in the equity market or if they are able to dip back into the high-yield market again like they did earlier this year," he told "Closing Bell."

Shares of Tesla are up 46 percent year to date.

— Reuters contributed to this report.

Disclosures: Oppenheimer makes a market in Tesla.

Correction: Christian Hoffmann is the correct spelling of the investor's name