Wall street's 'dean of valuation' calls tesla’s bond buyers 'naive,' sees stock worth half as much

__ Elon Musk, chairman and chief executive officer of Tesla Motors, speaks during an event at the company's headquarters in Palo Alto, California. David Paul Morris | Bloomberg | Getty

Images Wall Street's "dean of valuation," Aswath Damodaran, says he is perplexed over why a cash-burning company like Tesla is choosing debt to raise money over stock.

"There is much to admire in the Tesla story but there is one aspect of the story that I find puzzling, and if I were an equity investor, troubling. It is the way in which Tesla has

chosen to, and continues to, finance itself," Damodaran wrote in a blog post Friday. Tesla later on Friday raised $1.8 billion, $300 million more than expected, in a bond offering with

a 5.3 percent yield. The company is "trying to woo bond buyers with the same pitch of growth and hope that has been so attractive to equity markets. That suggests that those making the

pitch either do not understand how bonds work (that bondholders don't get to share much in upside but share fully in the downside) or are convinced that there are enough naive bond

buyers out there, who think that interest payments can be made with potential and promise," the professor wrote. Damodaran added bond issuance doesn't make sense for the company

either. He cited how Tesla has historical losses of more than $4 billion, which negates any tax benefit against profits from debt's interest payments. In addition, he is concerned added

debt gives the company additional liquidity risk. "While the benefits from debt are low to non-existent, the costs are immense," he wrote. "The company is still young and

losing money, and adding a contractual commitment to make interest payments on top of all of the other capital needs that the company has, strikes me as imprudent, with the possibility that

one bad year" could put the company at risk. Damodaran is a professor of finance at the New York University Stern School of Business. He is widely regarded as the foremost expert in

valuing companies and is often referred to as Wall Street's "dean of valuation." The valuation expert increased his fair value estimate for Tesla shares to $192 from $151,

representing 46 percent downside from Friday's close. Telsa did not immediately respond to a request for comment.__ Disclaimer WATCH: TESLA DELIVERS THE FIRST MODEL 3S