What happened

Shares of Tellurian (TELL -14.25%) plummeted 40.3% in September, according to data provided by S&P Global Market Intelligence. Weighing on the liquefied natural gas (LNG) stock was news that it pulled a bond offering and terminated two sales contracts as it shifted the financing strategy for its proposed Driftwood LNG project. 

So what

In late August, Tellurian announced its intentions to offer and sell units consisting of 11.25% senior secured notes due in 2027 and warrants to purchase shares in the company. It intended to use the proceeds to support the construction of its Driftwood LNG project. 

However, the company withdrew that offering in mid-September due to uncertain conditions in the high-yield bond market as the Federal Reserve raised interest rates. That increased investor concern about how the company might fund its proposed export facility. 

Tellurian provided a subsequent update to its financing strategy in late September, shifting its priority to securing equity partners. As part of that strategy, the company introduced flexibility into its LNG portfolio by terminating two current sales and purchase agreements. It believes that the type of strategic partners it's seeking might want LNG volumes they can sell globally, which it can now offer. 

These revelations led analysts to downgrade their view. For example, Stifel analyst Benjamin Nolan lowered that firm's price target from $3 per share to $2 while keeping a sell rating. The analyst noted the company's inability to raise capital even at a high cost "simply reinforces the challenge of capital raising and challenging prospects of the project attracting a strategic investor."

Meanwhile, Evercore ISI analyst Sean Morgan slashed that firm's price target from $5 to $2.50. Morgan said that while the company is "still far from out of the game," given its approvals and contracts, it's unclear where it goes next. 

Now what

Tellurian is working to build a large-scale LNG export facility to capitalize on growing global LNG demand. But it's unclear how the company will finance the massive project. It's now hoping to secure equity partners, but that could be highly dilutive to existing investors, especially given the steep slide in its stock price last month. 

Because of that, Tellurian is a high-risk bet. It could pay off spectacularly if the company secures funding and builds Driftwood. However, shares could have further to fall if it can't finance that project.