Tesla's finances may be hurt by the negative ramifications of CEO Elon Musk's controversial plan to take the company private, according to Citi Research.

The firm reiterated its "neutral/high risk" rating on Tesla shares, citing the company's deteriorating balance sheet.

"Ultimately, credit risk is a function of confidence, without which a company's financial position can quickly spiral into distress. Though we don't think Tesla has necessarily entered such a spiral, the current state of affairs heightens the focus," analyst Itay Michaeli said in a note to clients Monday. "If a go-private transaction is looking less likely, we think it'd be wise for Tesla to at least try to raise significant new equity capital sooner rather than later."

Michaeli said if Musk's plan to take the company private doesn't happen, the company's cash position may be "pressured" by class-action lawsuits.

Tesla shares closed up 1 percent Monday after the report.

Tesla's skeptics have called into question the state of the company's financial position. It lost nearly $2 billion last year, and through the first two quarters this year it has burned through about $1.8 billion in cash after capital investments. The company had $2.2 billion in cash at the end of the June quarter.

"When a company's balance sheet is fundamentally weak the outcome can become self-fulfilling — and that's really the risk we see with Tesla right now," Michaeli said.

The analyst reaffirmed his $356 price target for Tesla shares, representing 16.5 percent upside to Friday's close. The company's stock is down 2 percent this year through Friday versus the S&P 500's 7 percent gain.

Tesla did not immediately respond to a request for comment.