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Tesla Ups Price, Volume of Initial Public Offering

Demand for stock in loss-making EV firm greater than expected. Initial stock offering closes up 40% from the asking price.

by on Jun.29, 2010

Tesla Motors founder Elon Musk, shown here .with the Tesla Roadster, at the Detroit Auto Show, January 2009

Tesla Motors founder Elon Musk at the Detroit Auto Show, January 2009.

 

Tesla Motors, Inc. (Nasdaq:TSLA), a manufacturer of electric vehicles and electric powertrain components, today announced its initial public offering of 13.3 million shares of its common stock at a price to the public of $17 per share. 

Tesla originally said it hoped to sell 11.1 million shares of stock, equal to 12% of the company, at a price range of $14 to $16. The increase reflects anticipated demand from investors hoping to cash in on electric vehicles. 

Tesla shares began trading at $19 a share this morning on the NASDAQ Global Select Market. Of the shares in the IPO, the company is offering 11,880,600 shares and 1,419,400 shares are being offered by selling stockholders. It closed at $23.89 – up more than 40% from the $17 asking price. 

In addition, the selling stockholders have granted the underwriters a 30-day option to purchase up to an additional aggregate of 1,995,000 shares of common stock to cover over-allotments, if any. Tesla will not receive any proceeds from the sale of shares by the selling stockholders. 

Goldman, Sachs & Co., Morgan Stanley, J.P. Morgan and Deutsche Bank Securities are acting as the joint book-running managers for the offering. 

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Tesla’s move to go public is the first IPO by a U.S. automaker in half a century, since Ford Motor in 1956. Analysts say a number of other electric vehicle manufacturers could enter the market if Tesla’s bid proves successful. EVs will be heavily subsidized by taxpayers under current legislation. And where Tesla’s stock will be trading a month from now as the hype subsides is questionable. 

 

Potential investors should consider whether Tesla can actually take advantage of a potential battery car boom. Tesla is hemorrhaging cash, having lost money in every quarter since its founding – a total of $230.5 million so far. Moreover, with Model S development efforts underway, the loss for the first quarter of 2010 jumped to $29.5 million, nearly double the year-earlier figure. The company projects that it lose money for years. 

However, Tesla does have other potential sources of revenue while it waits for the Model S to appear. It is providing the battery technology for Daimler AG’s new Smart electric, a battery version of the 2-seat fortwo microcar. In addition, Tesla is working with Daimler on other battery-based vehicles. 

Based in Silicon Valley, Tesla was founded in 2003 by Elon Musk, a South African émigré who made his initial fortune as one of the founders of the online service PayPal. He has since moved into a variety of other high-tech ventures, including SpaceX, which hopes to become one of the leading providers of commercial space launches. (See also Tesla IPO Set for Tuesday Launch)

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