Tesla Pulls Off Successful IPO

By Chris Haak

Electric-vehicle manufacturer Tesla pulled off a successful initial public offering yesterday, selling at least 13.3 million shares at $17 per share, which is above the $14 to $16 range that the company’s underwriters had proposed.  The gross proceeds of the stock sale were $226.1 million, with about $202 million going to Tesla as proceeds to help it develop its Model S electric sedan and ramp up production of that car.

Tesla’s IPO marks the first IPO of a US automaker since Ford’s IPO way back in 1956.  The IPO values the company at about $1.33 billion, because only about 17 percent of the company was sold to the public via the IPO.  Several early investors, including founder and CEO Elon Musk, sold portions of their stakes in the company to raise funds.

Mr. Musk, who admitted in recent divorce filings to being out of cash and depending on loans from friends to sustain his daily expenses, sold 909,212 shares to get him $15.3 million in much-needed cash.  Musk invested $70 million in Tesla, so still has not seen a return on his investment.  His stake in the company dropped from 36 percent to 28 percent after his sale.

Tesla shares are actually trading above their offer price today, their first day on the market.  As of 12:50 PM EDT, the stock (symbol TSLA) is trading at $18.40.

Though Tesla has revenue, unlike many startups, and was the recipient of a low-interest Department of Energy retooling loan from the US government, the revenue earned by selling $109,000 Tesla Roadsters will dry up by the end of 2011 as one of the company’s key suppliers – suspected by many to be Lotus, the chassis supplier – no longer has the necessary parts in production.  The company also pulls in some money by selling EV components to the likes of Daimler-Benz for that company’s Smart electric car, which is entering demonstration fleets later this year in the US and already on the road in Europe in similar tests.

Wall Street analysts are not bullish about TSLA’s prospects in the relatively short term, namely because a lot of work remains to be done on the Model S before it reaches production, and the company has never made money, in spite of still not seeing the peak of its Model S development and tooling expenses.  Still, the company has sold 1,063 Roadsters to consumers, and has reservations in the pipeline for another 110.

Toyota has an agreement with Tesla to then buy $50 million worth of shares of the company at the IPO price of $17 per share.  That purchase would get Toyota about 2.9 million shares, showing a vote of confidence in the startup company that Daimler AG also showed when it invested in Tesla a year earlier.

Tesla has proven to be a resilient company, with many betting against it ever mass-producing the Roadster, yet it has, and never pulling off its IPO, and yet it has.  I’ve learned personally to let Tesla’s actions speak for themselves before pronouncing the company in trouble or at risk.  They’ve done pretty well so far.

Author: Chris Haak

Chris is Autosavant's Managing Editor. He has a lifelong love of everything automotive, having grown up as the son of a car dealer. A married father of two sons, Chris is also in the process of indoctrinating them into the world of cars and trucks.

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