Electric car startup Tesla Motors saw 2,500 of its shares trade yesterday for $10 apiece, valuing the company at $1 billion. No, Tesla has not gone public. Rather, it’s the first private company to have its stock sold in a new — and at this point experimental — marketplace launched by a startup called SharesPost. The service has just come out of a private beta, or test phase.
Tesla spokesperson Rachel Konrad told us today that the company “did not work with SharesPost at all in this transaction,” and declined to comment on the valuation. A cool billion is significantly more than the $550 million valuation at which Daimler took a stake in Tesla just last month. At the time, CEO Elon Musk said Tesla could have gotten a much higher share price from a private investor. But this much higher? Given that SharesPost lacks the regulatory oversight and massive pool of competing investors of established public markets, how much weight should we give to the valuations of Tesla and other cleantech startups listed on SharesPost (including BrightSource Energy, SolarCity and Altra Biofuels) in this new marketplace?
Just over a year ago, Musk said he aimed to take Tesla public by the end of 2008. He envisioned a debut raising some $100 million, even as other startups were backing away from a tumultuous market that has sapped many investors’ appetite for initial public offerings.
At the time — speaking at the TieCon Conference in Santa Clara, Calif. — Musk also said he wanted to find a way for customers to invest in Tesla before an IPO, according to a CNET report. That’s the basic idea of SharesPost. The BrightHouse-backed startup wants to provide a low-cost, web-based platform for connecting shareholders — be they entrepreneurs, early employees, venture capitalists or angels — with those with an appetite for such relatively risky investments.
A spokesperson for SharesPost told us this morning that the company “replaces brokers and lawyers with bulletin boards.” SharesPost members, who pay a $34 per month subscription fee, can anonymously post their shares for sale on the site’s bulletin boards using standard contracts and an option to upload additional documents laying out any specific restrictions (such as rights of refusal) or privileges attached to the equity. Buyers can then compete for the shares, with a minimum deal of $25,000. Right now, SharesPost supports only common stock contracts, but it expects to add preferred stock contracts “soon.”
We took a look at the report put together by Next Up Research and provided by SharesPost to subscribers that explains the analysis used to come up with the $1 billion valuation — a task that the research firm notes is “a difficult exercise” when dealing with companies in a period of rapid growth. For the Tesla valuation, additional uncertainty comes from the nature of the automotive sector. As Next Up notes, “The valuation on car companies varies widely depending on how profitable their niche is.”
Tesla’s Roadster falls in the generally higher-margin niche of luxury performance vehicles, but with a new technology and relatively small scale, it might be a stretch for the startup to reach the margins of a company like Porsche anytime soon, even though both are vying for a customer group that’s not terribly sensitive to prices.
Next Up is working with the assumption that Tesla will launch the Model S electric sedan, as planned, in 2011, and that the model will make up an increasing portion of Tesla’s revenue with each passing year. Also included in the revenue projections is a third model called Blue Star, which has yet to debut in concept form, that Next Up expects to start generating revenue in 2013.
Despite the potential boons for Tesla — including its early-mover advantage in the luxury plug-in sports car niche and its in-house battery technology — Next Up cites plenty of risks for potential investors, among them a “lack of significant cost or performance advantage” over conventional sports cars, potential for additional safety issues related to the battery technology and long-term reliability, as well as the “slew” of competitors expected to roll out in the next 2-3 years, notably the all-electric E6 from China-based BYD Auto, with its “formidable battery technology.” Next Up also cites Tesla’s history of product delays, transmission problems layoffs, and the potential for more delays with the planned Model S.
It seems too early to take the share prices and valuations on the just-launched SharesPost as truly accurate assessments of startups’ value — but it offers a new forum for entrepreneurs and investors to connect, and see how their investments might compare with competitors. For startup employees, who typically receive equity as part of their compensation package, SharesPost could offer a means of turning that equity into cash when they need it. For Tesla and other cleantech startups, SharesPost could also be an important “third exit,” (an idea suggested by Adeo Ressi, founder of the entrepreneurship site TheFunded) allowing them to take their time building a healthy business rather than being under the gun from investors to shoot the moon with a big, early IPO.