Tesla Motors’ shares ended their first day of trading up 40.5 percent over their $17 offering price, at $23.89. The electric car maker, which is backed by CEO and Chairman Elon Musk, various Silicon Valley venture capitalists, the governments of both the U.S. and Abu Dhabi, and German automaker Daimler, among others, saw most of its gains late in the day, when the stock surged as high as $25.
This is a company that since its founding in 2003 has lost money in every quarter and sold fewer than 1,100 cars (at more than $100,000 a pop) and expects to record operating and net losses every quarter until at least 2012. That apparently didn’t scare off investors, however, who scooped up Tesla’s shares while the larger market tumbled on renewed fears of a global economic slowdown.
Tesla’s Nasdaq debut comes shortly after several other greentech IPOs have been canceled or postponed. Solar company Solyndra, for example, which had been aiming to raise as much as $300 million going public, said earlier this month that it has opted to raise $175 million from existing investors instead. Solyndra, which makes tube-shaped solar panels and has won support from the Department of Energy, cited “going uncertainties in the public capital markets” as reason for pulling its IPO. Other greentech companies that have withdrawn plans to debut on the public markets in recent months include geothermal developer Nobao Renewable Energy and amorphous-silicon solar panel maker Trony Solar.
With its public trading debut today, Tesla is offering some of the first data points to help answer a critical question: Is the classic venture capital model (invest early and find a big exit in the form of an acquisition or an IPO) viable for the electric vehicle sector? It remains to be seen how Tesla’s stock will perform over the long term, and analysts widely expect it to drop as Tesla works to build its business. In the meantime, however, Tesla has shown that investor appetite exists for a greentech IPO with the right marketing. Tesla increased the number of shares slated for the public offering by 20 percent yesterday, a sign of strong investor interest. In addition, the company priced its IPO aggressively at $17 per share, above the originally estimated range of $14-$16, and then proceeded to open trading today at $19 per share.
Tesla’s selling stockholders, directors, officers and employees who are subject to a lock-up period for 180 days after the IPO (underwriters typically secure lock-up agreements to prevent a company’s stock from gushing too quickly onto the market) are undoubtedly hoping that appetite isn’t sated anytime soon. Musk, who has invested more than $70 million of his personal fortune in the company, sold 909,212 shares in the IPO for gains of more than $15 million. On paper, at least, Tesla’s stock market debut gave birth to a new breed: the electric car millionaire.
Photo courtesy of Tesla Motors
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