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Electric car startup Tesla Motors made history last week when it delivered the first IPO for a U.S. car company since Ford Motor’s public debut more than half a century ago. While Tesla hasn’t made a profit and doesn’t plan to for at least two years from now, the world needs a lot more Tesla’s to emerge in order to get it on track to remaking our energy infrastructure away from fossil fuels.
Tesla itself might not even end up a success story. While its shares soared over 40 percent on the first day of trading, its stock price has now drifted back down to a more reasonable $19.20 (it started trading at $19 last week). My guess is that you can expect the price to trend even lower and Tesla’s stock will likely mirror lithium ion battery maker A123 Systems’ descent from above $20 after going public in September, to below $9 today.
One of the reasons I think the stock price will slide will be due to the fact that Tesla has a major gap in revenues coming. It won’t be selling (or even producing) its next-generation electric sedan the Model S until 2012, it will stop selling its current Roadster in 2011, and won’t sell the next version of the Roadster until a year after the Model S goes on sale. As Tesla put it in its S-1: “Prior to the launch of our Model S, we anticipate our automotive sales may decline, potentially significantly.”
So why is Tesla, a startup that has only sold a little over 1,000 luxury electric cars at $100,000 a pop, and won’t deliver profits for years so important? First off, with a successful IPO under its belt, the venture-backed company has proven that early investments in a risky electric vehicle startup can pay off. At the IPO asking price of $17 per share, Tesla founder, CEO and major backer, Elon Musk’s percentage of the company was worth $481.1 million. Venture investors Technology Partners and Draper Fisher Jurvetson saw their shares worth around $50 million each.
But beyond the economics for the early risk takers, Tesla and its IPO, has managed to capture the imagination of investors and the market. Tesla’s vision — to use an electric sports car to create mass appeal — is such an utterly cool concept that, as Marketwatch reported last week, it drew interest from investors from all over the globe, from Bahrain to Australia.
A similar amount of excitement surrounded an IPO that kicked off the dotcom boom in 1995: Netscape. The Netscape IPO “mesmerized investors,” as this Fortune article put it and “More than any other company, it set the technological, social, and financial tone of the Internet age.”
The same could be said for Tesla’s IPO and I think it will pave the way for many more greentech startups to follow suit. Ray Lane, a venture capitalist with Kleiner Perkins who backed electric vehicle startup Fisker Automotive (a Tesla competitor) said last week that Fisker, like Tesla, would at some point plan to sell shares in the public market once its vehicle was on the road. A variety of entrepreneurs and greentech venture capitalists that I spoke with last week saw the Tesla IPO as a very positive sign for their companies’ future success.
After Netscape’s IPO it later lost the famous “browser war” to Microsoft (s MSFT). Tesla, too, will have a long road ahead and will no doubt struggle as a company. But its successful IPO has marked a beginning of the larger world taking notice of new innovation and opportunities for greener cars.
And the reality is that we need a whole lot more of these IPOs and success stories if the world is going to remake the fundamental building blocks of transportation, electricity generation, and energy consumption. To build the needed infrastructure to ween the world off of fossil fuels and reduce carbon emissions we will need thousands of Tesla’s.