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DATE News (chronologically)
06/27/10
automotive
Tesla bets that stock sale will fund electric car work
Tesla Motors' Elon Musk is trying to pull off the first initial public offering of a U.S. automaker in a half-century for an electric sports-car company that's lost money every year since its founding in 2003.They're hemorrhaging cash and they're selling a brand-new product," said David Whiston, an auto analyst at Morningstar in Chicago. "There just comes a point where you've got to get a lot of capital quickly and an equity offering is an efficient way to do that."

Toyota, Google, Abu Dhabi

While the automaker has burned through $230.5 million in cash and posted losses in every quarter since it was founded in July 2003, Tesla attracted Toyota, which plans to buy $50 million of shares alongside the IPO.

Tesla and Toyota said they may cooperate on electric-vehicle development, though they haven't signed agreements to do so, filings show. Mountain View, Calif.-based Google's founders Larry Page and Sergey Brin, the government of Abu Dhabi and Daimler of Stuttgart, Germany, are also investors.

Tesla's net loss in the first quarter almost doubled to $29.5 million from a year earlier. The deficit is more than half the $55.7 million the carmaker lost in all of 2009.

'So much buzz'

"Tesla's a very high-profile deal, in a very sexy industry, with very heavy backing from some major partners, not the least of which is the U.S. government," said Michael Yoshikami, who oversees about $1 billion at YCMNet Advisors in Walnut Creek, Calif. "There's so much buzz around electric vehicles, it's going to be well received."

Still, "Tesla's financials are horrible," he said. "That's why they're doing the IPO -- they need the money."

Tesla is selling a 12% stake of 11.1 million shares at $14 to $16 each in the initial offering, according to its SEC filing. That includes 1.1 million shares that existing stockholders, including Musk, will unload.

Goldman Sachs Group, Morgan Stanley and JPMorgan Chase of New York, along with Frankfurt, Germany-based Deutsche Bank, are leading Tesla's sale.

At the midpoint price of $15, Tesla is valued at six times its net tangible assets, a measure of shareholder equity that excludes assets that can't be sold in liquidation. That's more than triple the median 1.85 times for automotive companies globally, data compiled by Bloomberg News show.

Model S

Tesla will use the IPO and the federal loan to develop its lithium-ion battery-powered Model S, a $57,400 electric sedan intended to travel 160 miles per charge, by 2012. The company plans to produce at least 20,000 each year.

Under terms of the federal loan, Musk and certain affiliates must retain 65% of their stock in Tesla for a year after finishing the Model S project.

Tesla plans to introduce additional models, including a crossover utility vehicle.

"The supply is my main concern," said Tim Cunningham, who helps oversee $57 billion at Thornburg Investment Management in Santa Fe, N.M., and is considering buying shares of Tesla. "Going from essentially almost zero units today and not doing the production themselves to going to producing 20,000 units in just a couple of years, that's the scary part."

Leaf and Volt

As Tesla focuses on creating a niche for premium-priced electric vehicles, Nissan and General Motors are developing battery-powered vehicles for mainstream buyers.

Nissan's electric Leaf hatchback, which has a range of 100 miles, goes on sale in the U.S. later this year with a base price of $32,780, or a third less that Tesla's Roadster.

GM plans to introduce the Chevrolet Volt electric car in November. The automaker is preparing for an IPO that may sell 20% of the Treasury's stake in the company and reduce the U.S. to a minority owner, two people familiar with the plan said this week.

Nissan CEO Carlos Ghosn said it has more than 20,000 orders for the Leaf globally, and is prepared to build up to 500,000 electric cars annually by 2012. Nissan reported revenue of $81.1 billion in its fiscal year ended March 31.

Tesla had revenue of $112 million last year.

"My bet is we won't be seeing Teslas in 10 years, but at least now there's some hype, so investors might be able to trade on that hype," said Rochdale's Abella. Detroit Free Press

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