Tesla (TSLA) Drives onto the Nasdaq

Tesla (TSLA) Drives Onto the Nasdaq Shares of Tesla are expected to hit the public stock market today with a $244 million offering. Tesla will be the first American automaker to be listed on a major exchange since Ford Motor, which went public in 1956. But before you get all excited, be sure you do your homework. Keep in mind that Tesla has yet to turn a profit (since its 2003 inception) and is coming to market amidst some serious global economic headwinds, not to mention a very finicky car-buying public.

As a car NUT myself (and having owned many exotics and regular cars alike), I can tell you that the car business is a tough one to break into. Companies like Ford, GM, Toyota (even with its recent issues), Mazda, Mercedes, BMW, Honda, Subaru, Renault, and many others with similar pedigrees hold a firm grip on the average car buyer these days. These companies are established and producing reliable and sometimes pretty sexy cars with vast networks and marketing machines.

So why, especially in times of economic uncertainly, would anyone want to go out and buy a $100,000+ niche car? Tesla basically has two models available now, both in the six-figure range. They both look like Lotus Exiges, just with electric power plants. Personally, I would rather save $30,000 and buy the Evora.

I did the math and at $2.60 per gallon, with the Evora’s mpg rating, driving 10,000 miles per year (probably much less with a specialty car such as this in reality) would cost about $815 in petrol annually. Heck, even if my gas bill hits $2,000, I could drive the Evora for 15 years for free before the fuel savings would justify the additional $30,000 for the Tesla. Granted, there is a market for cool expensive supercars, which I guess the Tesla fits into, but does a “novelty” car company offer real shareholder value?

Remember the Qvale Mangusta? Really cool looking car, memorable name, and kind of clunky to drive. It was powered by the Ford Cobra engine, though much cheaper, but they couldn’t stay in business. The DeLorean Motor Company wanted to make unique cars that were affordable and energy efficient (by late 70s, early 80s standards … anyone remember the gas shortages?). DeLorean didn’t turn out so well, despite a memorable cameo in Back to the Future. Granted, founder John DeLorean was arrested on drug trafficking charges (though later released) and the company quickly went under. It probably would have done so even if John were able to sip his Cutty Sark whisky without being interrupted by those FBI agents.

Okay, I know, the Tesla is sleek, fast, and best of all, it’s really green (well, sort of … you do have to charge it). The question is really not whether I want to or would drive it (because that’s a yes) but do I want to buy stock in a company that has never made a cent in profit and really has the odds stacked against it?

Apparently there is strong demand for Tesla shares. Tesla’s IPO is “multiple times oversubscribed,” which explains the deal being priced at $17, which is above the expected range, but does this mean investors should buy? Apparently, some Tesla insiders, including a nearly bankrupt CEO Elon Musk, have already sold 13.3 million shares at $17 ahead of the IPO (I wonder if Musk used PayPal – which he also co-founded – to receive that payment? :-) ) Fun fact: the eccentric Musk is reportedly the inspiration for Robert Downey Jr.’s portrayal of Tony Stark in the Iron Man movie franchise.

Maybe it is the overall dearth of IPOs, especially the lack of deals with “sex appeal” like Tesla’s that have been hard to come by as of late. That yearning could be a reason for all the excitement. The company even increased its offering yesterday by 20% to 13.3 million shares.

To be fair, there are positives here, like a $50 million investment from Toyota. Tesla also said they are banking on future sales of a $50,000 Model S sedan, with production to begin in 2012 and an even smaller and cheaper car down the road. The question is, how will they do in the meantime? “Cheap” is good, but how about quality and performance (and besides, $50k is still not really that inexpensive). Tesla also has venture capital injections and loans from the U.S. government to the tune of $465 million, which will ultimately need to be repaid.

The cars are neat and the concept is appetizing, like the shares seem to be for those brave enough to jump in right after the stock begins trading. If you believe in the story, you obviously have that choice. For me, I may just sit back and learn a bit more about the company and how the investment public will treat their lack of profitability. Tesla will trade on the Nasdaq under the ticker symbol “TSLA.”

Photo Credit: jurvetson

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