In one of the most highly anticipated IPOs in the tech sector, Tesla aims to raise about $226 million to begin production of its Model S electric sedan.
Martin LaMonicaFormer Staff writer, CNET News
Martin LaMonica is a senior writer covering green tech and cutting-edge technologies. He joined CNET in 2002 to cover enterprise IT and Web development and was previously executive editor of IT publication InfoWorld.
Tesla Motors went public Tuesday morning with its stock priced higher than originally planned, amid enthusiasm for the company's sleek electric vehicles and questions about its ability to turn a profit.
Under the ticker symbol TSLA, the Silicon Valley company's stock opened at $17, above its anticipated range of $14 to $16, and Tesla CEO Elon Musk heralded the day's Nasdaq trading by ringing the opening bell.
The higher opening price reflects the enthusiasm among investors for Tesla's historic IPO, the first auto-related IPO since Ford Motor went public in 1956.
Tesla's $109,000 electric Roadster sports car has received great reviews and Tesla is already taking orders for its $57,400 Model S sedan, which it plans to start building in 2012. The company is said to have raised over $220 million in funding, including investments from Daimler and Toyota, and has received a $465 million loan guarantee from the U.S. Department of Energy to build a factory.
But even with its attractive products and votes of confidence from investors, Tesla is not profitable and the road ahead holds a number of obstacles.
Bright electric future?
Tesla's fortunes in the next few years hinge on the company's ability to transition from selling a relatively small number of Roadsters (it sold 126 in the first quarter this year) to producing higher volumes of the Model S at its newly acquired factory in California. Among the many risk factors Tesla listed before going public are that it has a "limited operating history" and that its future is dependent on consumers' willingness to adopt electric vehicles.
The company's product strategy is to use the Model S powertrain as a platform for other vehicles, including a crossover SUV, cabriolet, and van. After that, the company plans to make a lower-priced electric car model.
Whether or not Tesla manages to become a world-class auto giant as it hopes, the IPO reflects how electric vehicle technology is shaking up the auto market, both for start-ups and entrenched automakers. Tesla's success so far also provides a road map for thousands of companies seeking to commercialize green technologies in established industries.
In response to doubts over the company's prospects, Musk told CNBC shortly after ringing the Nasdaq bell that Tesla has proven skeptics wrong before. He said the company is not profitable because it has been ramping up its operations to make the Model S.
"People need to appreciate if we were just making the Roadster and [earning money from] our powertrain business, we'd be profitable as a company. But we're in massive expansion mode. With the Model S, we're increasing our volume 30- to 40-fold so it's impossible to be profitable for the company as a whole given that level of growth," he said.