TESLA SHARES GAIN 40 PERCENT ON DAY ONE

+ Click to Enlarge 'A FREAKING TECHNOLOGY VELOCIRAPTOR' Tesla founder Elon Musk talks to the media outside New York's NasDaq on the day of his company's initial public offering. Image: REUTERS

June 30, 2010
By Jonathan Spicer and Poornima Gupta

Battery automaker Tesla's initial public offering zoomed ahead on Tuesday with shares soaring more than 40 percent as investors put their money on electric cars as the future of personal transport.

Tesla's shining debut - it was the best performer on the NasDaq on Tuesday - came despite weakness in the overall market, with other auto stocks hit by concerns about a global slowdown.

It closed at $23.89 (R183), boosting Tesla's net worth from $1.6-billion (about R12.2-billion) on Monday night to $2.2-billion (R16.8-billion) 24 hours later.

It was the first initial public offering by an American automaker since Ford's debut in 1956 and came amid heightened interest in battery vehicles as major industry players gear up to launch various types of battery-powered vehicles, including plug-in hybrids.

Market analyst Matt Therian said: "They're competing against both internal combustion engines and alternative fuels such as fuel cells and compressed natural gas. It's too early to say battery vehicles are going to be the next thing in cars but, if they are, the potential is huge."

The shares are likely tobe volatile in the short term. Tesla is losing money and doesn't expect to be profitable for at least two years.

CEO Elon Musk said: "A lot of people were puzzled about why we were going public without profit. We're not profitable now because we're in the middle of expanding to build the Model S sedan."

The Tesla IPO provided much-needed liquidity for Musk, 39, who declared in February that he was broke. He has poured more than $70-million (R530-million) of his own money into the company, of which he owns 28.4 percent

That's now worth $650-million (R5-billion) even after he raised $15.5-million (R118-million) by selling part of his stake in the IPO.

It has also yielded millions of dollars for some of the early investors in Tesla, which was founded in 2003. But major shareholders still have to wait for the 180-day lock-in period to expire to cash in.

FOCUSING ON OPPORTUNITY

Tesla still faces an uphill battle. It's delivered little more than 1000 of its Roadsters after early setbacks and a slower-than-expected start of production. It's also facing strong competition from the $32 500 (R248 000) Nissan Leaf, due to be released in 2010, Chinese automaker BYD's E6 and GM's Chevy Volt.

Musk said Tesla could be profitable if it continued to make pricey sports cars but instead would go through most of 2011 without any products for sale. He said production would resume in 2012 with the mass-market Model S.

But investors are focusing on the opportunity instead of the risks. Musk said recently Tesla was closer to a technology company than an automaker. He called his car "a freaking technology velociraptor," ready to revolutionise the way Americans buy and drive cars. – Reuters