Shares of Tesla Motors Inc gained more than 40 percent in their public trading debut on Tuesday after the electric car manufacturer raised more money than expected in its initial stock offering.
Investors snapped up Tesla’s shares even as the broader markets took a beating. The stock soared US$6.89, or 40.5 percent from its offering price, to close at US$23.89 — marking the second-biggest first-day gain among initial public offerings (IPO) this year.
Tesla’s performance was a feat in a sour market that has forced many companies looking to raise funds through IPOs to accept lower prices to get deals done.
PHOTO: BLOOMBERG
The electric car maker, based in Palo Alto, California, is the first US automaker to go public since Ford Motor Co held its initial public offering in 1956.
The offering raised US$226.1 million after selling 13.3 million shares priced at US$17 apiece. Tesla had earlier expected to price just 11.1 million shares at US$14 to US$16 per share.
Tesla’s first-day stock gain was outpaced only by Financial Engines Inc, a portfolio manager that saw shares gain nearly 44 percent in their first day of trading in March.
Scott Sweet, owner of IPO research firm IPO Boutique, said Tesla was “brilliantly marketed” to investors as a next-generation automaker. Shares opened at US$19, but drifted down, hitting a low of US$17.55. The shares regained some ground and took off once they hit US$19 again, as investors lost reservations over how the stock would fare.
“Once it penetrated the US$19 opening, that was almost like a buy signal,” Sweet said.
But he cautioned that the company has risks, including the fact it has yet to show a profit.
Tesla CEO Elon Musk appeared on Tuesday morning at the NASDAQ stock exchange at Times Square to mark the start of trading. At least five Tesla vehicles, including the US$109,000 Roadster, were lined up outside, where spectators gathered to gawk at the cars.
“The response from investors has been tremendous,” Musk said. “We increased the size of the offering and the demand was still enormous, so we increased the price to a dollar above the top of the range and we still had massive, overwhelming demand.”
Tesla hasn’t had a profitable quarter since it was founded in 2003. It has sold only 1,000 of its high-end Roadster sports cars. The company expects that a US$50,000 four-door electric sedan, the Model S, which isn’t slated to go on sale until 2012, will attract more buyers. Its goal is to build 20,000 of them a year.
The company has a prominent backer in Toyota Motor Corp, which last month agreed to sell Tesla a shuttered plant in Fremont, California, and invest US$50 million in the company. Tesla plans to use the plant to build the Model S. Tesla expects annual net losses until mass production of the Model S.
The company also has a high-profile CEO. Musk was a cofounder of Internet payment service PayPal and runs rocket manufacturer Space Exploration Technologies.
But Tesla may face competition in the electric car market by the time the Model S is ready for consumers. Nissan Motor Co is already taking orders on the Leaf, which gets 160km per charge and is priced at about US$25,000 after tax credits. The Chevrolet Volt, which has a gasoline range-extender, goes on sale by the end of this year with a US$35,000 price tag.
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