Electric car firm's shares spark into life

By Lee Spears, Kristen Scholer

Tesla Motors, the electric car company that hasn't posted a profit, raised US$226 million selling shares above its forecast price range in the first initial public offering of a US carmaker in a half-century.

The maker of the US$109,000 ($155,000) electric Roadster bought by Brad Pitt and George Clooney sold 13.3 million shares at US$17 each after offering them for US$14 to US$16, according to Bloomberg data and a filing with the Securities and Exchange Commission.

The Palo Alto, California-based company will use the proceeds to pay for factories and possible acquisitions, the SEC filing showed.

The IPO was the first by an American car company since Ford Motor in 1956.

Chief executive Elon Musk, who has staked his personal fortune to Tesla after making almost US$300 million selling PayPal and Zip2, is using the offering to fund a startup that expects to lose more money in the next two years as it tries to build a battery-powered sedan.

The sale came after at least 35 companies worldwide postponed or withdrew IPOs since the start of May as the European debt crisis sent the Standard & Poor's 500 Index down as much as 14 per cent from its 2010 high.

Tesla will start trading today on the Nasdaq Stock Market under the ticker TSLA.

New York-based Goldman Sachs Group, Morgan Stanley and JPMorgan Chase, alongside Deutsche Bank of Frankfurt, led Tesla's offering.

Electric-car technology has been supported by US policymakers including President Barack Obama as a way to reduce the nation's oil use and dependence on foreign energy sources.

Obama set a goal of getting 1 million plug-in hybrids and electric cars on US roads by 2015 and subsidised Tesla with a US$465 million loan from the Department of Energy to develop its cars.

Musk, Tesla's biggest shareholder, co-founded PayPal, the online payment company now owned by San Jose, California-based EBay, and is chief executive of Space Exploration Technologies, a Hawthorne, California-based company that builds spacecraft.

He has spent more than US$70 million of his own money on Tesla while selling about 1000 Roadsters to film stars, musicians and battery-car advocates.

While the carmaker has burned through US$230.5 million in cash and posted losses in every quarter since it was founded in July 2003, Tesla attracted Toyota, the world's largest carmaker, which planned to buy US$50 million of shares alongside the IPO. Tesla and Toyota said they might co-operate on electric-vehicle development, though they haven't signed agreements to do so, filings show.

Mountain View, California-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 US$29.5 million from a year earlier.

The deficit is more than half the US$55.7 million the carmaker lost in all of 2009.

At the original midpoint price of US$15, Tesla was valued at 5.5 times its net tangible assets, a measure of shareholder equity that excludes assets that can't be sold in liquidation.

That's triple the median 1.82 times for automotive companies globally, data compiled by Bloomberg show.

Tesla will use the IPO and the federal loan to develop its lithium-ion battery-powered Model S, a US$57,400 electric sedan intended to travel 257km per charge, by 2012. The company plans to produce at least 20,000 units of the Model S each year.

Under terms of the federal loan, Musk and certain affiliates must retain 65 per cent of their stock in Tesla for a year after completing the Model S project. Musk's divorce proceedings won't result in the combined stake falling below 65 per cent or have a material impact on his ability to serve as CEO, according to filings.

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

Nissan's electric Leaf hatchback, which has a range of 160km, goes on sale in the US later this year with a base price of US$32,780, or a third that of Tesla's Roadster.

GM plans to introduce the Chevrolet Volt electric car in November. The Detroit-based carmaker is preparing for an IPO that may sell 20 per cent of the Treasury's stake in the company and reduce the US to a minority owner, two people familiar with the plan said last week.

Nissan chief executive Carlos Ghosn said the carmaker had received more than 20,000 orders for the Leaf globally, and was prepared to build as many as 500,000 electric cars annually by 2012.

Japan's third-largest carmaker reported revenue of US$81.1 billion in its fiscal year ended March 31.

Tesla had revenue of US$112 million last year.

- BLOOMBERG

CAR THE STARS LOVE
* Founded in 2003 by South African Elon Musk, co-founder of online payments giant PayPal and SpaceX.
* Specialises in environmentally friendly electric cars.
* Flagship Roadster car costs $155,000.
* Customers include Brad Pitt and George Clooney.

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