Tesla IPO: A Pure-Play on Electric Cars

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 |  About: Tesla Motors (TSLA)
by: SA Editor Mohit Manghnani

Tesla Motors (NASDAQ:TSLA), a designer and manufacturer of high-performance fully electric vehicles and advanced electric vehicle powertrain components, priced its IPO on 28th June at $17 per share, above the previous range of $14-$16 per share, giving a first-day return of 40.5%.

Business Overview (from prospectus)

We design, develop, manufacture and sell high-performance fully electric vehicles and advanced electric vehicle powertrain components. We have intentionally departed from the traditional automotive industry model by both exclusively focusing on electric powertrain technology and owning our vehicle sales and service network. We are the first and currently only company to commercially produce a federally-compliant highway-capable electric vehicle, the Tesla Roadster, which combines a market-leading range on a single charge with attractive design, driving performance and zero tailpipe emissions. Introducing the Tesla Roadster required us to develop a proprietary electric powertrain that incorporates four key components—an advanced battery pack, power electronics module, high-efficiency motor and extensive control software. We believe our core intellectual property contained within our electric powertrain will form the foundation for our planned future electric vehicles. Since our team combines the innovation and speed to market characteristics of Silicon Valley firms with the experience of leading automotive companies, we believe that we will be able to rapidly and cost effectively introduce additional vehicles, such as our planned Tesla Model S sedan, and stay at the forefront of the electric automobile industry.

Offering: 13.3 million shares at $17 per share. Net proceeds of approximately $100-$125 million will be used for capex over the next one year.

Lead Underwriters: Goldman, Sachs & Co. (NYSE:GS), Morgan Stanley (NYSE:MS), J.P. Morgan (NYSE:JPM), Deutsche Bank Securities (NYSE:DB)

Financial Highlights:

Revenues remained flat at $20.8 million during the three months ended March 31, 2010 compared to the three months ended March 31, 2009...Cost of revenues decreased from $22.9 million during the three months ended March 31, 2009 to $17.0 million during the three months ended March 31, 2010...Research and development expenses increased from $7.9 million during the three months ended March 31, 2009 to $13.3 million during the three months ended March 31, 2010...Selling, general and administrative expenses increased from $6.6 million during the three months ended March 31, 2009 to $16.6 million during the three months ended March 31, 2010...Net loss increased from $16 million during the three months ended March 31, 2009 to $29.5 million during the three months ended March 31, 2010...

Competitors

Competition in the automotive industry is intense and evolving. We believe the impact of new regulatory requirements for occupant safety and vehicle emissions, technological advances in powertrain and consumer electronics components, and shifting customer needs and expectations are causing the industry to evolve in the direction of electric-based vehicles.

The worldwide automotive market, particularly for alternative fuel vehicles, is highly competitive today and we expect it will become even more so in the future. As of March 31, 2010, no mass produced performance highway-capable electric vehicles were being sold in the United States or Europe. However, we expect competitors to enter these markets within the next several years, with some entering as early as the end of 2010, and as they do so, we expect that we will experience significant competition. With respect to our Tesla Roadster, we currently face strong competition from established automobile manufacturers, including manufacturers of high-performance vehicles, such as Porsche (OTCPK:POAHY) and Ferrari (FIATY). In addition, upon the launch of our Model S sedan, we will face competition from existing and future automobile manufacturers in the extremely competitive luxury sedan market, including Audi (OTCPK:VLKAY), BMW (BMW), Lexus (NYSE:TM) and Mercedes (OTCPK:DDAIF).

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