TSLA | Tesla Motors zooms out of the gate
This morning, the tech-heavy Nasdaq stock exchange added TSLA. Tesla Motors, a seven-year old electric car company, launched its IPO this morning. The stock opened and is trading above expectations, but will it be enough to keep the company afloat?
TSLA launches IPO
Based in Palo Alto, Calif., Tesla Motors launched its initial public offering on Nasdaq today with a $17-per-share price. Already today, more than 13 million shares have been sold. Original estimates put opening bids for TSLA stock at between $11 and $13 per share.
IPO helps Tesla get money now
Tesla Motors is a company, founded in 2003 that is focused on making high-end electric vehicles. TSLA has released a few vehicles, but the price has been of concern. The company has never been profitable — it lost more than $200 million just last year. In order to continue development on the planned sub-$50,000 electric sedan, Tesla needed cash quick. With the IPO of TSLA, Toyota Motors invested $50 million in the company. The U.S. Government has also given Tesla a $465 million easy cash loan.
Growing competition in the electric car market
When Tesla Motors was first founded, the competition in the electric car market was mostly theoretical. Tesla Motors has garnered some very high-profile support with its $109,000 electric roadster — but the company needs a mass-market vehicle to be financially solvent. While they are hoping that the Tesla Model S will clock in at about $50,000 after tax credits, it will not be the only affordable electric vehicle. The Nissan Leaf gets one-third the expected range of the Model S, at only 100 miles. At half the price of the Model S, though, Nissan is already selling out pre-orders. The Chevy Volt is an electric car that has a gasoline back-up and is expected to go for about $25,000.
TSLA stock expectations
With a high stock price at the IPO and high expectations of performance, some investors are drooling over Tesla’s stock (as well as its cars). The company has made great strides for electric vehicles in the past seven years, but as an investor, it might be important to sit back and take a close look at the company. Growing competition and high start-up costs, as well as a niche market vehicle, mean that TSLA may be facing an uphill battle to profitability.