Its stock's 41 percent jump on Day One may herald a shift in sentiment
With all eyes in the cleantech world focused on Tesla Motors' (TSLA) first day of trading on June 29, venture capitalists and industry executives released a collective cheer when the stock of the electric vehicle maker surged 41 percent. Even sweeter, the investor support came on a day when the Standard & Poor's 500-stock index and Nasdaq both plunged more than 3 percent.
It's been a grim time for cleantech investors. Prior to Tesla, there hadn't been a U.S.-based initial public offering since A123 Systems (AONE), a maker of batteries for electric cars, went public in September. With stock markets worldwide reeling, solar-panel maker Solyndra pulled its IPO filing on June 18, choosing instead to raise $175 million in debt.
That was only part of the reason for skepticism leading up to Tesla's first day of trading. The company has been losing money since opening for business in 2003, and Tesla says it won't see profitability for at least two years as it moves from selling $109,000 sports cars to cheaper sedans.
The Palo Alto (Calif.)-based company's shares rallied on Day One to a stock-market value in excess of $2 billion. Chief Executive Officer Elon Musk sold shares worth at least $24 million. The strong showing had investors seeing a window of opportunity for more "liquidity events," to use a Silicon Valley term for IPO. "It really lubricates the way," says Nat Goldhaber, managing director of Claremont Creek Ventures in Oakland, Calif., which invests in energy-conservation companies. "You'll see a rush of bankers and companies trying to push through new green-based IPOs."
The Next Cleantech IPO?
No one knows which cleantech company might go public next, but the likeliest are those that, like Tesla, have raised tremendous amounts of money—and thus need to find a way to pay back investors. Fuel-cell manufacturer Bloom Energy, biofuel producer Sapphire Energy, and solar companies eSolar and BrightSource Energy each have raised at least $100?million in venture capital. Better Place, which is trying to build a network of battery-swapping facilities—sort of like filling stations for electric cars—raised $350 million in May.
For these and other cleantech companies, the Tesla IPO "is a real confidence builder," says Gary Bloom, the CEO of eMeter, which makes software to help utilities manage data and bolster energy efficiency. EMeter has raised more than $70 million. While the decade-old company isn't preparing for an IPO, Bloom says, Tesla's success is "proving that things are moving in the cleantech sector and that there's real deliverables."
Bloom is quick to caution against reading too much into Tesla's opening-day gains. After A123 raced out of the gates on Sept. 24, the stock proceeded to lose half its value over the next nine months and continues to sell below its offer price.
The bottom line Tesla's initial public offering may be a "real confidence builder" that paves the way for more cleantech IPOs.