Tesla Motors Increases Electric Car IPO Size by 20%
The maker of the $109,000 electric Roadster bought by Brad Pitt and George Clooney will now offer 13.3 million shares at $14 to $16 each, up from an earlier plan to sell 11.1 million, a filing with the Securities and Exchange Commission showed. Existing shareholders including Chief Executive Officer Elon Musk will offer 1.42 million instead of 1.1 million.
Tesla, which has lost money every year since its founding in 2003, is seeking to raise as much as $213 million to pay for factories and possible acquisitions, according to the Palo Alto, California-based company’s filings with the SEC. The IPO scheduled for today will be the first by an American car company since Ford Motor Co. went public in 1956.
“If the market is giving them the message that they’re willing to give them a little more cash, then it’s a prudent thing to take more cash,” said Philippe de Weck, who manages $700 million in clean-energy investments in Geneva at Pictet & Cie. “This company is going to be not making a profit for a few years, therefore it would need more cash to get it through.”
Tesla spokesman Ricardo Reyes declined to comment on the increase in the share offering.
Musk, who has staked his personal fortune to Tesla after making almost $300 million selling PayPal Inc. and Zip2 Corp., is counting on investors to fund a startup that expects to lose more money in the next two years as it tries to build a battery- powered sedan.
While the IPO may benefit from Tesla’s standing as the only producer of highway-legal electric cars sold in the U.S., cheaper alternatives from established automakers may keep Tesla from turning a profit, Rochdale Investment Management LLC said last week.
Electric-car technology has been supported by U.S. policy makers 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 U.S. roads by 2015 and subsidized Tesla with a $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 Inc., and is CEO of Space Exploration Technologies Inc., a Hawthorne, California-based company that builds spacecraft.
He has spent more than $70 million of his own money on Tesla while selling about 1,000 Roadsters to film stars, musicians and battery-car advocates.
While the automaker has burned through $230.5 million in cash and posted losses in every quarter since it was founded in July 2003, Tesla attracted Toyota City, Japan-based Toyota Motor Corp., the world’s largest automaker, which plans to buy $50 million of shares alongside the IPO.
Tesla and Toyota said they may cooperate on electric- vehicle development, though they haven’t signed agreements to do so, filings show. Mountain View, California-based Google Inc.’s founders Larry Page and Sergey Brin, the government of Abu Dhabi and Daimler AG of Stuttgart, Germany, are also investors.
“It gives investors more confidence in the company that major automakers are willing to do business or looking to do more business with Tesla,” said Matt Therian, a Greenwich, Connecticut-based analyst at Renaissance Capital LLC, which has specialized in IPO research since 1991.
Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co. of New York, along with Frankfurt-based Deutsche Bank AG, are leading Tesla’s sale.
Tesla’s net loss in the first quarter almost doubled to $29.5 million from a year earlier. The deficit is more than half the $55.7 million the carmaker lost in all of 2009.
At the midpoint price of $15, Tesla is 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 $57,400 electric sedan intended to travel 160 miles (257 kilometers) per charge, by 2012. The company plans to produce at least 20,000 units of the Model S each year.
Federal Loan, Divorce
Under terms of the federal loan, Musk and certain affiliates must retain 65 percent 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 percent 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, Japan-based Nissan Motor Co. and General Motors Co. are developing battery-powered vehicles to appeal to mainstream buyers.
Nissan’s electric Leaf hatchback, which has a range of 100 miles, goes on sale in the U.S. later this year with a base price of $32,780, or a third that of Tesla’s Roadster.
GM plans to introduce the Chevrolet Volt electric car in November. The Detroit-based automaker is preparing for an IPO that may sell 20 percent of the Treasury’s stake in the company and reduce the U.S. to a minority owner, two people familiar with the plan said last week.
Nissan Chief Executive Officer Carlos Ghosn said the automaker has received more than 20,000 orders for the Leaf globally, and is prepared to build as many as 500,000 electric cars annually by 2012. Japan’s third-largest automaker reported revenue of $81.1 billion in its fiscal year ended March 31.
Tesla had revenue of $112 million last year.