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Electric-car maker Tesla said to be planning stock offering

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The California firm reportedly is filing for an IPO soon. Some analysts wonder how much interest it would spark among investors, given the implosion of shares of ethanol producers.

November 21, 2009|By Martin Zimmerman

Will investors get charged up over a stock offering by California electric-car maker Tesla Motors Inc.?

The answer to that question may be coming soon. The company plans to file for an initial public stock offering in the near future, Reuters reported Friday, citing people familiar with the Bay Area firm's plans. A spokeswoman for Tesla declined to comment on the report.

An IPO by Tesla would be the first among the crop of electric-car companies that has sprung up in recent years as Americans have sought relief from skyrocketing oil prices.

The Obama administration and California Gov. Arnold Schwarzenegger have been vocal backers of alternative-powertrain vehicles.

"It would be a very trendy IPO, and if the investing public is sold on the concept of alternative cars and drivetrains, it's going to present a very interesting possibility for other companies coming to the market," said David Menlow, president of IPOfinancial.com.

A123 Systems Inc., a Massachusetts company that makes lithium-ion batteries used in electric vehicles, went public in September at $13.50 a share. Its stock closed Friday at $14.70, down 53 cents.

Investor enthusiasm for cutting-edge transportation stocks might be tempered by the implosion of shares of many of the ethanol-producing companies that went public with much fanfare a few years back, Menlow said.

Ethanol, made from corn and other crops, is mixed with gasoline and is promoted as a way to reduce U.S. dependence on imported oil.

VeraSun Energy Corp., for example, went public in 2006 at $18.25 a share. The company is currently being liquidated in Bankruptcy Court, and its shares are trading for 5 cents. Aventine Renewable Energy Holdings went public the same year at $43 a share and closed Friday at 43 cents.

The overall market for new stock offerings has been flourishing lately. Bloomberg's index of stocks from recent IPOs, which plunged 44% in 2008, has gained almost 48% this year, more than double the 21% year-to-date advance of the Standard & Poor's 500 index.

However, in contrast to the speculative tech IPO boom of the late 1990s, investors are showing a preference for established companies such as Dole Food Co. and retailer Dollar General Corp., said Sal Morreale, an institutional salesman at Cantor Fitzgerald who tracks IPOs.

"Developmental-stage companies aren't going public. There isn't a market for them," Morreale said. "You have to have a going concern already making money and an ability to grow earnings."

Besides giving Tesla a measure of credibility, successfully completing an IPO could also provide the automaker with cash for expansion -- although it won't be known how the company would use the proceeds from a stock offering until a prospectus is filed.

Tesla currently makes a $109,000 all-electric sports car called the Roadster. About 900 of the two-seaters have been delivered.

In March, the San Carlos, Calif., company unveiled a prototype of its $57,400 Model S electric sedan.

Tesla plans to build the car, which gets 160 to 300 miles on a single charge depending on the version, at a plant in Southern California beginning in late 2011.

When Tesla failed to complete a $100-million round of outside venture funding this year, it settled for a smaller, $40-million round from investors who already had a stake in the company.

To make up the gap, Tesla applied to the federal government's program to promote alternative-fuel vehicles and was approved in June for a $465-million loan.

It also sold a 10% stake to German automaker Daimler, which selected Tesla to provide batteries and chargers for Daimler's Smart EV electric car.

In September, a defamation lawsuit filed by former Tesla Chief Executive Martin Eberhard against current CEO Elon Musk was settled out of court.

martin.zimmerman @latimes.com

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