Despite Initial Flourish, Tesla Shares Lose Their Charge
By Bill Visnic July 6, 2010It was good while it lasted for early investors in electric-car maker Tesla Motors' initial public offering last week, but today the price of Tesla's stock slid into the red, falling under the $17 per share the IPO originally set.
The quick fall from grace of Tesla's heavily hyped move into the public domain could be a warning omen for General Motors Co.'s own IPO, the runup to which the automaker has been accelerating in recent weeks.
When shares of Tesla skyrocketed after the June 29 IPO, some analysts suggested the response signaled investors welcoming the new breed of auto manufacturing Tesla represents, with its focus on advanced propulsion and high technology and meager manufacturing overhead. The company's stock price leaped almost from the moment of its availability and closed the second day of trading at nearly $24 per share - a serious profit for those fortunate enough to buy near the $17 per share price of the initial offering.
But it's been all downhill since, with the three subsequent trading days dealing Tesla's shares a dose of bad-market, bad-economy reality. Tesla's stock closed on Tuesday, the first day of trading after the long Fourth of July weekend, at $16.20 - a plunge of more than 40 percent from its highs.
The most incisive comment on the situation might have come from Michael Holland, chairman of New York's $4-billion Holland & Co. investment firm. He told Bloomberg today: "The stock did get its pop and now it's plagued by the reality of the marketplace. The reality of the marketplace is that people aren't paying for dreams and visions."
Tesla has never been profitable. It currently sells a single battery-powered car, the 2-seat Roadster and plans to augment the Roadster with an all-electric, 4-door family sedan called the Model S, for launch in 2012. The company recently enjoyed a $50-million show of support from Toyota Motor Corp., which also is selling Tesla its former New United Motor Manufacturing Inc. vehicle assembly plant in Fremont, CA., the site of a longstanding joint-venture manufacturing operation with GM.
Photo of Tesla Model S sedan by Tesla Motors
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I believe this happens more often than not with IPOs, in any industry. What's going on in a year or so will be more interesting.
While Tesla is hardly the proven company that GM is, Their stock is still transacting higher than Ford's.
It will be interesting as an observer, yet I fear disappointing as a taxpayer to see what percentage of the $60 billion owed to We The People will be recovered at GM's IPO.
"The reality of the marketplace is that people aren't paying for dreams and visions."
Indeed.
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