June 29, 2010

Tesla Motors begins trading as a public company today. Tesla makes and sells a highway-ready electric car, and has been getting lots of buzz in the press. Three things come to mind:

  1. First the numbers. Tesla's offering of 14% of its shares will raise over $200 million, giving the company a total market value of $1.6 billion. This for a company with sales of only $150 million. The bet is that with additional financing Tesla can make its car cheaper and appeal to many buyers. But the two-seater car costs over $100,000 and a model expected to sell for $50,000 (after a federal tax credit of $7,500) isn't due until at least 2012. For that kind of money some very stiff competition is already on the road.
  2. The appeal, of course, is that the car is all-electric, not merely a hybrid. But where do we get electricity? According to the USEIA, 89% of US electricity supplies come from coal, oil, and natural gas. So like it or not, that wire you plug into your Tesla draws its power from fossil fuel.
  3. Last thing: as part of the bailout/rescue mania that gripped Washington in 2008 and 2009 Tesla received a $465 million loan from the US government. Tesla likes to compare itself to high-tech companies like Google and Apple, while taking tax money to build a high-priced car sold to celebrities? From an investment point of view, I'll stick with Exxon Mobil.

GTC

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).