Tesla raises $226m in rare US carmaker IPO

Tesla Motors Inc, the electric car company that hasn’t posted a profit, raised $226 million selling shares above its forecast price range in the first initial public offering of a US automaker in a half century.

The maker of the $109,000 electric Roadster bought by Brad Pitt and George Clooney sold 13.3 million shares at $17 each yesterday after offering them for $14 to $16, according to Bloomberg data and a Securities and Exchange Commission filing. The Palo Alto, California-based company will use proceeds to pay for factories and possible acquisitions, the SEC filing showed.

The IPO was the first by an American car company since Ford Motor Co in 1956. Chief Executive Officer Elon Musk, who has staked his personal fortune to Tesla after making almost $300m selling PayPal Inc and Zip2 Corp, is using the offering to fund a startup that expects to lose more money in the next two years as it tries to build a battery-powered sedan.

“It might be something that gets people excited about the equity markets,” said Michael Cuggino, the San Francisco-based manager of the $6.45 billion Permanent Portfolio Fund, which has outperformed 97 per cent of rival funds over the past five years. “It’s potentially a new technology with a lot of questions. The questions are whether it’s going to be profitable and has staying power.”

The sale came after at least 35 companies worldwide postponed or withdrew IPOs since the start of May as the European debt crisis sent the Standard & Poor’s 500 Index down as much as 14 per cent from its 2010 high.

Tesla, which raised 27 per cent more than it originally sought, will start trading today on the Nasdaq Stock Market under the ticker TSLA. The automaker had boosted the number of shares it was offering yesterday to 13.3 million from 11.1 million, according to an SEC filing.

Goldman Sachs Group Inc, Morgan Stanley and JPMorgan Chase & Co of New York, along with Frankfurt-based Deutsche Bank AG, led Tesla’s offering.

Electric-car technology has been supported by US 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 US roads by 2015 and subsidised Tesla with a $465m 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 $70m 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 $230.5m 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 planned 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.

Tesla’s net loss in the first quarter almost doubled to $29.5m from a year earlier. The deficit is more than half the $55.7m the carmaker lost in all of 2009.

At the original midpoint price of $15, Tesla was 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.

Under terms of the federal loan, Musk and certain affiliates must retain 65 per cent 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 per cent 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 US 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 per cent of the Treasury’s stake in the company and reduce the US 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 $112m last year.