Investors Pile Into Tesla (TSLA) On Hope It Will Do for Green Vehicles What Henry Ford Did for Traditional Cars

The IPO for Tesla Motors (Nasdaq: TSLA) went off without a hitch today despite the 250 point sell-off in the Dow.

The maker of the sexy electric cars closed up 40 percent to $23.89, well above the $17 per share. Tesla Motors sold 13,300,000 shares in the offering, which was up from the 11,100,000 shares originally expected to be sold.

Based on the current price, Tesla Motors' market capitalization is approximately $2.2 billion, based on the 93,109,393 shares that will be outstanding after the offering and the $50.0 million concurrent private placement with Toyota Motors (NYSE: TM).

While Tesla has sold just 1,063 of their first vehicle, the $100,000 Tesla Roadster, the hope lies in the company's ability to tap into the America's desire to move away from fossil fuels and the government's push to make that a reality.

Tesla's Model S will be the first step in bring the company more into the mainstream. The vehicle, slated to begin volume production in 2012, is priced at a much more affordable price of $49,900, after the currently available U.S. federal tax credit of $7,500 for the purchase of alternative fuel vehicles. The company has targeted annual production of up to approximately 20,000 cars per year of the Model S.

The company's longer-term, more ambitions plan is to use the Model S's adaptable platform architecture and common electric powertrain to make additional electric vehicles, which may include a crossover/SUV. The company intend to offer this vehicle at a lower price point and expect to produce it at higher volumes than the planned Model S. This still unnamed vehicle won't likely be produced until a few years after the Model S starts in 2012.

Tesla will use the approximately $275 million generated from its IPO and the Toyotal private placement to fund its ambitions plans. In addition to the proceeds from the stock offering, Tesla has $465.0 million long-term loan with the U.S. Department of Energy.

While Tesla hopes its Model-T and future offspring are the equivalent to Henry Ford's Model T, risk remains.

The company laid out a host of company specific risk factors in its prospectus. Some of those include: Losses of approximately $290.2 million from our inception through March 31, 2010, and losses for at least the foreseeable future; future growth is dependent upon consumers’ willingness to adopt electric vehicle; the company's production model for the non-powertrain portion of the Model S is unproven, still evolving and is very different from the non-powertrain portion of the production model for the Tesla Roadster; the company has no experience with using common platforms in the design and manufacture of vehicles; The automotive market is highly competitive, and the company may not be successful in competing in this industry. The company currently face competition from established competitors and expect to face competition from others in the future; the company may need to raise additional funds and these funds may not be available to us when we need them.

While the opportunities for Tesla are unlimited, risk factors suggest that the chances of the company taping that potential are slim.

Tesla may not make a dime for years and years, but the potential for Tesla to become the Ford of electric vehicles will likely keep investors pouring money into the stock. High risk/reward defines many infant stage companies in biotech and other technology fields.

Don't count on Tesla Motors going away anytime soon, but also don't count on the company following-through with its underlying mega-plan.

For the foreseeable future the stock will trade on variables including Model S production news, oil prices, government clean energy headlines, and consumer attitudes toward alternative-energy vehicles.

Don't be shocked if you see the stock trading as high as $50 per share over the next few years on the hype. When you see this, poke yourself and remind yourself that it is all based on hype and potential. The Tesla story could take decades to play out, that is if the money lasts. However, if the money dries up so will the stock.

Market Moving News and Intelligence - Free Sign-Up
http://www.streetinsider.com/premium_content.php/a>

You May Also Be Interested In

• Tesla readies August launch of CyberCab - The Information
• Tesla Nears Unveiling of Radical New ‘Flying’ Roadster - The Information
• U.S. EV market shows signs of bottoming out: Bernstein