Tesla Motors: Can it deliver?

The automaker may have underestimated what it would take to develop its mainstream electric car and the price it can sell for.

By TheStreet Staff Oct 6, 2010 12:46PM

thestreetCredit: (© Craig Ruttle/AP)
Caption: Tesla Roadster electric carBy Eric Jackson, TheStreet

 

Tesla Motors (TSLA) went public last June in one of the few IPOs of the year.

 

It had the support of high-profile underwriters Goldman Sachs (GS), Morgan Stanley (MS), JP Morgan (JPM), and Deutsche Bank (DB), as well as many well-known Silicon Valley venture capitalists.

 

It priced at $17, the top end of its range, and soared 41% on its first day of trading. It's still trading more than 24% above its IPO price three months later.

 

The company has done a great job of funding itself. Its IPO raised $250 million. It also received a $465 million loan from the Department of Energy, and it needs it. Since inception, Tesla has lost $300 million.

There are generally two types of Tesla investors: those who love the company and those who hate it. Investors who are bullish on Tesla point to electric cars being the future and Tesla sporting the biggest brand within that space. Post continues after video:

They are most excited about Tesla's planned second car -- the Model S sedan, which is scheduled to ship in 2012. They argue that Tesla doesn't have to sell many units to make a lot of money. They also proudly point out that Tesla has struck important partnerships with Daimler (DDAIF) and Toyota (TM).

 

Investors who are bearish on Tesla point out that the automaker keeps losing money, that further capital needs for the company are underestimated, and that the upcoming IPO lockup expiration in December is a potential weight on the stock price. Flashy Tesla CEO Elon Musk is also a lightning rod for criticism.

 

I have a short position in Tesla owing to the reasons cited above and what I perceive as poor corporate governance structures in place for a public company.

 

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