This analysis of Tesla Motors (
) was provided to
in advance of its Tuesday, June 29 IPO. Tesla sold 13.3
million shares in the IPO and priced the deal at $17, above its
expected range of $14 to $16 a share.
Tesla Motors plans on offering 12.8 million shares (assuming
over-allotments) at a range of $14-$16. Insiders will be selling
2.2 million shares in the deal.
In addition, Tesla/Toyota (
) will be conducting a private placement outside of the ipo
offering. Toyota will be purchasing $50 million in TSLA stock at
ipo price in a concurrent private placement. On a pricing of $15,
Toyota will be purchasing 3.33 million shares. This is a big boost
to this deal. TSLA is a first mover here with a workable/marketable
electric car that can operate on highways and has a 236 mile range.
The automakers are spending heavily to catch up and the concern
with this deal is that TSLA will eventually be passed by the major
auto manufacturers and left behind. Toyota making a significant
investment in TSLA leads to the possibility of a partnership down
the line. Really, to me, this private placement with Toyota at ipo
price is what allows this deal to work at least in the short run.
In addition to the stock purchase, Tesla and Toyota have announced
their intention to cooperate on the development of electric
Goldman Sachs, Morgan Stanley, JP Morgan and Deutsche Bank are
leading the deal.
Post-ipo TSLA will have 95.2 million shares outstanding for a
market cap of $1.428 billion on a pricing of $15.
Ipo proceeds will be used to fund capital expenditures and working
Of note, TSLA is setting aside shares in this ipo to be offered to
those that have purchased a Tesla Roadster.
**Ceo Elon Musk will own 29% of TSLA post-ipo. Mr. Musk co-founded
We design, develop, manufacture and sell high-performance
fully electric vehicles and advanced electric vehicle powertrain
Two things of note:
TSLA focuses exclusively on electric automobiles and electric
Second, TSLA owns their vehicles sales and services networks. No
franchises. As of 6/14/10, TSLA operated 12 Tesla stores in North
America and Europe.
This is a tech company from silicon valley, not a traditional car
company. Keep that in mind.
First mover is the key and selling point here. Fully functional
electric cars have been on the drawing board for a number of years;
TSLA is the first to succeed. From the S-1: 'We are the first and
currently only company to commercially produce a
federally-compliant highway-capable electric vehicle.'
TSLA currently has one vehicle model, the Tesla Roadster. The
Roadster retails for approximately $100,000, can accelerate from
zero to 60MPH in 3.9 seconds and has a range of 236 miles on a
As of 3/31/10, TSLA has sold 1,063 Roadsters. Looking at previous
filings, sales totaled just 9.7 cars per week in the first quarter
of 2010. In contrast, TSLA sold 16-17 cars a week in 2009, their
first full year of production.
TSLA has made a splash with a high end vehicle, shifting next into
premium sedans with the Model S due in 2012. TSLA plans an annual
production of the Model S of 20,000. Model S will be a four door,
five passenger sedan and will retail for approximately $50,000.
Future vehicles will work off the Model S platform.
- In addition to the Toyota stock purchase on ipo, TSLA has an
existing collaboration with Daimler AG (
). In 3/08 TSLA made a deal with Daimler to apply the TSLA battery
pack and charger technology for Daimler's electric drive. An
affiliate of Daimler owns TSLA stock as well. Daimler currently has
a 1,500 battery pack purchase commitment which began shipping in
Going forward, TSLA plans on developing and marketing electric
powertrain components to both Daimler and Toyota.
In 1/10, TSLA entered into a $465 million long term low interest
loan from the US Department of Energy. The loan will be used to
finance the manufacturing facility for the S model. Through
6/14/10, TSLA had drawn down $45 million from this loan. In
addition, TSLA has been granted $31 million in California tax
incentives for the development of the Model S.
- In 2008, electric vehicles and hybrid electric vehicles account
for 3% of worldwide vehicle sales. Estimates put this number at 14%
annually by 2015.
Approximately $2.25 in net cash post-ipo. Expect a lot of this
cash, as well as the USDOE low interest loans, to be utilized in
the manufacturing and launch of the Model S.
TSLA had a very unimpressive first quarter compared to 2009. The
'newness' and hype factor of the Roadster launch has obviously worn
off. This is a niche car aimed at a relatively small end market and
the first movers got theirs soon after launch. Sustaining that
early momentum has been difficult.
Losses will be steep over the next 2-3 years as TSLA spends heavily
on the production of Model S.
- Assuming the Roadster sales per month have permanently leveled
off (and I believe they have), revenues for 2010 should be in the
range of 2009 at $110 million. Gross margins of 15% or so.
Operating expenses far exceed gross margins. Losses for 2010 should
be in the $1 per share range.
- Anyone telling you with certainty where TSLA's market cap will be
4-5 years from now is telling stories.
: Tesla is successful in profitably selling their own electric
vehicles. They also develop their partnerships and their powertrain
and battery technology, which is used in a number of other auto
manufacturers electric vehicles. The electric vehicle market takes
off and TSLA has a much higher market cap than current.
: Tesla proves to be a fad and can never sell enough of their
vehicles at price point to make a profit. The Model S is delayed by
a year or more while other auto manufacturers bring fully electric
cars to market at more attractive price points. Company bleeds
money year after year, stock is near worthless and technology and
remains are scooped up by Daimler or Toyota or another of the large
Each scenario is in play down the line and I have no idea which
will play out...or something in between. Really we will not have
much of an idea until TSLA begins producing and selling their
$50,000 luxury sedan in 2012. Currently their Roadster has a niche
appeal at best. The S model will be going head to head with
Mercedes, Lexus, Audi and BMW after a much broader target market.
How that plays out, it will tell a lot about the future of Tesla.
This deal works short term though. Why? TSLA has built the first
good looking all electric high performance sports car. They beat
the worldwide auto manufacturers at their own game. That says a lot
about the technology and the potential. One also needs to look at
how a potential shift to electric cars over the next 10-20 years
would greatly reduce pollution from vehicle emissions. This
technology will be favored and promoted by governments worldwide
and right now TSLA has the best (and first) mousetrap. Pre-TSLA,
all electric vehicles were essentially low power 'around town'
vehicles with limited miles per charge range and weak horsepower.
Not anymore, and TSLA is the one that beat everyone else to market.
That alone is very impressive and gives TSLA some long term hope.
Yes,TSLA has been bleeding money since inception. The possibility
that this fact never changes is what puts the long term viability
of TSLA into question. As noted above, the longer term
success/failure range here for TSLA is as wide as I've seen in an
ipo. Even knowing that going in, this deal should absolutely work
in range short term. Pretty exciting deal.
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