EV Maker Tesla Files for IPO, Sets Roadster End Date
By Chris Haak
02.02.2010
Although Tesla just got its start a few short years ago, and in fact has only just reached the 1,000-unit milestone in Roadster production, the company filed for an IPO yesterday and – as is required in such a filing – spilled the beans on several financial details and future plans that had not been public knowledge to this point.
Tesla reported in its IPO filing that it lost $31.5 million during the first nine months of 2009, which is an improvement over the $57.3 million that it lost during the same period in 2008. Revenue shot up from $580,000 in the first three quarters of 2008 to $93.4 million during the same period in 2009.
Still, it isn’t enough. Not only was the $93.4 million and 937 cars sold (and 1,000 cars produced) not enough to turn a profit, but that also leaves nothing but the initial venture capital investments to fund development of future models, such as the Model S sedan. Current investors in Tesla, which stand to potentially make paper profits if the IPO is successful, include Google founders Sergey Brin and Larry Page, Daimler AG, Abu Dhabi-based Aabar Investments of Abu Dhabi (which also owns a stake in Daimler), and several venture capital funds.
The Model S sedan – shown last year in concept form – is slated to cost $49,900 after the $7,500 federal tax credit (or $57,400 without it) – and to go on sale in 2012. Tesla predicted that it would continue to show losses until the Model S was being delivered in “significant” numbers, which likely means after 2012. If we’re just starting 2010, that means Tesla is looking at another three years of losses that it has to fund – plus Model S and a future less-expensive model’s development – over the next three years.
Tesla did not disclose its expected timing for the IPO or the anticipated offering price (both of which are likely to be determined by the market’s receptiveness toward the offering and in consultation with its underwriters Goldman Sachs, Morgan Stanley, JP Morgan and Deutsche Bank Securities. From the cheap seats here at Full Metal Autos, it appears that Tesla’s IPO has a decent chance of success, since awareness of the car is fairly high, and environmentally-friendly technology is looked favorably upon by much of the buying public, and certainly by the Obama Administration.
But it’s the company’s longer-term prospects that give me cause for concern. The three years of losses are certainly one matter, but perhaps more disturbing is the additional news that came out that because of an undisclosed supplier retooling its factory next year, Roadster production will end in 2011. This leaves a one-year gap – at a minimum – between when Roadster revenue dries up and Model S revenue potentially kicks in. It’s pretty obvious that the unnamed supplier is Lotus, which builds a portion of the Roadster for Tesla, including much of its chassis.
And that’s assuming the Model S, which does not yet have a final design, a production process, or even an assembly plant, hits all of its development milestones on time and within budget. Both bogeys are not easy ones to hit. Oh, and it’s also not going to be easy for the company to hit its price point target and still turn a per-model profit.
Tesla currently has about $100 million in cash and qualified for $465 million in Department of Energy retooling loans (by being, in the company’s words, “briefly profitable” during 20o9). Coupled with the to-be-determined proceeds from the IPO at some to-be-determined future date, the company estimates that it has enough to stay afloat for two years. If it survives the no-revenue period between the Roadster and the Model S, it plans to launch a successor to the Roadster in 2013.
Tesla’s travails are shaping up to be nothing short of a roller coaster ride for investors, but the company has managed to defy many skeptics over the past several years. First, they said the company wouldn’t survive – yet it’s still hanging in there, with an all-star roster of investors, plus some big Wall Street weight behind its IPO underwriting. Then, they said that the Roadster was vaporware – yet 1,000 have been produced. I’ve learned to think twice before second-guessing Tesla, but it’s not going to be easy for the company – or for its shareholders – between today and 2013.
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