NEW YORK (Bloomberg) -- Tesla Motors Inc.’s Elon Musk is trying to pull off the first initial public offering of a U.S. automaker in a half-century for an electric sports-car company that’s lost money every year since its founding in 2003.
The maker of the $109,000 electric Roadster bought by Brad Pitt and George Clooney is seeking to raise as much as $178 million to pay for factories and possible acquisitions, the company’s filing with the U.S. Securities and Exchange Commission showed.
The IPO on June 28 will be the first by an American car company since Ford Motor Co. went public in 1956, according to the New York Stock Exchange.
Musk, who has staked his personal fortune to Tesla after making almost $300 million selling PayPal Inc. and Zip2 Corp., is counting on investors to fund a startup that expects to lose more money in the next two years as it tries to build a battery- powered sedan.
While the IPO may benefit from Tesla’s standing as the only producer of highway-legal electric cars sold in the U.S., cheaper alternatives from established automakers may keep Tesla from turning a profit, according to Rochdale Investment Management LLC.
“This is a company that really needs the cash,” said David Abella, a manager at New York-based Rochdale Investment, which oversees $2.9 billion. “Right now, it’s a big money pit. There is a lot of excitement and hype over electric cars, so based on some of the excitement and hype, now seems like a pretty good time to try the IPO.”
Electric-car technology has been supported by U.S. 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 U.S. roads by 2015 and subsidized Tesla with a $465 million loan from the Department of Energy to develop its cars.
Musk, Tesla’s CEO and its biggest shareholder, co-founded PayPal, the online payment company now owned by EBay Inc., and is also the CEO of Space Exploration Technologies Inc., a California company that builds spacecraft.
He has spent more than $70 million of his own money on Tesla while selling about 1,000 Roadsters to film stars, musicians and battery-car advocates.
“They’re hemorrhaging cash and they’re selling a brand new product,” said David Whiston, an auto analyst at Morningstar Inc. in Chicago. “There just comes a point where you’ve got to get a lot of capital quickly and an equity offering is an efficient way to do that.”
Toyota, Google, Abu Dhabi
While the automaker has burned through $230.5 million in cash and posted losses in every quarter since it was founded in July 2003, Tesla attracted Toyota Motor Corp., which plans 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.
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 $29.5 million from a year earlier. The deficit is more than half the $55.7 million the carmaker lost in all of 2009.
‘So much buzz’
“Tesla’s a very high profile deal, in a very sexy industry, with very heavy backing from some major partners, not the least of which is the U.S. government,” said Michael Yoshikami, who oversees about $1 billion at YCMNet Advisors in Walnut Creek, California. “There’s so much buzz around electric vehicles, it’s going to be well received.”
Still, “Tesla’s financials are horrible,” he said. “That’s why they’re doing the IPO -- they need the money.”
Tesla is selling a 12 percent stake of 11.1 million shares at $14 to $16 each in the initial offering, according to its SEC filing. That includes 1.1 million shares that existing stockholders including Musk will unload.
Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co. of New York, along with Frankfurt-based Deutsche Bank AG, are leading Tesla’s sale.
At the midpoint price of $15, Tesla is valued at 6 times its net tangible assets, a measure of shareholder equity that excludes assets that can’t be sold in liquidation. That’s more than triple the median 1.85 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 percent 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 percent or have a material impact on his ability to serve as CEO, according to filings.
Tesla plans to introduce additional models, including a crossover utility vehicle and convertible.
“The supply is my main concern,” said Tim Cunningham, who helps oversee $57 billion at Thornburg Investment Management in Santa Fe, N.M., and is considering buying shares of Tesla. “Going from essentially almost zero units today and not doing the production themselves to going to producing 20,000 units in just a couple of years, that’s the scary part.”
As Tesla focuses on creating a niche for premium-priced electric vehicles, 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 U.S. later this year with a base price of $32,780, or a third less that 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 percent of the Treasury’s stake in the company and reduce the U.S. to a minority owner, two people familiar with the plan said this week.
“The Model S is going to be a premium sedan, and we’re not planning for it to be in the same class as the Leaf or the Volt,” Tesla spokesman Ricardo Reyes said.
‘There’s some hype’
Nissan CEO 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. Nissan reported revenue of $81.1 billion in its fiscal year ended March 31.
Tesla had revenue of $112 million last year.
“Pretty much every established auto company, if electric gains traction, will have an electric car,” said Rochdale’s Abella.
“The history of the automobile industry is littered with companies that tried to do it on a more boutique basis and didn’t make it. My bet is we won’t be seeing Teslas in 10 years, but at least now there’s some hype, so investors might be able to trade on that hype.”