In the guest post below, Ambrose Desmond who runs sustainablog’s green investment subdomain discusses the risk of investing in Tesla Motors.
by Ambrose Desmond
Tesla Motors, a Silicon Valley-based electric vehicle innovator is slated to sell $244 million of stock in an IPO on June 29. While Tesla is clearly one of the most exciting companies in an industry that is almost certain to explode (alternative fuel vehicles), the timing of this sale does not seem to benefit investors. The main reason is that the underlying value of the company is so difficult to ascertain because they have not starting making any profit.
Tesla Motors currently sells a Roadster for about $110,000 that goes from 0-60 mph in under 4 seconds and gets about 240 miles/charge. To date, they have only sold around 1000 cars since the Roadster came out in 2008. They are developing a $50,000 sedan that can go over 300 miles/charge, but it is unlikely to be on the road before 2013. In the meantime, there will be 10 all electric car models for sale in China this year, starting at as low as $10,000. With the possibility that 100% electric Chinese imports could be well established in the US before Tesla gets its sedan on the market, it doesn’t seem to bode well for the near-term profitability of the company.
While some IPO’s gain value from the start, many more have a different pattern. They shoot up initially, then have a big drop, and finally they begin to approach the underlying value of the company. There is a big enough chance that Tesla Motors will follow this pattern that it is my belief investing in them right now would be highly risky.
However, if you are interested in buying one of their cars, they are selling their Roadster and taking orders for the sedan on their website.
Ambrose Desmond specializes in holistic financial counseling. He also firmly believes that a road bike may be the best transportation investment you can make.
Disclosure: Ambrose has no positions in any company mentioned.
Image Credit: Tesla Motors