This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Tesla Motors: Can It Deliver?

Stocks in this article: TSLA DDAIF TM

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 over 24% above its IPO price three months later.

The company has done a great job of funding themselves. Its IPO raised $250 million. It also received a $465 million loan from a Department of Energy (DOE). But they need it. Since inception, Tesla has lost $300 million.

There are generally two types of Tesla investors: ones of love the company and ones who hate it. Tesla bulls point to electric cars being the future and Tesla sporting the biggest brand within that space.

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).

Tesla bears point to how Tesla keeps losing money, how further capital needs for the company are under-estimated, and the upcoming IPO lock-up expiration in December as a potential weight on the stock price. Flashy Tesla CEO Elon Musk has also a lightning rod for criticism.

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

I spoke last month to Eric Noble and Mike Dovorany of The CarLab, an Orange, CA-based auto consultancy. They have recently expressed publicly critical comments about Tesla's currently planned Model S. Here's an excerpt from the interview:

Jackson: You've said publicly that it will take Tesla $1 billion to develop the Model S.

Noble: We believe that it would take an OEM (e.g., Toyota, GM) $500 million to $700 million to design a new car. That's conservative. For a new company like Tesla doing the Model S as it's been most recently shown, we think they will need $1 billion -- but that's before ER&D on the alternative power train (where the electric battery is).

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs