Tesla Motors Shares Fall Below $17 Offering Price

Tesla Motors Inc., the electric-car company that hasn’t posted a profit, fell below the $17 price its shares sold for last week in the first initial public offering by a U.S. automaker in more than a half century.

The maker of the $109,000 electric Roadster retreated for a fourth straight day, losing 16 percent to $16.11 in Nasdaq Stock Market composite trading. The Palo Alto, California-based company has slid 33 percent since rising 41 percent on the first day of trading June 29.

The $260 million IPO, the first by an American car company since Ford Motor Co. in 1956, is funding a startup that expects to lose more money in the next two years as it tries to build a $57,400 battery-powered sedan. Chief Executive Officer Elon Musk, who made almost $300 million selling PayPal Inc. and Zip2 Corp., brought Tesla public as the Standard & Poor’s 500 Index posted its worst quarterly drop since 2008.

“The company is a great concept with relatively weak fundamentals,” said Josef Schuster, the Chicago-based founder of IPOX Capital Management LLC and manager of the Direxion Long/Short Global IPO Fund. “Markets are weak and in a weak market right now this is hurting the company even more.”

The automaker, which now has a market capitalization of $1.5 billion, sold 15.3 million shares at $17 each after an overallotment option was exercised, according to filings with the Securities and Exchange Commission. The company will use proceeds for factories and possible acquisitions.

The decline in the shares erased Musk’s paper gains of at least $361 million from the remaining 26.89 million shares he owns in Tesla, the company’s regulatory filings and data compiled by Bloomberg show. His stake is now valued at about $433 million, less than the $457 million after the IPO.

Tesla raised 27 percent more than it originally sought after boosting the number of shares it was offering to 13.3 million from 11.1 million. Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co. of New York, along with Frankfurt-based Deutsche Bank AG, led Tesla’s offering.

The stock rallied on the first day of trading even as the S&P 500 slid 3.1 percent on concern over growth in China and lower-than-estimated U.S. consumer confidence. The sale also came after at least 35 companies worldwide postponed or withdrew IPOs since the start of May as the European debt crisis sent the S&P 500 down as much as 14 percent from its 2010 high.

The first-day advance was the second-biggest for a U.S. IPO this year after Financial Engines Inc., according to data compiled by Bloomberg. The Palo Alto-based investment adviser co-founded by Nobel laureate William Sharpe increased 44 percent on March 16.

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 biggest shareholder, co-founded PayPal, the online payment company now owned by San Jose, California-based EBay Inc., and is CEO of Space Exploration Technologies Inc., a Hawthorne, California-based company that builds spacecraft.

‘Dreams and Visions’

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.

“They brought this thing into a market that was not rewarding hype,” said Michael Holland, who oversees more than $4 billion as chairman of Holland & Co. in New York. “The stock did get its pop, and now it’s plagued by the reality of the marketplace. The reality of the marketplace is that people aren’t paying for dreams and visions.”

At the original midpoint price of $15, Tesla was valued at 5.5 times its net tangible assets, a measure of shareholder equity that excludes assets that can’t be sold in liquidation. That’s triple the median 1.82 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, an 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.

As Tesla focuses on creating a niche for premium-priced electric vehicles, Yokohama, Japan-based 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 that of 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 last month.