Abu Dhabi investors to benefit from Tesla’s IPO

Abu Dhabi investors in Tesla Motors Corp saw their stakes soar in value as the shares in the electric carmaker rose 40 percent following the US-based firm’s successful initial public offering earlier this week.

The revolutionary electric carmaker raised $226m in the initial public offering (IPO) earlier this week, selling 3.3m shares after it increased its IPO share by 20 percent. The IPO was priced at $17 a share. As a result, Tesla was the top gainer on the Nasdaq on Tuesday with its closing share price of $23.89 boosting its market capitalisation to $2.22bn, compared with $1.6bn on Monday night.

It is the first IPO by an American automaker since Ford's debut in 1956. The debut comes amid heightened interest in electric cars and as major automakers gear up to launch various types of battery-powered vehicles, including plug-in hybrids.

The IPO has yielded millions of dollars for some of the early investors in Tesla, which includes two from Abu Dhabi. However, major shareholders still have to wait until the 180-day lock-in period to expire to cash in.

German giant Daimler has seen a nice return on its investment in the startup in 2009. The eight percent stake of Blackstar Investco, which Abu Dhabi's Aabar Investments has a 40 percent stake in, is now worth $178m.

Abu Dhabi's Al Wahada Capital Investment took a 7.8 percent stake that is now worth about $174m, while the quickest return was on the investment made by Japanese automaker Toyota Motor Corp, which bought $50m worth of shares in a private placement at the IPO price. That is now worth about $70m.

Elon Musk, the company’s serial entrepreneur who is the inspiration for Robert Downey Jr's Tony Stark character in "Iron Man" and sold his online payment company PayPal to eBay for $1.5bn in 2002 in order to set up the carmaker, is the largest shareholder.

Although he claimed to be broke in February, Musk has poured in more than $70m of his own money into Tesla and his 28.4 percent stake is now worth more than $650m.

“It's probably too early to say that electric vehicles are definitely going to be the next thing in cars, but if they are I think the potential is huge," said Matt Therian, an analyst with Connecticut-based IPO research house Renaissance Capital.

Analysts say that the cars may be sleek, but the shares will be volatile in the near term. The Palo Alto, California-based company is losing money and does not expect to be profitable for at least two years.

Despite the rousing day one, Tesla faces an uphill battle. The company has delivered slightly more than 1,000 of its Roadsters after early setbacks and a slower-than-expected start of production.

The company is also facing upcoming competition from the $32,500 Nissan Leaf that will hit the market this year. Other electric cars expected to launch this year include Chinese automaker BYD's E6 and GM's Chevy Volt.

Since its start, the company has burned through $230m of cash while recording revenue of just $148m. It expects losses to deepen as it devotes the next year to preparing to manufacture Model S, a luxury electric sedan it plans to launch in 2012 and to sell starting from $57,400.