Technical indicators and screening measures were positive again Thursday while the market averages treaded water. There are lots of technical positives, but also some...
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I drive a 1994 Geo Prizm, rusted and sputtering, that came from a factory near San Francisco that was owned by a GM-Toyota joint venture that eventually flopped.
The car’s held up all these years, but other than that, there’s not much good to say about it, and the company that built it didn’t amount to much, either.
It gives me a laugh to think that these days that very factory – rebuilt with money from the 2009 stimulus, no less – now makes the car that’s the toast of Wall Street.
The U.S. government’s $465 million loan turned the factory that built my Prizm into the launching pad of Tesla Motors Inc.’s (Nasdaq: TSLA) Model S, the luxury electric sedan Consumer Reports calls one of the best two cars it has ever tested. (The Model S tied the 2007 Lexus LS 460L, receiving 99 of 100 points.)
The plug-in Tesla has surpassed all expectations, but here’s what’s really extraordinary about the company: It’s a government-financed clean-energy project that’s actually a great American success story that even some conservatives can love.
Among big fans of Tesla Motors: Charles Payne, a co-host on FOX Business‘ “Varney & Co.” who regularly touts the company and its stock.
With the success of the Model S, TSLA has skyrocketed from its 2010 IPO at $17 a share to $91.97 as of late Thursday and the company’s valuation is approaching $10 billion.
The company just sold convertible bonds to repay the government loan – five years early – and is selling about 2.7 million shares of stock to raise about $260 million more. Elon Musk, Tesla’s founder, chairman and CEO, is also buying $100 million worth of stock personally, a move designed to show he’s so convinced the stock will rise that he’s betting his own money on it.
How refreshing to see such a success story financed in part by the same government program as solar panel maker Solyndra, which had gotten a $527 million loan guarantee and went bankrupt, and electric car maker Fisker, which is on the verge of bankruptcy and owes the U.S. government more than $180 million.
Paying back the loan will get Tesla Motors out from under any potential stigma of joining GM as a so-called Government Motors, a captive of the administration that funded it.
The Obama administration loan agreement included warrants to buy almost 3% of Tesla’s shares – 3.09 million of them – for $7.54 a share, according to SEC filings. By repaying the loan, Tesla gets the warrants back before most of them vest.
Meanwhile, analysts have raised ratings on TSLA stock, which also plans to develop an SUV and a lower-priced sedan.
Morgan Stanley analyst Adam Jonas reiterated his “Overweight” rating on Tesla Motors while increasing his price target from $47 to $103.
“What Tesla has accomplished isn’t luck, it’s real,” he wrote Wednesday.
And the success starts with the Model S, a first-rate luxury car that continues to win rave reviews.
Priced at around $70,000 for the basic version, the car has dispelled fears it wouldn’t sell. In fact, in the first quarter the Model S outsold the top three German luxury brands, the Mercedes Benz S Class, the BMW 7 Series and the Audi A8.
Tesla Motors also disproved critics’ claims it would fail when it turned profitable in the first quarter of this year.
Betting against Tesla has proven to be a lousy strategy.
With the stock up over 100% in just the past month, Tesla has enjoyed an extra push from panicked short-sellers (as of April 30, 44.1% of TSLA shares were sold short) rushing to cover their positions.
In the end, the Tesla Motors story shows that for all the failures of the stimulus, the blind squirrels in Washington were able to find at least one juicy nut.
It seems almost as unlikely as turning my pumpkin-like Prizm into one of those Model S’s that hits 133 mph within a quarter mile on the test track.
Maybe the old jalopy will have a second life yet.
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