Tesla IPO: A Vote for Cleantech or the Auto Industry?

As you may know by now, Tesla Motors [NASDAQ: TSLA], went public earlier this week, on June 29, in a $226M IPO. In a day when the NASDAQ lost about 4% and the Dow ~2.7%, TSLA's shares closed at $23.89, a 40% gain from a $17 open. As of June 30, their market cap is a cool $2.2B. All this despite the fact that the company has registered profits only once (last July) and lost $26M in the first quarter of this year. Keep in mind that this is a company in which Toyota, Daimler, and the DoE have invested.

Like many people watching the IPO and post-IPO rally, I too am trying to figure out whether the market rally, which saw TSLA soar in a way that reminded me of the irrational exuberance of late-90s, demonstrates bullishness on clean tech or an appetite for and confidence in the American auto industry (the last IPO in the auto industry was Ford's IPO in the late 1950s). TSLA may claim its Silicon Valley roots to distance itself from GM/Ford while comparing itself to technology giants Apple/Google, but at the end of the day, it is a car company which will have to manufacture cars and contend with fierce competition from the incumbent auto makers who are poised to enter this market. To be fair, it is too soon to read too deeply into the market rally and discern if these are long-term investors who are betting on the success of the technology and company, or those who are simply riding the wave. Additionally, it would be naive for startups and VCs, particularly those involved in high capex ventures, to start betting on an IPO exit, particularly with the characteristics of TSLA, i.e. pre-revenue, first large commercial roll-out still 2 years away, and high capex.

I believe that innovation in cleantech should and will continue. It is encouraging to see the concerted and collaborative efforts of the public and private sectors to ensure that the cleantech sector continues to grow and mature. If TSLA is eventually a success, it will be an exemplar of what public/private partnerships can achieve and, perhaps more importantly, will encourage investors and entrepreneurs alike to pursue innovation even more rigorously in this sector.