Tesla Motors shares continue drop after big runup; fall below IPO price for first time

Tesla Motors shares drop below initial sale price

DETROIT — Shares of high-end electric car maker Tesla Motors Inc. ran low on voltage Tuesday, falling beneath the stock’s initial public offering price after a stunning run-up last week.

Tesla shares lost more than 16 percent of their value to close at $16.11 — below the $17 price that the Palo Alto, California, company got when it first sold the stock on June 29.

Tesla’s shares rose 40 percent in their first day of trading as excited investors bet on the automaker’s future as a player in the electric car market. They pushed the stock as high as $30.42 on Wednesday, but prices began falling later in the week, closing Friday at $19.20.

On Tuesday, shares dropped as low as $15.83 before recovering to finish down $3.09 at $16.11.

“The euphoria has worn off,” Scott Sweet, senior managing partner of IPO research firm IPO Boutique, noted Tuesday. “In this market environment, people are not buying $109,000 cars.”

Tesla has not turned a profit since it was founded in 2003, and so far the company has sold only about 1,000 of its high-end electric cars. It currently sells just one vehicle, the $109,000 Roadster sports car, which is popular among celebrities and performance-car enthusiasts. But by 2012 it plans to start selling a four-door luxury sedan, the Model S. That car is expected to cost $50,000 and have an annual production run of 20,000 cars a year. From there, Tesla hopes to roll out even more electric cars aimed at economy buyers.

Sweet said the company was grossly overvalued as some investors believed that Tesla was the next Google. Elon Musk, Tesla’s high-flying CEO with a history of successful startups such as PayPal, put on a “spectacular” road show to drum up interest in the shares, he said. But Sweet predicts Tesla will find it difficult to make a profit.

Messages left with a Tesla spokeswoman seeking comment weren’t immediately returned.

The company does have strong backers. Last month, Toyota Motor Corp. agreed to sell Tesla a shuttered plant in Fremont, Calif., and invest $50 million in the company. Tesla plans to use the plant to build the Model S.

In June, the company was awarded $465 million in low-interest loans from the U.S. Department of Energy to help build the Model S, which is designed to travel as far as 300 miles on a three- to five-hour charge. With a federal tax credit for battery-powered cars, the cost to buyers could be less than $50,000.

However, Tesla faces competition from mainstream automakers. Later this year, Nissan Motor Co. and General Motors Co. both plan to start selling rechargeable electric cars at far lower prices than the Model S.

Teslas initial public offering raised $226.1 million after selling 13.3 million shares. Before the sale, Tesla expected to price just 11.1 million shares at $14 to $16 each.