Tesla vs. GM: Which IPO Will Prevail? (TSLA)

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As Tesla Motor Inc. makes its public debut today, a glaring question comes to the market forefront: Will Tesla, the Silicon Valley start-up, prove more successful in its IPO than GM's re-entry into public trade? Tesla Motor
TSLA
, which manufactures electric vehicles (EVs) and electric vehicle components, is among the highly-anticipated IPOs slated for 2010. Shares have already gained over 27% today, closing at $21.63. It would appear that investors have optimistic expectations for the young company, though it has yet to turn a profit. How will Tesla's initial IPO success compare to GM's expected equity offering later this year? To be sure, both automobile companies are exceedingly different. General Motors, which entered and exited Chapter 11 bankruptcy last year, is majority-owned by the U.S. Treasury. It offers a fleet of vehicles in various brands and employs over 200,000 people. This fall's expected equity offering would be the second time GM trades publicly. Tesla, on the other hand, was founded in 2003, employs 500 people, and produces only two vehicles. Tesla's first public offering is expected to raise funds for the company to fast-track growth efforts. Certainly, the contrasts are apparent. Investors will place their confidence in Tesla and GM based on growth expectations and risk tolerance. With a positive market reception and an increased interest in energy-effecient vehicles, Tesla's prospects are good should the company capitalize on its market niche. It offers two electric vehicle options, priced at $57,400 for the sedan and $109,000 for the roadster. Full market potential in electric vehicles remains to be seen, so only time will tell what investors expect in terms of valuation growth. The opportunities for renewal shouldn't be lost on GM, however. The company owns valuable brands, including Chevy and Cadillac, that it can continue to utilize. Research & Development has made progress in alternative fuel technologies and improved customer satisfaction. Importantly, General Motors is no longer stranded with unprofitable assets, and management can pursue strategic initiatives freely. Pricing the growth potential of both companies is largely determined by confidence in management. Should Tesla and GM execute strategies quickly and efficiently, the two stocks could prove a worthwhile investment. Risks to both companies include a deeply competitive environment, a shaky economy, and progress in management leadership.
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Posted In: NewsGlobalMarketsGeneral Motors
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