Tesla Motors chairman Elon Musk said at a conference recently that he plans to take the electric car maker public by the end of 2008. Without having had an opportunity to look at the financials -- there hasn't yet been a registration statement or prospectus -- I would say that this is exactly the kind of IPO that investors should avoid.
I know, it's exciting and new. It's technology. It's stuff that could change an entire industry and quite possibly the world. As Musk said, "Thirty years from now the majority of new cars will be pure electric, not hybrid."
Exactly. Just like Sirius Satellite Radio (NASDAQ: SIRI) and XM Satellite Radio (NASDAQ: XMSR). And all those internet stocks. And the hundreds of exciting new car makers a hundred years ago that captured the fancy of investors before they ended in bankruptcy.
But the problem is that history has demonstrated amply that world-changing technologies often fail to lead to profits for the innovators. As Warren Buffett famously said about the airline industry, "I like to think that if I'd been at Kitty Hawk in 1903 when Orville Wright took off, I would have been farsighted enough, and public-spirited enough -- I owed this to future capitalists -- to shoot him down. I mean, Karl Marx couldn't have done as much damage to capitalists as Orville did."
In his book The Future For Investors: Why the Tried and True Triumph over the Bold and New, Jeremy Siegel showed that, since the birth of the airline industry, the railroad industry that was decimated by air travel has been a far superior investment.
If the Tesla IPO is a hot one and investors start dumping boring profitable companies to pile in, I say take the hint and run the other way.
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Reader Comments (Page 1 of 1)
5-20-2008 @ 4:39PM
Al Schrader ; said...
Actually, there is something new, but Tesla doesn't have, I do. It's the new Farad system that for the first time, will make an electric car out run a gas one.
alfredschrader@aol.com
5-20-2008 @ 7:34PM
william lindblad said...
The TESLA will stay around, but it will be niche vehicle and I agree with you on the IPO assumption. While it is a new twist on an old technology it is really only new in respect to the battery system. Anyone thinking that Tesla looks good should keep in mind that this technology is well known to all of the large manufacturers. The chevy Volt has a better chance as these things are going to require mass production and a reasonable price to become hot sellers. At this point there is nothing yet that will exceed 200 miles without re-charge.
5-21-2008 @ 8:58AM
BBHY said...
Buffet is great and all, but he is not the one to ask about tech stocks. He would have also shot down Microsoft, Cisco, and Google. If you want to ask about the next Walmart, ask Mr. Buffet.
Sure it's risky, and I wouldn't bet the farm, but I like to put a few thousand into more risky stuff, because occasionally you get a big payoff. This can't be any worse than Enron, and almost all the investment advisors were very keen on that one.
Besides, these days just keeping your money in US dollars you run the risk of losing half your wealth. Anything outside of gold bullion is a risky investment in this environment.
7-03-2008 @ 7:25AM
charlesray said...
I don't needa roadster, I want a suitcase and grocery hauler for less than 200 mile trips. However pennsylvania can get cold and slippery. I want some heat and defrost, only more like a van than a roadster, like that car on the wii commercial. They have bodys like that in Japan we have never seen.I need something that can go anywhere in winter, like my caravan with deicent tires, like I almost never have. I would buy a testla if I could represent the company and sell the crap out of them!