Tesla is two weeks into its roadshow, and due to come out today. It is increasing the size of the float from 11m shares to 13m shares, a very positive sign. At this point in the process, the underwriters are getting feedback from institutions and building an opening day book of orders.
Given the interest, the stock would be expected to sell at the high end or even above the range of $14-16/share. Indeed, it got priced Monday night at $17, valuing the company at $1.6B, a bit lower than a research estimate last week at $1.85B, or $20/share. The buzz last week was also generally positive. The last minute (unsigned) deal with Toyota also boosted interest.
There is a strategy to these sorts of IPOs to buy the dip six months after offering. Last Sept a much-hyped green IPO, A123, popped 50% on the first day ($29) but has since dropped below the offering ($13.50) to under $10. It has now come out of the 180 day lockup, where insiders begin selling and further depress the price. When that selling abates, the stock typically becomes a buy – especially in this case if Tesla does well, since A123 supplies batteries for electric cars.
A successful offering could strengthen the tech IPO market, which has gotten despairingly weak recently. Given the bellweather status of the first electric car startup going public, a successful offering could also bolster a whole slate of green offerings, such as Smith Electric, an electric truck startup that also wants to go out, and Fisker, the closest venture-back competitor to Tesla. It might also have a halo effect on solar IPOs, which were hot three years ago and have been downright chilly recently. eSolar may be the next solar IPO to test the window.