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Elon Musk Plans To Raise $178 Million From Tesla ISO

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On: Mon, Jun 28, 2010 at 3:02PM | By: Sherry Christiansen

Elon Musk Plans To Raise $178 Million From Tesla ISO

Tesla Motors is getting ready for public offering, and founder, Elon Musk, who was voted 2007 Entrepeneur of the Year, says he plans to raise $178 million dollars from the IPO. The company filed its stock registration on January 29th and the expectation was initially to collect proceeds of only $100 million.

The company, which has not yet posted a profit, will sell 11.1 million shares which equates to 12% of the company at $14-$16 each. Tesla Motors has been valued at about $1.5 billion, according to Renaissance Capital. Musk plans to re-coop a portion of his initial investment taking about $21 million from the sale.

After the IPO offering, Toyota will subsequently purchase $50 million in shares and Tesla will then turn around and pay Toyota $42 million for the Nummi factory in California that is currently closed. The Nummi factory, which was a previous a joint venture between Toyota and General Motors, will be the future location where Tesla will build its second automobile, the Model S Sedan. Tesla’s first model, the Roadster, sold over 1,000 models (including cars sold to Brad Pitt and George Clooney) for $109,000 each, yet the company still endured a total loss of around $290 million.

The Model S will sell for $49,900—the price made possible through a federal tax credit, but some say that more affordalble electric vehicles, being designed by more established automakers may bump Tesla out of the market. According to an article on Freep.com, David Abella, a manager at New York-based Rochdale Investment Management, stated, "This is a company that really needs the cash.Right now, it's a big money pit."

In fact, Tesla lost $29.5 million in the first quarter this year, compared with $16 million in the same period of 2009. Musk invested over $70 million of his own money into Tesla in May of 2009 when the world’s second luxury car maker, Daimler, invested $50 million in June of 2009. Tesla received a $465 million loan from the U.S. government to build the Model S and the battery packs needed to propel it. Under the terms of the federal loan, Musk must keep 65 percent of his stock for at least a year after finishing the Model S project.

Tesla recently recapped the company’s plans to develop a third electric car. "We intend to offer this vehicle at a lower price point and expect to produce it at higher volumes than our planned Model S," the company said. "We expect that this vehicle will be produced a few years after the introduction of the Model S."

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