Government support jump-starts Tesla IPO

Tesla's Model S is slated for 2012 rollout.

When Tesla Motors (Nasdaq: TSLA) had its initial public offering in late June, not only was it was the first U.S. automaker to go public in more than 50 years, it also scored the year’s second-best first-day IPO performance.

Many are asking how a company that’s still years away from profitability raised $226 million with its IPO. The Silicon Valley-based company has not shown a return on investment on the more than $300 million it has spent so far developing the Tesla Roadster and Model S sedan—and doesn’t expect to start making money until 2012 when it begins mass production of its $57,400 Model S sedan.

A number of factors may have contributed to Tesla’s big day out. In general, investors are favoring more mature companies, but companies with a lot of growth opportunity can be strong performers, says Matt Therian, an analyst with Connecticut-based Renaissance Capital.

Tesla’s founder, Elon Musk, has said the company is aiming for growth of 3,000 percent to 4,000 percent, with the goal of producing about 20,000 vehicle units per year.

Government support for Tesla in the form of $465 million in low-interest loans from U.S. Department of Energy, likely bodes well for investor confidence, according to Therian. “It’s a different story without government backing,” he says.

Tesla’s outing makes it the second government-backed cleantech company to go public in the last year. Like Tesla, lithium-ion battery maker A123 Systems (Nasdaq: AONE) was backed by government funds—a $249 million DOE grant to go toward building a manufacturing facility. The Massachusetts-based company had one of the best performing IPOs of 2009, but has since seen its stock sink to well below its offering price.