June 30, 2010 / 6:53 PM / 9 years ago

Tesla Motors' underwriters sell more shares

SAN FRANCISCO (Reuters) - Tesla Motors Inc (TSLA.O) underwriters sold an additional 2 million shares in the electric carmaker on much stronger than expected demand for stock of the still-unprofitable company, sources familiar with the offering said on Wednesday.

Goldman Sachs (GS.N), which led the underwriters on the deal, exercised the full overallotment amount of 1,995,000 shares on behalf of the underwriting syndicate, the sources said.

Tesla’s charismatic co-founder and largest investor, Elon Musk, who has put in more than $70 million of his own money in the carmaker, stands to gain about $24 million from the IPO, based on regulatory filings.

His stake in the company is now worth more than $650 million and the IPO provides much-needed liquidity for Musk who had declared in February that he was broke.

In their second day of trading on Wednesday, Tesla shares remained more than 40 percent above their IPO price of $17 even though they dipped 6 cents on the day to close at $23.83 on the Nasdaq. The shares rose as high as $30.42, a 27 percent rise, on their second day.

The carmaker raised $226 million in the IPO on Monday night, selling 3.3 million shares after it increased its IPO share by 20 percent. As of Monday night, 14 percent of the company was sold to the public.

Goldman and the other underwriters can buy the extra shares at the IPO price of $17.

Tesla’s scorching run comes in spite of weakness in the broad market and as major automakers gear up to launch various types of battery-powered vehicles, including plug-in hybrids.

Tesla’s strong performance — the strongest since Financial Engines Inc FNGN.O 44 percent first day pop in March — has some analysts worried.

“I personally see this as an initial IPO run-up,” said Oliver Hazimeh, Detroit-based director of electric transportation consulting at PRTM. “This will probably be calibrated in the next few weeks.”

“They need to drive scale quickly,” he added.

Tesla is quickly losing money as it works simultaneously on its sports car and its planned, lower-cost Model S. The company has burned through $230 million of cash while recording revenue of just $148 million.

Tesla’s IPO is often compared with that of lithium-ion battery supplier A123 Systems Inc AONE.O which began trading last September.

The battery maker, which is also betting on the electric vehicle market, saw its shares jump 50 percent on the first day to close at $20.29. The stock has since plummeted and currently trades at around $9.

Loss-making Tesla has said it expects losses to deepen as it devotes the next year to preparing to manufacture Model S, a luxury electric sedan it plans to launch in 2012 and to sell starting from $57,400.

Additional reporting by NY Newsroom staff, editing by Maureen Bavdek and Matthew Lewis

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