Tesla Motors Inc., whose electric sports cars combine good looks, high performance, and high-status price tag with environmental correctness, government subsidies, and lots of good media, will go public on Tuesday. The company hopes its IPO will garner about $15 a share, for a $1.4 billion valuation.
Tesla's public offering represents an interesting chance to measure just how much glamour is worth. The business not only lacks profits but has minimal sales. "Glamour and excitement are not the same as a sound investment," warns the WSJ's Brent Arend in a much reprinted post. "Indeed the reverse is more often the case." Newsweek Nancy Cook is blunter, listing five reasons that Tesla will "never make money."
Of course, glamour stocks are nothing new to Wall Street. They have high price-earnings ratios because investors believe they have strong growth potential. Is Tesla such a rational glamour play? Or is buying into its IPO more like funding a movie or an airline startup--the triumph of hope over experience, glamour over good sense?
UPDATE: Tesla's glamour turned out to be worth even more than the company hoped. Shares went for $17 each, and Tesla increased the number it sold by 20 percent.