July 6th, 2010

Tesla Motors: Stock Shares Down after initial IPO-TSLA.  Tesla Motors was the first IPO in the automotive industry since Ford hit the market in 1956.  The target price upon the first day of trading was $17.  The stock climbed and closed its first day of trading over 40% above it’s initial price.

However, after a couple of days on the market the excitement waned down and the shares dropped back down to a little over $19.  Although this is still above the opening price, many investors have already lost money.

Why the decline? Tesla Motors makes luxury electric cars. Luxury cars have a limited market, as do electric cars.  There just aren’t may people out there who want to spend over $100,000 on an electric car.

Tesla also only has one model currently, but that’s expected to change.  The company wants to roll out a $20,000 option in 2012.  This is what investors are banking on.

Investing in alternative fuels and energy is smart.  The BP oil spill has once again gave way to reform, and could inspire many people to seek hybrid, natural gas, and electric cars. This investment could pay off big.

Then again, if you put all your eggs in this basket, you could lose everything. The founder of the company is the same individual who started PayPal.  It’s rumored that before the IPO he lost his entire fortune on the firm.

Tesla has yet to have a profitable year – but the entire automotive industry has been hurting for some time now. However, in looking over the facts and history many previously excited investors are getting cold feet and jumping out of holding the stock.

What should you do? That depends on your risk tolerance and your gut feeling.  Each investor is different, so be sure to look over the risks.  Remember, the bigger the risk, the bigger the reward – or downfall.