Tesla's public offering: Irrational exuberance

FORTUNE -- While the rest of Wall Street was slumping this week, one small corner of the market was behaving like it was 1999 all over again.

That would be the public offering for stock in Tesla Motors (TSLA), which has all the characteristics of a frothy Internet stock and almost nothing in common with anything else that has "Motors" in its name.

First a brief history: Tesla is a Silicon Valley-based company founded in 2003 to make battery-powered cars. Elon Musk, an Internet centi-millionaire, became a lead investor and took over as CEO in 2008. That same year, Tesla began production of the Roadster, a Lotus Elise-based sports car that uses 6800 lithium-ion laptop-like batteries for power.

The Roadster now sells for $121,000, and about 1,000 have found customers. Tesla has plans for a second car, a sedan called Model S, that will cost half as much. It hopes to sell 20,000 a year.

The prospectus for the Tesla public offering almost defines the term "wishful thinking." Tesla has accumulated losses of $236.4 million, which means it has lost $236,000 on every car it sold -- not an auspicious beginning.

Tesla cites research forecasting sales of 10.6 million electric cars by 2015 without pointing out that the vast majority of those cars will be gas-electric and plug-in hybrid vehicles like the Toyota (TM) Prius, not pure battery-electrics like Tesla's.

It contends that it has a competitive advantage over existing auto manufacturers because they are dependent on the internal combustion engine, are pressured by the need for profitability, and take a long time to develop new vehicles. It overlooks their vast armies of engineers, established protocols for research, and massive resources.

And Tesla imagines that its Roadster competes against such long-established models as the Porsche 911, Chevrolet Corvette, and Jaguar XK , while the Model S will be going up against Audis, BMWs, and Mercedes.

Explains Tesla: "We believe our Roadster and Model S may appeal to consumers who are environmentally and politically conscious or who are interested in the technological and economic benefits of electric vehicles."

Tesla likes to pat itself on the back for doing things differently, without thoroughly examining why things are done that way in the first place.

Henry Ford decided he couldn't afford to set up his own company-owned dealer network so he allowed for the growth of independent dealers. Not Tesla. It wants its own sales outlets because it believes it can get faster market intelligence that way and make repairs more efficiently.

Manufacturers like Honda (HMC) have flopped at building hybrids where the aim is to improve performance instead of fuel economy. Not Tesla. It continues to brag about the acceleration of its electric cars (zero to 60 in 3.9 seconds for the Roadster) and seldom acknowledges the fact that such heavy-footed driving rapidly depletes the batteries and shortens the range of the cars.

Indeed, modesty does not appear to be a core value at Tesla. It states in its prospectus that "since our team combines the innovation and speed to market characteristics of Silicon Valley firms with the experience of leading automotive companies, we believe we will be able to ... stay at the forefront of the electric automobile industry. " Tell that to Nissan, General Motors, Mitsubishi and the other established automakers that are introducing electric.

None of this apparently registered with investors earlier this week. Shares in the company's IPO shot up more than 40% to $23.89 on their first day of trading, giving Tesla a market capitalization of $2.5 billion.

Timing is everything. A year and a half ago, you could have bought Ford Motor (F, Fortune 500) at $1.26 a share, giving it a market cap of $4.3 billion.

Apparently, all those people who missed the run-up in Ford (it now sells for around $10 a share) decided to invest in Tesla instead.

Caveat emptor.