Tesla Offers to Acquire SolarCity

[mahatmakanejeeves]

Source: The Wall Street Journal.

Tesla Offers to Acquire SolarCity

Elon Musk is chairman, largest shareholder of both companies

By Mike Ramsey, Lynn Cook and Mike Spector
[e-mail]
@MRamseyWSJ
[e-mail]
@LynnJCook
[e-mail]
@MikeSpectorWSJ

Updated June 22, 2016 12:08 a.m. ET

Elon Musk proposed combining the electric-car and solar-energy companies that he backs, the latest in a series of financial shuffles among disparate firms of his empire.

Tesla Motors Inc., Mr. Musk’s Palo Alto, Calif., electric-car company, on Tuesday offered to acquire SolarCity Corp. in an all-stock deal valuing it at up to $2.8 billion. Mr. Musk is the chairman and largest shareholder of both companies.
....

The acquisition aims to create a company employing nearly 30,000 people with all products renamed “Tesla” that will package electric cars, batteries and solar panels for customers, Mr. Musk said. ... But it would also add to the growing complexity and vertical integration of Tesla and add an unprofitable operation to its already-strained finances. Tesla, in a huge growth effort that includes building a $5 billion battery factory in Nevada, isn’t expected to be profitable until 2020 at the earliest and recently launched a share sale to raise $1.7 billion for capital expenses.
....

The proposal is also likely to draw further scrutiny of Mr. Musk’s dealings with multiple companies he owns and helms, and their financial viability. In addition to Tesla and SolarCity, Mr. Musk is the largest shareholder and chief executive of rocket maker Space Exploration Technologies Inc.
....

Write to Mike Ramsey at [e-mail], Lynn Cook at [e-mail] and Mike Spector at [e-mail]

Read more: http://www.wsj.com/articles/tesla-offers-to-acquire-solarcity-1466545551

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Like anything else solar- or Tesla-related, this is of national interest to DUers.

Also, I now have an excuse to link to this article:

MoneyBeat: Elon Musk Eats the Shorts

Tesla's offer for SolarCity will hit short sellers hard

By Justin Lahart
[e-mail]
@jdlahart

Jun 21, 2016 6:38 pm ET

SolarCity seemed like a great short up until the moment that Tesla Motors offered to buy it. Then, suddenly, it wasn’t.

When the closing bell rang on Tuesday, the solar power company’s stock price was down 58% on the year, and a revival didn’t seem to be in the offing. The company has, after all, burnt some $2.7 billion in cash over the past four quarters. Given the outlook it provided when it reported first-quarter results last month, that didn’t look like it was ending anytime soon.

So betting against the stock was heavy. There were 26 million shares of the company sold short as of the end of last month, an amount equal to a whopping 41% of its shares available for trading.

Tesla’s offer to acquire SolarCity at a 21% to 30% premium over its closing price puts those bearish bets in a very bad place. Investors will have to scramble to buy back the shares they’ve shorted, and the buying pressure could even temporarily send SolarCity past Tesla’s offer. Short sellers who began betting against SolarCity late into its price decline could bear heavy losses. Covering them may require raising money by unwinding other positions.

[mucifer]

1. Buyouts are almost never good for workers.

But, these days sometimes companies can't survive without it.

Very sad.

[Renew Deal]

2. I think this case is going to depend on whether Musk wants to keep operating Solar City's business

Or if this is just about patents. 1st is good. 2nd is bad. Of course, back office will always be vulnerable.

[Zorro]

3. Sounds as if it fits Musk's vision

Leveraging the Tesla brand and marketing it as having a whole-house solar/electric storage solution may be very compelling to many people.

[EricMaundry]

4. Tesla will be marketing something called a "Power Wall."

This will be an in-house battery that will store energy throughout the day and provide power overnight when solar panels are not producing electricity. What this will enable the homeowner to do is completely cut any ties to the grid as net metering will no longer be necessary. For the first time in a century homes could be both self-sufficient energy-wise and free from the utility company. Could be quite a game changer.

[lonestarnot]

5. How do you know?

[Alex4Martinez]

6. It's real, but the poster above misdescribes it a little. Link and Video:

The PowerWall is a great idea not just for homeowners but for utility providers.

Home energy storage will allow ordinary customers to charge up when energy is cheap (at night) if they're on a time of use plan and use their stored energy during expensive times of day. If they have home solar, they can store their own energy.

The utility companies love it because it allows them more flexibility with energy generation, the ability to deploy wind and solar more fully because there is storage capacity out on the grid in the form of these home systems where customers are participating (it would be voluntary).

The poster above is mistaken in describing a user as becoming independent of the grid. While that's certainly a possibility for homeowners with self-generation, it's not a very good idea for most of us and it's not what Tesla or anyone else has in mind except perhaps in remote areas.

https://www.teslamotors.com/powerwall

[lonestarnot]

8. Thank you Alex4Martinez!

[EricMaundry]

10. Confusion, but who is perfect?

Sorry, but the ultimate aim of advanced solar power companies like Solar City/Tesla is to give people the option of firing their 100 year old polluting utility companies. The PowerWall will give people that option. Five years from now people will be reflecting upon a time when wires and so-called "smart meters" were attached to their homes.

You honestly don't believe that this would be a popular option?

[lonestarnot]

11. Did anyone really say that?

[Alex4Martinez]

7. Here's another video from last year, May...

[Egnever]

9. Solar city got screwed in Nevada by a corrupt panel.

http://lasvegassun.com/news/2016/mar/28/are-brighter-days-ahead-for-solar-customers/

In December, the Public Utilities Commission of Nevada approved a price hike for most solar customers, tripling a fixed charge and slashing the value of credits solar customers can earn for sending excess electricity to the grid as part of a program known as net metering.

As a result, national rooftop solar companies SolarCity and Sunrun pulled sales and installation teams from the state, resulting in hundreds of layoffs. Customers were caught in the middle, left wondering whether converting to solar was worthwhile.

[lonestarnot]

12. Yes they did.

[Xithras]

13. Solar lease companies like SolarCity are an awful deal

I've now known THREE people who took financial hits when selling SolarCity paneled homes. They not only add zero value to your home, but all three took financial hits compared to their comps because they were selling homes burdened by lease debt.

Financing is nearly always a better deal if you can do it. Unlike lease companies like SolarCity, the panels are actually owned by the homeowner, which means their value is calculated into the value of the home. It also means the homeowner gets the tax credits (SolarCity seizes those from their customers) and other perks that come along with having a solar power system. Solar financing requires decent credit, but it can still be done with zero down and is nearly always a better deal. Companies like SolarCity are successful because they prey on people who don't know any better.