Potential Solar City bankruptcy impact on Tesla Stock

[luca]

scty will be bankrupt after german auto makers

They are definitely next Nokia


And germany will be next piigs

Hey there,

as you all know im a Tesla and Solar City bear and i have been sharing my thoughts with you for quite some time.
So my opinion is obviously very negatively biased against both stocks.

Now thats not just stock but also bonds of Solar City are trading at very distressed levels:

Bonds Detail
Bonds Detail

So you can buy SCTY 2018 bonds today and more then double your money in less then 3 years IF they can repay it i wouldnt do it but it seems much better investment then the stock at this point (well as much as Scylla seems nicer then Chalibdis but still)

So now to the actual question:

How much could the bankruptcy damage Musks reputationon ?
Solarcity has some very aggressive and misleading accounting practices (the misleading part is my opinion and not a fact, thus shouldnt be discussed), in case of bankruptcy there will be tears of investors, those retail guys whom he sold Solar Bonds, and Tesla accounting would be looked upon with much more scrutiny. There will also be tons of dirt poured upon Musk.

This is my bear point, i would like to hear counter arguments from Bulls.

Remember Risk is not being right, Risk is being wrong.

 

[flankspeed8]

Does TSLA as a corporation hold any ownership of SCTY?

 

[blakegallagher]

I should have also pointed out that SolarCity’s auditor is not worried about the company as a going concern. I checked the 10-Q yesterday, and there was no going concern warning from the auditor. SolarCity is not in any near term risk of bankruptcy.

This 100x, If there was a risk of them running out of capital and going bankrupt it would be there. They have stated they will soon start selling All of the contracted value on some of these contracts to help in becoming cash flow positive. They have said they have already gotten offers and they look good. If they were really this close to being bankrupt they would be taking whatever offers they could get and moving full force ahead. Solar City is best in class at raising money. Nobody else in the Solar Industry seems to be on the same page.

Sbenson and others are not giving credit to the very fruitful things that are being invested in. They are equipping a large Factory that will churn out 10k panels a day that will save them significantly on installs. They are investing a lot of money into studying how to set up the grid of the future in California and doing a lot of R&D that will pay divedends for a long time.

Solarcity Corporation patents list (updated weekly)

They have 4 new patents this year and they look very promising.

 

[jhm]

scty will be bankrupt after german auto makers

They are definitely next Nokia


And germany will be next piigs

Um, if you say SolarCity is Nolia, what's the iPhone that will out displace distributed solar, batteries and aggregated grid services? Are land lines really a technological threat?

 

[SBenson]

Does TSLA as a corporation hold any ownership of SCTY?

Nope

- - - Updated - - -

I can't tease any bond screener to show these bonds. How does one buy them on the secondary market? What do I need to search for?

Bonds are typically identified by their CUSIPs in US.

The Nov 2019 maturity bond's cusip is 83416TAC4.
The Nov 2018 maturity bond's cusip is 83416TAA8.

Some systems drop the last letter of the cusip and just go with the first 8 letters.

I tired to get my hands on these in the previous downturn but Interactive Brokers said they don't support trading in convertibles.

 

[flankspeed8]

Nope

Then I fail to see how any SCTY bankruptcy, it it were to occur, would have an impact on TSLA. The power wall marketing could get a little muddier if they would every try and bundle the products, SCTY panels and TSLA batteries for a true off-grid ability, especially in rural areas.

 

[TheTalkingMule]

The mistake is in thinking this thread has any rational purpose whatsoever.

 

[Krugerrand]

The mistake is in thinking this thread has any rational purpose whatsoever.

Oh, it has a purpose. :wink:

 

[Jack6591]

The mistake is in thinking this thread has any rational purpose whatsoever.

I cannot believe how many calories have been burned on this subject. The shorts are dedicated with tremendous work ethics.

 

[electracity]

Then I fail to see how any SCTY bankruptcy, it it were to occur, would have an impact on TSLA. The power wall marketing could get a little muddier if they would every try and bundle the products, SCTY panels and TSLA batteries for a true off-grid ability, especially in rural areas.

Really? 1) SCTY bankruptcy would signal Musk and friends inability to raise a relatively modest amount of capital. 2) Bankruptcy would signal a major failure of strategy by Musk. You don't see how that would affect Tesla? The trilogy losing a member would call into question the wisdom of the theology.


Bankruptcy seems unlikely to happen because Musk and friends would lose more than they would gain. This is the basic point of the OP.

 

[flankspeed8]

Really? 1) SCTY bankruptcy would signal Musk and friends inability to raise a relatively modest amount of capital. 2) Bankruptcy would signal a major failure of strategy by Musk. You don't see how that would affect Tesla? The trilogy losing a member would call into question the wisdom of the theology.


Bankruptcy seems unlikely to happen because Musk and friends would lose more than they would gain. This is the basic point of the OP.

I think these are more emotional concerns rather than rationale. Did not realize that Space X, Tesla and Solar City shared the same business plan nor customer/supplier base. Aside from the contributions of Musk, what else do they have in common? It would be a terrible problem if Tesla was impacted by the survival of Solar City and if so, does not reflect well on management or the Street's perception of really what Tesla is.

 

[TheTalkingMule]

I cannot believe how many calories have been burned on this subject. The shorts are dedicated with tremendous work ethics.

It's all a valid exercise. Personally, I've gotten far more understanding out of the seemingly irrational attacks at 3Q and 4Q earnings than I have in the duration in between.

To say shorts have no value is to say influenza isn't an important part of human existence.

 

[Jack6591]

It's all a valid exercise. Personally, I've gotten far more understanding out of the seemingly irrational attacks at 3Q and 4Q earnings than I have in the duration in between.To say shorts have no value is to say influenza isn't an important part of human existence.

I'm not opposed to valid, lucid arguments. The title of thread smacks of something different.

 

[SBenson]

I agree bankruptcy is very unlikely. There are way too many obligations in too many layers. It will be quite very messy. Lawsuits will fly every which way. Instead I believe Musk will take the entity private as the stock price reaches low single digits by offering a premium from there. Once private, the entity can grow or not-grow or unwind all based on funding model. There wont be quarterly pressures to show progress in a linear fashion.

If things do turn out this way, I believe TSLA stock won't be affected as it won't appear as though SolarCity failed. At least this is my hope as I am long biased TSLA and hope that it is protected from whatever nonsense SCTY goes through (I already paid my dues on that one).

 

[TheTalkingMule]

I'm not opposed to valid, lucid arguments. The title of thread smacks of something different.

Even attempted sentiment shift purely for personal gain can be valuable. Look how deep these people have dug into the concept that SCTY may not be able to procure funds. Then jhm quietly points out that if the 5th ABS had taken place 3 weeks earlier 2015 would have been cash positive. It's a joke, but it can still have value.

 

[30seconds]

Really? 1) SCTY bankruptcy would signal Musk and friends inability to raise a relatively modest amount of capital. 2) Bankruptcy would signal a major failure of strategy by Musk. You don't see how that would affect Tesla? The trilogy losing a member would call into question the wisdom of the theology.


Bankruptcy seems unlikely to happen because Musk and friends would lose more than they would gain. This is the basic point of the OP.

Under that logic then we should also be worried about the pending failure of Mercedes and BMW due to impact from VW showing that the 1.) German car industry cannot meet environmental regulatory challenges in auto manufacturing and 2.) Bankruptcy would signal major failure of strategy by German government.

 

[electracity]

Under that logic then we should also be worried about the pending failure of Mercedes and BMW due to impact from VW showing that the 1.) German car industry cannot meet environmental regulatory challenges in auto manufacturing and 2.) Bankruptcy would signal major failure of strategy by German government.

I can't follow your analogy, but my position is that SCTY will not go bankrupt.

 

[lango]

The stock market and the finance people love to cluster things together. The actual company is in many cases considered last especially when things go downhill. First is asset class, then index, then sector and lastly the company. There is other clustering going on too, for example solar with energy and Tesla with oil prices. I fully expect TSLA to be clustered together and take a hit in the sp if SCTY goes bankrupt. It is not right but that does not matter, the history I think is clear that unfair clustering is almost the norm, rather than the exception.

 

[electracity]

The stock market and the finance people love to cluster things together. The actual company is in many cases considered last especially when things go downhill. First is asset class, then index, then sector and lastly the company. There is other clustering going on too, for example solar with energy and Tesla with oil prices. I fully expect TSLA to be clustered together and take a hit in the sp if SCTY goes bankrupt. It is not right but that does not matter, the history I think is clear that unfair clustering is almost the norm, rather than the exception.

I'll argue that it is right because it would show Musk and his investors group's unwillingness to back one of their companies. Which is why solarcity has extra bankruptcy protection, I think.

I will speculate that the CFO quit because the founders and VC were selling stock when SCTY should have been issuing more stock. The argument by the insiders for not raising more equity would have been low interest rates. Now the bond prices show the huge error.

I would think that these circumstances would Musk unhappy. TSLA insider selling is much less and what one would expect for any company intending to be long lasting and profitable. SCTY is more dump and run.

 

[Krugerrand]

I'll argue that it is right because it would show Musk and his investors group's unwillingness to back one of their companies.

Given the history of Musk, anyone trying to make that argument isn't a) paying attention, or b) purposely isn't paying attention.