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SCTY Acquisition makes no strategic, financial or operational sense!

Discussion in 'TSLA Investor Discussions' started by Quant, Jun 21, 2016.

  1. Quant

    Quant Member

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    1. These are 2 completely different and unrelated businesses. Yes, the solar part is common ...but one is Panels on a rooftop and the other is Batteries ! The home and the car are 2 different animals, Not everybody owns both. In the US or globally. OH, and yeah TSLA is global, SCTY is NOT !!!! One is a technology brand and other is more like a service. One is personal and other is a utility.

    2. Financially, there are zero synergies in product development, manufacturing or assembly or delivery costs.

    3. Elon Musk is now forcing all current owners of SCTY and all current owners of TSLA to become owners and investors of both. The subset of such an owner pool is quite small and will get smaller.

    4. The execution risks for the new combined TSLA investor are now doubled. BOTH entities have to do well on product, production, marketing and finance, IF they both don't then the combined entity will be hicupping for a long time.

    Why and how in the world did the Board of TSLA agree to this ?

    I am betting that this deal will NOT close ! And, Elon will look terrible and will have lost a lot of investor credibility.

    I can't see the majority of TSLA car owners seeing this hodge podge of a new entity making execution risk of initial and long term quality in TSLA cars' process and production quality better.

    Who exactly wins here ? SCTY owners who had no exit ?
     
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  2. Discoducky

    Discoducky Active Member

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    SCTY and Tesla Energy are very synergistic and may pair very efficiently together. Looking ahead at least 5 years this makes more sense as more reliance on residential energy generation becomes common
     
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  3. Ryan MF

    Ryan MF Member

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    If Tesla were to expand into another market (not saying it's the best time for that) solar is the obvious and logical choice. They were already advertising solar city products on the tesla webpage and also prioritizing powerwalls to users with solar. Having a fully integrated product will help attract new customers and cross sell.
     
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  4. bonnie

    bonnie Oil is for sissies.

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    As another forum member said in another thread, "Elon is playing 3D chess while the rest of us are playing checkers."

    I am in awe of what this deal actually means. It's a puzzle piece of a large vision. If you focus on the minutia, you miss how big this could get. I'm both a SCTY and TSLA stockholder & I'm only pissed that I didn't see this coming. I'm in.
     
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  5. TaoJones

    TaoJones Beyond Driven

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    Repurposing and fully integrating the business into Tesla's car and battery businesses makes more sense than watching SCTY collapse under its own weight.

    I am not thrilled at the short term implications of the acquisition, since I own no SCTY shares, but I do understand why they chose now to do it.
     
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  6. Jon Barkland

    Jon Barkland Member

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    Completely bizarro.
     
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  7. neroden

    neroden Happy Model S Owner

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    There are synergies between Tesla Energy, Silevo, Zep, and SCTY's installer business.

    Where there are no synergies is in SCTY's exotic financial products business. Which has been its main business so far. Can I hope that if they merge, they'll wind that down?
     
  8. tftf

    tftf Member

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    #8 tftf, Jun 21, 2016
    Last edited: Jun 21, 2016
    Exactly, this merger is great! Amazing synergies. Soon SpaceX and new ventures like household robots will be merged into Tesla as well, creating a giga-scale green entity.

    Normal humans playing checkers will only understand the moves of a true genius CEO decades later...if at all.

    By then, Elon will have already created the largest and most valuable holding company on the planet, as he predicted:

    Elon Musk: Tesla Could Be Worth As Much As Apple Is By 2025

    With a rapid SCTY merger he will probably achieve this goal much quicker. Go Elon!

    PS: Apple was worth around $700 billion when he made that statement. Tesla could be worth a trillion easily!
     
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  9. TaoJones

    TaoJones Beyond Driven

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    That's a good point.
     
  10. Skotty

    Skotty 2014 Model S P85

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    If it makes sense to acquire Solar City, then it makes sense to acquire Solar City while people are down on it and the stock price is low. That time seems to be now.

    Does it make sense to acquire Solar City? That is the question. I think it does from a long term objectives point of view, but I'm sure this will be topic of great debate for awhile.
     
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  11. woof

    woof Model S #P683 Blue 85 kWh

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    I love this new tftf persona. From total short (who sometimes had interesting things to say) to totally sarcastic uber long (think Trip Chowdry combined with Adam Jonas on steroids). I'm not sure which is more annoying. It is interesting to see some not get the sarcasm.
     
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  12. SBenson

    SBenson Active Member

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    SCTY merger will make one ungodly mess of TSLA financial reports. May god help us!
     
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  13. tftf

    tftf Member

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  14. Perfectlogic

    Perfectlogic Member

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    This is definately a bailout and makes me think SCTY is in even worse shape than I thought before. I don't see any real synergies here besides that they are obviously both passionate about the environment, the merger won't lower the COGS which is usually what a merger is all about.

    Both business are very capital intensive and both will need a lot of new capital to grow according to their plans. The problem here is that a potential merger probably will raise the cost of capital for Tesla, sure Tesla can also just keep diluting the shares but what if the SP goes down?

    This merger just doesn't make sense (for Tesla) which means that SCTY probably needs this really bad. The borrowing cost have been going up a lot recently for SCTY, which is very bad in this industry (the reason SUNE went bankrupt), especially when you are planning to expand upstream AND have made promises to the NY state about investing a large amount over the next 10 years or whatever it is in their planned cell factory. If they don't uphold these investment promises they will be fined instead as far as I remember.

    I see this whole ordeal as super bad for TSLA shareholders, I assume Elon saw a real risk of SCTY going bankrupt over the coming years and wanted to play it safe thinking Tesla could easily handle taking in SCTY providing cheaper and easier funding for its growth phase.

    I think TSLA will take a nosedive in the coming months as there certainly will be a lot of investors who does not agree with this merger. Also many SCTY investors who will recieve TSLA shares will sell as they are now invested 90% in a different business than before.
     
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  15. mkjayakumar

    mkjayakumar Active Member

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    Unfortunately I have to agree with that sentiment and rationale.
     
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  16. neroden

    neroden Happy Model S Owner

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    That's worth noting.

    I am really of two minds about this. The "yes" case is that Tesla gets the Buffalo factory, the rest of Silevo, Zep, and a nationwide network of electricians. Arguably Tesla is getting all this stuff rather cheaply *because* SolarCity is in trouble. Yay! I believe the repeated statements that SolarCity has a very low installation cost before considering sales (Zep helps), and I think the Silevo panels will be a highly competitive product for enough years to be decently profitable. Tesla should be better at making sales than SolarCity was, lowering "cost of sales". (And no, Tesla couldn't buy the pieces out of bankruptcy, because the Buffalo factory would revert to the state of NY and I suspect several other pieces are encumbered by secured debt.)

    The "no" case is that Tesla is buying into a mare's nest of very complicated debt financing which is several times larger than the actual operating business and which requires regular refinancing. I'm voting no unless the financials are made much clearer.
     
  17. travwill

    travwill Member

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    The best view I've seen is that the last thing Tesla needs right now is another unit that is "bleeding cash". SCTY is and it's debt financing is all short-term over next 1-3 years due for repayment, at a time Tesla can not afford that. Odd in the first place since they finance installations 20-25 years even.

    SCTY - do business with them if needed but keep it separate!!!
     
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  18. schonelucht

    schonelucht Active Member

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    The only way this makes sense is that STCY had a likelihood of failing which would expose Elon to banks demanding he give up more of TSLA for them to continue bankrolling him. TSLA will tank today on this news.
     
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  19. SageBrush

    SageBrush Active Member

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    #19 SageBrush, Jun 21, 2016
    Last edited: Jun 21, 2016
    This much I know: EM is a genius and he takes BIG gambles. He is going to succeed more often that just about anybody else, but his failures are going to be epic. And since he lives on the edge, so do his stockholders.

    A wild thought, perhaps: is he hoping to cut the sales cost of SCTY by selling PV with most cars ? That would certainly make me a happy customer. Heck, make it a package deal with a home battery too.
     
  20. SBenson

    SBenson Active Member

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    #20 SBenson, Jun 21, 2016
    Last edited: Jun 22, 2016
    I spent years researching SCTY. At one point I was holding 8000 shares being retail investor.

    SCTY is toxic. It will destroy both Tesla and TSLA.

    There are no synergies. Exact opposite cultures, especially sales cultures. SCTY has nearly impenetrable business model and financials.

    This is a bailout to avoid public embarrassment of SCTY bankruptcy, due to liquidity issues. I posted countless posts in SolarCity thread on this topic.
     
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