SCTY Acquisition makes no strategic, financial or operational sense!

[smac]

Completely agree with the others that suggest this is a bailout.

The synergies are a massive stretch, and it compounds all the normal financial metric problems TSLA have with stuff that is even worse


From a purely analytical view of the combined SCTY+TSLA accounts this is very bad news, and must have been triggered by something very serious.

I was borderline on the current TSLA level on the basis the 3 could start to turn round these key metrics, but SCTY is a millstone round TSLA's neck that will take years to unwind, and a complete distraction whilst they should be concentrating on their stated core mission.

The big question for me is when this triggers the next capital raise, which given the joint cash outflows has surely accelerated that timetable.

 

[WarpedOne]

Tesla is an energy company.

Q.E.D.

 

[marvinat0rz]

I'm have a really bad gut feeling about this acquisition. Purchasing a company that is losing money doesn't sound like a good idea when Tesla is currently just barely able to meet its huge capital requirements.

Also, there's the issue of Musk's loans from these companies. Could this be a forced decision due to a margin call from Goldman Sachs or a similar bank?

Basically, is anyone able to make sense of this and explain it better than "Elon is a genius and the wisdom of this move will become clear in due time"? Increasing Tesla's execution risk is really, really not what we need for the next few years.

 

[Johan]

Basically, is anyone able to make sense of this and explain it better than "Elon is a genius and the wisdom of this move will become clear in due time"?

In essence, no. But as I posted remember he had an information arbitrage as compared with you, me and everyone else on this board. He is basically like an insider. And as was very wisely stated in the TSLA short term thread: agressive insider buying is usually considered a sign of strength, all things considered.

 

[tftf]

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.

You owned 8000 shares and now call it toxic?

Again, Elon Musk who sits on the SCTY board and prepared the IPO called this deal a "no brainer".

He doesn't just sit there, he is the Chairman:

Meet the SolarCity Team and Learn About the Company

Musk is a genius, he wouldn't chair a toxic company. He sees decades ahead (playing 3D chess while we play checkers).

I assume many people here who say they are long TSLA are in fact shorts who want to hurt Tesla's next great strategic move!

Again:

Amazing synergies, amazing combination, amazing vision. Or in Elon's words: A "no brainer"!

Go Elon!

The money part will take care of itself. There are great advisors who worked tirelessly on this deal to make it a "no brainer".

Investors shouldn't get entangled in details, the big picture counts.

 

[marvinat0rz]

And as was very wisely stated in the TSLA short term thread: agressive insider buying is usually considered a sign of strength, all things considered.

Unless Musk was somehow forced, e.g. due to a margin call that we are unaware of. Would there be a requirement for such inside information (conflict of interest) to be disclosed it it was the case, or if such a concern is large part of the reason for the acquisition? Would love if someone with knowledge of US securities law could shed light on this.

 

[tftf]

He is basically like an insider. And as was very wisely stated in the TSLA short term thread: agressive insider buying is usually considered a sign of strength, all things considered.

Great post.

Those who embrace and hold (buy on every dip, it's a bargain at the moment since weak hands sold some TSLA shares) will reap the rewards within a decade:

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

It can't be more clear. Tesla will be worth more than Apple within a decade if it grows for 50% every year (linear, very simple).

Thanks to this merger, there will be more synergies and more economies of scale:

SCTY will be worldwide overnight in every Tesla store and Tesla cars can be sold in every SCTY store!

Just one example: All the Superchargers will now finally get solar canopies. Basically for free, since it's now the same company.

 

[Johan]

Great post.

Those who embrace and hold (buy on every dip, it's a bargain at the moment that weak hands sold some TSLA shares) will reap the rewards within a decade:

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

It can't be more clear. Tesla will be worth more than Apple within a decade if it grows for 50% every year (linear, very simple).

Thanks to this merger, there will be more synergies and more economies of scale:

SCTY will be worldwide overnight and Tesla cars can be sold in every SCTY store!

You think you're trolling but in fact your "ridicule" is a lot closer to the truth than you can fathom.

 

[Perfectlogic]

In essence, no. But as I posted remember he had an information arbitrage as compared with you, me and everyone else on this board. He is basically like an insider. And as was very wisely stated in the TSLA short term thread: agressive insider buying is usually considered a sign of strength, all things considered.

I wouldn't call this insider buying, it isn't a simple stock buy from an insider. Elon isn't raising his stake in any company, he is using one company to buy the other, a company that just so happens to be in financial dire straits and will soon need capital to expand.

 

[Quant]

The CC that is ON right now is really POOR ! Musk is saying BS stuff and no hard facts, just pie in the sky stuff. Some of his comments just don't seem like the logical Musk ....more like Donald Trump.

With Musk and Antonio ( Board member ) recusing themselves, I can see Tesla Board dissension,

I expect there will be at least one lawsuit challenging this deal on conflict of interest grounds.

And SCTY debt will be big worry for the Board.

I expect Market will speak louder than anything else and Board will take notice.

In the end, I expect offer will be rescinded, Musk will lose face and credibility,

Majority of Tesla employees I think will not be for this deal either. This could be another medium term negative.

 

[Ingenieur]

I believe SCTY was cut off from capital market, Musk is trying to save it, at cost of risking Tesla (not Tesla isnt at risk)

 

[Jackl1956]

Solar power is the greatest tool ever invented by man. It will power our homes, transportation, and businesses.

This deal is the definition of synergy.

 

[electracity]

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

I agree it may not close, but I don't see why Elon would look bad. The short interest in SCTY will decrease, and perhaps borrowing will becomes easier.

I don't get the "synergy" between the companies.

 

[Quant]

IMO, better to split Tesla into 2. And have Tesla Energy combine with SCTY. Leaving Tesla Automotive separate.

But, this too has many problems....debt , cash flow, management team, JB 's future etc.

 

[marvinat0rz]

I would vote against this if it had any effect. Does Musk have majority control over decisions like these, or is a successful shareholder lawsuit required?

This seems insane, frankly. Would love to be proven wrong, but that's my assessment.

 

[electracity]

IMO, better to split Tesla into 2. And have Tesla Energy combine with SCTY. Leaving Tesla Automotive separate.

But, this too has many problems....debt , cash flow, management team, JB 's future etc.

Can't split the gigafactory from Tesla.

 

[Quant]

Can't split the gigafactory from Tesla.

Why ? What if TSLA had convinced current battery supplier Pansonic to build Gigafactory on their own without a JV. And Panasonic had continued as battery supplier. After all, Gigafactory is not just for supplying TSLA car batteries. And, battery tech and material inputs may change 5-10 years from now.

Anyway, this split won't happen, so don't worry ! Elon is one adamant person ( on this deal ) and I for one don't think he is seeing straight, and is all idealistic and non-objective about actual synergies and debt & execution risks for a combined TSLA. If deal goes through ( I say one in 3 chance ), TSLA financials will be challenged for many years.

And, I would expect another $2 Billion equity raise by the new, combined TSLA, because SCTY will need a lot more cash to do what Musk wants it to do, including Buffalo factory, and due to the capital intensive all leasing model of SCTY sales strategy. Cash flow drainer....

 

[ecarfan]

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

That you ignore the fact that Tesla's mission statement is to advance the adoption of sustainable transport, and transport is only sustainable if it uses sustainable energy, and that batteries are an essential part of driving the adoption of sustainable energy, tells me that you do not understand that at its core Tesla Motors is a company that stores and manages energy and while its first product is an EV, it's core product is sustainable energy storage. SolarCity fits right into that core product strategy.

 

[Quant]

That you ignore the fact that Tesla's mission statement is to advance the adoption of sustainable transport, and transport is only sustainable if it uses sustainable energy, and that batteries are an essential part of driving the adoption of sustainable energy, tells me that you do not understand that at its core Tesla Motors is a company that stores and manages energy and while its first product is an EV, it's core product is sustainable energy storage. SolarCity fits right into that core product strategy.

I'm sorry ! Please tell me what SCTY has to do with sustainable transport ? Are you saying that TSLA's next car is going to be powered by solar cells, or that you are going be living in a mobile home with solar cells that will power your drive back and forth to work - and the grocery store - in such a TSLA mobile home ? LOL

 

[Johan]

I'm sorry ! Please tell me what SCTY has to do with sustainable transport ? Are you saying that TSLA's next car is going to be powered by solar cells, or that you are going be living in a mobile home with solar cells that will power your drive back and forth to work - and the grocery store - in such a TSLA mobile home ? LOL

Many Teslas are already powered by solar power, with the panels on the owner's roof.