SCTY Acquisition makes no strategic, financial or operational sense!

[ecarfan]

Please tell me what SCTY has to do with sustainable transport ?

Out of courtesy I'm going to assume you are serious in asking that question, but it strains credulity to think so.

SCTY is a solar power company. Solar power is sustainable. Solar systems produce electricity. Tesla makes EVs and storage batteries. EVs are powered by electricity drawn from batteries.

Can't make it much simpler than that.

 

[TheTalkingMule]

People know so many things and then turn around and ignore them.

Is solar no longer the future of energy supply worldwide?
Is Elon Musk no longer best at integrating "the next thing" at scale?

At the end of the day I don't see this merger happening, but the doom and gloom from Tesla fans when it comes to solar is a bit surprising. Energy(mostly in solar form) will be delivered as a service moving forward, not from coal-based utilities. SCTY is at the forefront of that dynamic and TSLA has the batteries. What's not to like?

 

[malcolm]

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.

This is why I love Tesla watching

The OP was a tad more succinct here: Elon " We will be opening up in Mexico later this year."

He only seems to have left out "Elon's *insert name of body organ* is bigger than mine".

ETA: My choice would be this: The Panasonic Situation

 

[Evbwcaer]

So many people are making good arguments against this acquisition, but they are the arguments of the conservative (not in the political sense)...the sort of, "play it safe" or traditional sense.

Elon lands rockets on barges, makes 100mpge SUV's that are quicker than Lambos, he is a billionaire. He expected Tesla to fail.

People with grander vision consider things differently....and Elon is surely one of them.

I am happy to hear this news, and I own some TSLA.

Imagine, the Model 3 coming with option to power itself forever for "free" if you choose the solar panel option. It is the tip of the iceberg.

I understand that it makes people jittery and cautious, but the stronger appeal to me is Elon's strong push toward a cleaner, healthier, and better planet. There is certainly A LOT of money to be made along those lines, probably more everyday, in selling the solutions.

 

[Gerardf]

OP 'question' is :

"SCTY Acquisition makes no strategic, financial or operational sense!"

Strategic : that is the clearest 'no-brainer' of all three.
The 'Solar-panel' factory that will start-up Q4 alone would make it that. Not only for residential solar, but specially to offer total solutions to utility solar. And also Bonnie's point makes sense,, but we can all easily think of more on this one.

Financial : tougher one for the short term. Long term.. also a very clear yes.
Solar is still very early in the adoption cycle. All Solar shares will rise in the mid & long term. That is why I am in both TSLA and SCTY.

Operational : Sure. Makes a lot of sense.
Many installation people will be needed. Not just for Solar panels, but also for TE products. But do not forget home chargers.

Tesla can very eaily grab a very big chunk of the US home & workplace charger market now. By offering installation services for home-chargers, while preparing for storage & optional solar upgrade. All Model-3 reservation holders are a nice target market for this ! (Not to forget the expected 100k S & X new owners we all expect the next 12 months !)

Home & work chargers are currently WAY to expensive.. Specially the so-called SMART-chargers. Even at much lower prices very nice margins are to be made with the upcomming M3 volumes. 1M / year home chargers plus installation costs. Just pick a price for the charger plus work-hours and multiply by 1M / year !. For 500k per year @ US$ 1k per home that is already 1/2 B$ yearly revenue !

However, Tesla will need hands in the field for SAFE installation of these. IIRC Tesla is already making a move with new smart home chargers.

My only question mark is the timing. Here I simply have to trust Elon and the other management & board members.

 

[Spidy]

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.

I have been wondering the same and honestly there more I think about it the more sense it makes, although I obviously don't have a good overview about Elon's finances and how the whole issuing new shares works out and how many options he still has.

I mean this time he had to sell/donate shares to pay taxes and I think the last time he made some loan deal with Morgan Stanley (can't find a source, but I'm pretty sure I remember something like that.)

If SolarCity goes bankrupt that would result in a huge hit to his net worth and certainly won't make it easier to keep his % share in TSLA.

 

[Waiting4M3]

I would be more worried if Wall Street had loved this deal. Those guys are all about quarterly earnings, and most of them still just see Tesla as a car company, and can't see past the Model 3 and Gigafactory, or maybe Model Y and another factory in China. To them that is the extent of Tesla's potential, and they plan to sell out and cash in along the way. If Elon does something that every Wall Street guys think makes obvious sense, then what good is Elon? We should just get a Wall Street guy to run Tesla then.

 

[Drivin]

I would be more worried if Wall Street had loved this deal. Those guys are all about quarterly earnings, and most of them still just see Tesla as a car company, and can't see past the Model 3 and Gigafactory, or maybe Model Y and another factory in China.

Funny!
Tesla's valuation is based on Tesla's quarterly earnings!?

Hmm...let's take a look.

Tesla Valuation: $29B
Tesla EPS: -7.83
(note the "minus sign")

GM Valuation: $45B
GM EPS: 6.63

Yup, makes sense that Wall Street are "all about quarterly earnings"

 

[Drivin]

People are all missing the obvious synergy here.
At some point, to get higher and higher market penetration of the 3 and the Y and other underwater and/or floating car, Tesla will have to reach people who don't have the luxury of being able to charge their cars in their own garage.

TSLA + SCTY = Solar panels on top of the car. Eventually your car will be a solar panel.

Using the trailer hitch, you can then put an extra battery pack in the back of your car and then bring that home every night to power your appliances.

Vision folks!

Remember Elon is playing 3D chess while ice skating backwards while singing opera, and mere mortals are just playing checkers.

 

[Drivin]

He sees decades ahead (playing 3D chess while we play checkers).

.

I always find that analogy really unusual since it doesn't actually mean you get to a better result - it just means you are out of sync.

Elon: Check mate, I won!
Other: But we are playing checkers and you just took one of my 20 pieces.
Elon: But...I was playing a different game.
Other: Oh, and I just jumped your king, which by your rules means you lost since you have only one king.
Elon: But..I was playing a different game.

 

[tftf]

Unfortunately I have to agree with that sentiment and rationale.

You must be one of those Tesla bears.

Elon Musk laid out all the reasons for this great merger in the conference call earlier today. Did you listen to the call?

Tesla Motors Conference Call | Tesla Motors

A few of the amazing quotes:

The Tesla-SolarCity deal explained through some amazing quotes by Elon Musk

His thinking is so far ahead that mere humans will only comprehend this in a few years.

He couldn't have said it more clearly (in fact, he was more concise than ever today):

The new Tesla is a trillion dollar market-cap opportunity!

So probably the biggest investment opportunity of the decade given Tesla's current market cap.

 

[Waiting4M3]

People are all missing the obvious synergy here.
At some point, to get higher and higher market penetration of the 3 and the Y and other underwater and/or floating car, Tesla will have to reach people who don't have the luxury of being able to charge their cars in their own garage.

TSLA + SCTY = Solar panels on top of the car. Eventually your car will be a solar panel.

Using the trailer hitch, you can then put an extra battery pack in the back of your car and then bring that home every night to power your appliances.

Vision folks!

Remember Elon is playing 3D chess while ice skating backwards while singing opera, and mere mortals are just playing checkers.

Homer Simpson is here!

 

[NigelM]

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

Just noting that these type of announcements are only made when the parties are already certain it will happen. It's not contested, both boards agree; ergo it's a done deal.

That said, I scratch my head a little and (keeping an open mind) wonder on what synergies can be generated that couldn't have been reached with simple cooperation agreements.

 

[NigelM]

The "yes" case is that Tesla gets the Buffalo factory, the rest of Silevo, Zep, and a nationwide network of electricians.

Nationwide network??

 

[neroden]

Point!

 

[Electroman]

All this synergy stuff can be done through partnership

That said, I scratch my head a little and (keeping an open mind) wonder on what synergies can be generated that couldn't have been reached with simple cooperation agreements.

Exactly especially when both the companies are effectively headed by the same man.

 

[neroden]

Actually, Musk explained that. It's basically not legal for them (violation of fiduciary duty) to do favorite-vendor deals with SolarCity without doing their due diligence on all other options every time. He said it's getting difficult and annoying to try to do arms-length transactions with SolarCity over and over again.

 

[Drivin]

That said, I scratch my head a little and (keeping an open mind) wonder on what synergies can be generated that couldn't have been reached with simple cooperation agreements.

That really is an interesting question.

From the live blog this morning. The comment after the Musk quote is from Jeremy Owens

“If we give a special deal to SolarCity, and SolarCity is not part of Tesla … We can’t do that,” Musk says. Um, I don’t think partnerships are illegal.

Considering that Tesla did a deal with Panasonic for batteries, had early partnerships with Mercedes and Toyota, and probably has hundreds of supplier relationships, resells third party produced products in the store, I don't understand what is the problem with having another parter to provide solar panels or charging stations to Tesla buyers.

When I go to Home Depot, there is often some people there selling Solar panels.

 

[Drivin]

Actually, Musk explained that. It's basically not legal for them (violation of fiduciary duty) to do favorite-vendor deals with SolarCity without doing their due diligence on all other options every time. He said it's getting difficult and annoying to try to do arms-length transactions with SolarCity over and over again.

If he can recuse himself from a multi-billion dollar acquisition, I don't understand why he couldn't recuse himself from a much smaller business partnership. LOL.

Besides, it isn't as if SCTY doesn't have competition or is guaranteed to be around, so why not spread the risk and do deals with multiple companies?

 

[bonnie]

Nationwide network??

SolarCity doesn't have the same barriers to entry. Tesla would be able to open Tesla stores in the other states without dealing with the dealership lobby.

I've had some people message me with 'but they could do the same thing with Powerwall!'. Problem there is it starts to look like a game to state legislators if all of a sudden Tesla claims that's how they sell Powerwalls. SolarCity is already established with retail locations in many states, expanding to new states has likely been in their business plan for quite some time.

Legit to have stores for selling solar, since that's already an established business method. Also legit to expand that business plan into new states.