SCTY Acquisition makes no strategic, financial or operational sense!

[TheTalkingMule]

Jonas hasn't seen SCTY Q2 financials, or participated in getting funding for ongoing SCTY installs. If the wheels are falling off SCTY, timing isn't a choice for Musk.

The purchase is likely a buyout before a SCTY blow up where Tesla takes a lot of collateral damage.

Nonsense. SCTY is very profitable in mature markets, the expense(and risk that comes with it) is entirely from new markets and their other efforts to broadly expand the residential solar market. Financing PPA installs at well over 100%+ with minimal sales costs is basically a money machine. It's the expensive dive into new markets pushing residential solar out into more and more regions that is wildly expensive.

If SCTY wanted to solve all their "problems" tomorrow they could easily do so by closing down any market that isn't profitable and working only in mature markets riding the natural growth of solar there. That's not Elon's plan.

 

[tftf]

Jonas hasn't seen SCTY Q2 financials, or participated in getting funding for ongoing SCTY installs. If the wheels are falling off SCTY, timing isn't a choice for Musk.

The purchase is likely a buyout before a SCTY blow up where Tesla takes a lot of collateral damage.

What blow up?

SCTY will be cash-flow positive very soon. Elon Musk said so on the call!

Here's the transcript discussing SCTY becoming a net cash generator in just 3-6 months:

"And yes, I think there have been some questions about like does this sort of really increase our debt position or lever -- our balance sheet?

It really doesn’t, I think [indiscernible] will take a close look at SolarCity. What really matters is the recourse debt. Obviously the non-recourse debt is not what matters. And the cash flow that’s generating, that SolarCity will generate -- it covers what’s required with the recourse debt. So, we’re headed to cash flow positive situation for the next three to six months at the [indiscernible], and that’s where the company has been steering itself, reducing their growth rate to some degree to achieve that cash flow positive position, but they are very clearly on their way to getting there in short order. So, it’s actually -- we expect it to be a net cash generator, not a user of cash, particularly when taking into account the dramatic reduction in the cost of sales of solar systems sold through our stores. The biggest factor in SolarCity’s increasing cost per watt in Q1, was their sales costs."

What more do we need to know? Elon Musk, the chairman of SCTY, says SCTY will generate cash within 3-6 months.

I doubt anyone on this board has more inside knowledge than he has.

Only the Internet is rumor-mongering about a "bailout". Such a discussion is damaging to the proposed merger. I'm glad Elon Musk firmly answered the cash-flow question on the SCTY call!

 

[electracity]

Nonsense. SCTY is very profitable in mature markets, the expense(and risk that comes with it) is entirely from new markets and their other efforts to broadly expand the residential solar market. Financing PPA installs at well over 100%+ with minimal sales costs is basically a money machine. It's the expensive dive into new markets pushing residential solar out into more and more regions that is wildly expensive.

If SCTY wanted to solve all their "problems" tomorrow they could easily do so by closing down any market that isn't profitable and working only in mature markets riding the natural growth of solar there. That's not Elon's plan.

The solacity board is not bullish on solarcity. Unanimously not bullish.

 

[TheTalkingMule]

The solacity board is not bullish on solarcity. Unanimously not bullish.

If this is what it takes to keep expanding at breakneck speed, then this is the step Elon will pursue. Simple physics.

That doesn't mean there aren't a ton of other options to instantly become wildly profitable if that were the plan.

 

[Vitold]

Jonas hasn't seen SCTY Q2 financials, or participated in getting funding for ongoing SCTY installs. If the wheels are falling off SCTY, timing isn't a choice for Musk.

The purchase is likely a buyout before a SCTY blow up where Tesla takes a lot of collateral damage.

Here's Morgan Stanley supporting solar+battery merger (posted June 21st 2016)

• Australian utilities are underestimating the disruptive potential of solar-plus-storage technology, according to a new report from investment bank Morgan Stanley.
  
  
• The report estimates that solar and storage technology will be adopted four times more quickly in Australia than the country’s utilities expect.
  
  
• Morgan Stanley estimates battery storage will grow from about 2,000 Australian homes now to one million by 2020 or as high as two million homes by 2020 in its most optimistic estimate.

 

[eloder]

Here's Morgan Stanley supporting solar+battery merger (posted June 21st 2016)

• Australian utilities are underestimating the disruptive potential of solar-plus-storage technology, according to a new report from investment bank Morgan Stanley.
  
  
• The report estimates that solar and storage technology will be adopted four times more quickly in Australia than the country’s utilities expect.
  
  
• Morgan Stanley estimates battery storage will grow from about 2,000 Australian homes now to one million by 2020 or as high as two million homes by 2020 in its most optimistic estimate.

Sounds like a fantastic opportunity for a purely US based solar company that has no reach whatsoever outside US borders!

(Australia is much more conducive to solar+battery than most every other market out there, on the residential scene. This again points to "Why Solarcity", and "Why not a super-cheap solar panel production facility)

 

[Vitold]

Jonas hasn't seen SCTY Q2 financials, or participated in getting funding for ongoing SCTY installs. If the wheels are falling off SCTY, timing isn't a choice for Musk.

The purchase is likely a buyout before a SCTY blow up where Tesla takes a lot of collateral damage.

I think board has realized that it's getting harder to be competitive (selling PPAs or MySolar/MyPower) while risk has increased due to unpredictable or unfriendly regulations (like Nevada).

In my view it's in Tesla Energy benefit to start anew, without SolarCity's strained rep - therefore merger makes sense. As long as Tesla does not continue SolarCity's old business model there will not be drain on TSLA resources.

 

[Alketi]

No one, to my knowledge, actively sells and markets a completely integrated battery/solar solution. Not to homeowners, and not to utilities.

Leaving aside even the obvious sales opportunities to EV owners, with the merger, Tesla will create and be able to market a wholly integrated generation + storage product that will address the needs of consumers in all the states where net metering doesn't effectively exist, including Hawaii, which has the highest electrical rate in the nation. Drop in place, effectively, go off-grid.

However, I think the real kicker will be at the utility-scale. What's the main criticism of solar -- what happens when the sun doesn't shine or if you're generating electricity when it's not needed? Solar panels + PowerPack will be another drop-in-place, integrated solution for utilities, the kind of which doesn't exist today.

Combine that with the fact that Tesla's batteries will be better and cheaper than anyone else's (Gigafactory), and that SolarCity's panels will approach the same levels of efficiency (with their own Gigafactory), then you not only have a ground-up integrated solution but one that will also be advantageous price-wise over any competitive offerings.

That, I'm sure, is at least part of Musk's vision.

Financially, I think it'll be a bit rocky in the short term, considering how much capital is required, but this is a long-term play. Musk is looking 3 to 5 years beyond everyone else, including the analysts. That's my take. I'll be voting YES with my Tesla shares.

 

[ggr]

The problem with these ideas is Musk's fiduciary responsibility as chairman to SCTY shareholders. If he thinks solarcity has a great future, he has no business selling it a a price not far from its five year low.

Musk is a SCTY bear. Welcome to the club, Elon.

I have to disagree with your logic. Getting a fair price now in return for an enhanced future as part of Tesla makes perfect sense for all shareholders. I also don't think he's a bear on SCTY; quite the opposite. He's a bull who sees an opportunity.

 

[John Chow]

As a Tesla shareholder, I will be voting YAY for this deal. I'm using the current downturn in the stock price to increase my holdings.

 

[yesla]

TSLA Referral program extends to SCTY customers.
refer a new SCTY customer and they get $1000 off a new TM or TE product.

 

[ggr]

Sounds like a fantastic opportunity for a purely US based solar company that has no reach whatsoever outside US borders!

(Australia is much more conducive to solar+battery than most every other market out there, on the residential scene. This again points to "Why Solarcity", and "Why not a super-cheap solar panel production facility)

Actually, being from Australia and having been involved in a solar energy startup based in Brisbane, I can assure you that Australia under the current government (today, not necessarily next week, given that there's an election about to happen) is pretty anti-renewable and head-in-sand.

 

[tftf]

TSLA Referral program extends to SCTY customers.
refer a new SCTY customer and they get $1000 off a new TM or TE product.

Synergies! It's happening.

 

[ChadFeldheimer]

No one, to my knowledge, actively sells and markets a completely integrated battery/solar solution. Not to homeowners, and not to utilities.

Sure, but how does a SolarCity acquisition help this happen? The benefits of an acquisition seem marginal.

For example, Tesla sells and markets a product that tightly integrates Panasonic batteries - yet they didn't have to buy Panasonic to make this happen.

However, I think the real kicker will be at the utility-scale. What's the main criticism of solar -- what happens when the sun doesn't shine or if you're generating electricity when it's not needed? Solar panels + PowerPack will be another drop-in-place, integrated solution for utilities, the kind of which doesn't exist today.

I agree with you that the market opportunity for PowerPack at utility scale is great. However, I actually expect the potential synergy to be smaller than for residential. At large scale, I believe it is easier to treat PowerPack and PV electric as separate solutions. This is because utilities have a more diverse source of power (e.g. hydro, wind, nuclear, coal, etc) - each of which could derive benefit from PowerPack.

I think the general consensus is that SolarCity needs Tesla for: (1) access to capital, (2) batteries, (3) sales infrastructure. On the other hand, the only cited advantage SolarCity can provide Tesla seems to be... a good looking solar panel? Thus the bailout talk.

 

[anticitizen13.7]

The basic issue: many TSLA investors do not know the true condition of SolarCity's finances. I'm one of them. I have a basic understanding of how SolarCity funds the deployment of its product via PPAs, but that's it.

If we assume, as many here and elsewhere seem to believe, that SolarCity is a mess, then the key question becomes: What does Elon Musk intend to do to get SolarCity on the right track?

There is precedent for Elon getting a company in a dire situation out of the ditch: Tesla Motors. Think back to 2007-2008. Tesla was in deep, deep trouble at the time: there was a new CEO every few months. Costs on Roadster components was out of control. The company had terrible financial management to the point where it was difficult to tell where the money was going and when. Elon somehow managed to pull this clusterfrack of a company away from financial and product abyss. If SolarCity is in trouble, I think Elon can turn it around. I just want to hear exactly what Tesla intends to do with SolarCity (and no, yesterday's conference call doesn't count -- it was too vague).

 

[Electroman]

Elon can still make a difference just the way it is, being a member of the board.

Getting Solar City back on track should be his priority no 10. His other 9 priorities are Model 3, Model 3 and Model 3.

 

[ggnykk]

It is quite surprising even the Tesla car owners/ TSLA shareholders who presumably believe in Elon Musk's ability are disagreeing with Elon. Have you guys even listen to his conference call a few days ago before making judgement?

The world is a worse place when people are focusing on short-term personal interest, rather than what's better long-term for the world. Haven't you guys learned from the mistakes of thousand of years of history yet? The world would have been a better place now but hindered exactly by people like you guys.

 

[Electroman]

Thanks for the humor. I badly needed it today.

 

[ggnykk]

Thanks for the humor. I badly needed it today.

Not really a humor, my message was serious.

 

[tftf]

Elon can still make a difference just the way it is, being a member of the board.

Getting Solar City back on track should be his priority no 10. His other 9 priorities are Model 3, Model 3 and Model 3.

Elon knows what's best for TSLA and SCTY. He sets the right priorities. Let's not interfere.

He was long enough a member of the SCTY board. It's not enough. TSLA needs to fully integrate SCTY to create all the synergies to create a trillion-dollar market cap company.