SCTY Acquisition makes no strategic, financial or operational sense!

[tftf]

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.

Fully agreed. Beancounters blind to Elon's vision and traders looking to make a quick buck have thousands of other stocks to choose from.

They should sell their TSLA and SCTY positons and move on. So Elon can do his job with long-term investors who thrust and believe in him!

 

[Canuck]

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?

I don't know if this is a good or bad acquisition for Tesla but just because some here disagree with Elon Musk on this issue doesn't mean they don't believe in his abilities. I bet Elon Musk is aware of certain contingencies (probably many) that he expects to come to pass, but are in no way certain, in order for this acquisition to be a success, making him also justifiably concerned that this will play out as he hopes and expects. He's a risk taker (to say the least!), and the very nature of risk involves failure, or there is no risk. But failure is not necessarily a bad thing to Musk:

"When the numbers are viewed from a GAAP perspective, SolarCity is losing about $150 million per quarter, but what a lot of people don’t understand is that SCTY has $2.7 billion in net retained value after all the debt is paid off over 30 years. SCTY leases most of their systems, therefore the earning per quarter is stretched out over a long period of time. Therefore, I don’t see SCTY as an anchor for TSLA. In the short run this does not look good, but in the long run, everything becomes more cost efficient."

A lot can change in the time it will take for this deal to make financial sense to Tesla. While people can speculate good or bad for Tesla, the fact is the jury is out and won't be returning with a verdict until a number of years have passed.

The world would have been a better place now but hindered exactly by people like you guys.

Perhaps just a little harsh?

 

[SBenson]

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.

What does any of this to do with TSLA, SCTY merger??

 

[eloder]

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.

I guarantee that even a slightly slowdown in the exponential growth, execution, or fundraising capabilities of Tesla would set the climate change prevention movement back far more than SCTY dying if left on its own.

That's why the anti-SCTY sentinment is so strong, even if you ignore all of the financial risks and impacts. The world needs Tesla, the world doesn't need SCTY.

 

[SBenson]

I guarantee that even a slightly slowdown in the exponential growth, execution, or fundraising capabilities of Tesla would set the climate change prevention movement back far more than SCTY dying if left on its own.

That's why the anti-SCTY sentinment is so strong, even if you ignore all of the financial risks and impacts. The world needs Tesla, the world doesn't need SCTY.

Precisely. There is no other company like Tesla with it's success in EVs.

There are 100s or even 1000s of solar companies all around the world. What happens to SCTY is largely irrelevant to climate change or any other greater good.

Solar will win on it's own, with or with out SolarCity's help.

That's not the case with EVs and Tesla.

 

[TheTalkingMule]

EVs will win on their own, but clearly 10+ years earlier due to TSLA.
Solar will win on it's own, but clearly SCTY is leading the charge against utilities in the US that is keeping the entire industry above water.

Not to mention all the work being done in the background on grid storage, off-grid/micro-grid options, etc. SCTY has definitely sped the adoption rate of solar in the US by 2x and it's most important attributes aren't even at the forefront yet. Anyone can slap solar panels on roofs, how are we going to handle things when we hit 5% solar and peak supply is like 60% solar in spots?

Others would fill in the gap, but it would set solar back YEARS if SolarCity were to disappear. I would argue that a 1yr setback in US residential solar is a major blow to "the vision".

 

[dakh]

Precisely. There is no other company like Tesla with it's success in EVs.

There are 100s or even 1000s of solar companies all around the world. What happens to SCTY is largely irrelevant to climate change or any other greater good.

Solar will win on it's own, with or with out SolarCity's help.

That's not the case with EVs and Tesla.

Did you listen to the conf call? I can understand reservations about the financial implications but this isn't what OP was referring to.

 

[ggnykk]

What does any of this to do with TSLA, SCTY merger??

Alright, let me be more explicit. The world is a worse place when people are focusing on short-term personal interest (TSLA shareholder short-term price hit, or even loss for some if they realize their loss now), rather than what's better long-term for the world (dramatically increase solar installation on people's home and reduce global warming).

 

[ggnykk]

I guarantee that even a slightly slowdown in the exponential growth, execution, or fundraising capabilities of Tesla would set the climate change prevention movement back far more than SCTY dying if left on its own.

That's why the anti-SCTY sentinment is so strong, even if you ignore all of the financial risks and impacts. The world needs Tesla, the world doesn't need SCTY.

That's a good thought. But Elon said SolarCity won't be a financial liability for Tesla, and it won't affect Tesla financial at all. SCTY will be cash flow positive by fourth quarter. He said that he will release more financial detail later, before the shareholder vote. He is the CEO of Tesla and chairman of SCTY, so he knows what he is talking about. He also stated twice in the conference call that he has absolutely ZERO doubt about this deal.

 

[ggnykk]

Precisely. There is no other company like Tesla with it's success in EVs.

There are 100s or even 1000s of solar companies all around the world. What happens to SCTY is largely irrelevant to climate change or any other greater good.

Solar will win on it's own, with or with out SolarCity's help.

That's not the case with EVs and Tesla.

Only partially true. After SCTY consolidated with Tesla, SCTY will be one of the most cost effective (if not the most cost effective) in the entire solar market in terms of costs at sales, installation, maintenance. Even the hardware cost (solar panel, battery) will be lower because the design will be more integrated and eliminate redundant hardware. Customer satisfaction will be a lot higher as well because there is only one place to buy all you need, one place of contact, and one visit for all installation. Rather than going back and forth between solar panel installer, battery installer, EV charging installer, and the EV company.

Keep in mind that the cost of installing solar panel on roof are increasing dominated by cost of installation, cost of labor, cost of paper work (permit), cost of sales etc. The costs of solar panel itself is no longer a dominant factor. That's why Elon is doing this to lower the overall cost of the installation, in order to dramatically increase solar installation around the world. I don't think other solar installers can lower the overall cost as much because they just don't have the kind of consolidation and synergy that I mention here.

The addressable market of customers are the same as well. As mentioned in Tesla press release, the type of people buying Tesla EV will most likely buy solar, and vise versa. Tesla is basically increasing the revenue per physical store if they are also selling solar. In addition, the Tesla brand is just a LOT more well known than SCTY or any solar company out there. Unless you are a green enthusiast, chances are you never heard what the heck is SolarCity or Sunpower, or understand the solar industry in general. But a lot of the general public would have heard about Tesla by now. Also, the Elon Musk "halo" effect are generally associated with Tesla and SpaceX in the general public, while most of them won't associate Elon with SolarCity. Many people buy into the Tesla brands coz of Elon himself. Putting SolarCity under the Elon "halo" effect will help solar industry for sure. In short, Tesla merging with SolarCity will create tremendous synergy in terms of cost, ease of implementation, customer satisfaction, and brand recognition. And it will make execution a lot easier for both Tesla and SolarCity, NOT harder, like Elon have stated couple times in the conference call.


For all the naysayer out there, have you guys even listened to the conference call, or even try to understand Elon's point of view?

 

[Seesaw]

Keep in mind that the cost of installing solar panel on roof are increasing dominated by cost of installation, cost of labor, cost of paper work (permit), cost of sales etc. The costs of solar panel itself is no longer a dominant factor. That's why Elon is doing this to lower the overall cost of the installation, in order to dramatically increase solar installation around the world. I don't think other solar installers can lower the overall cost as much because they just don't have the kind of consolidation and synergy that I mention here.

The worst model for low cost installation is the big corporate behemoth model. They cannot compete with the local small business operators that can work out of a van. Hence you see very few global corporates that operate effectively in the installation game of household hardware/appliances.

Not saying it cant work, but I would prefer that Tesla stay in the capital intensive arena of product development and manufacturing rather than getting in the space of installing solar panels on peoples roofs.

 

[ggnykk]

The worst model for low cost installation is the big corporate behemoth model. They cannot compete with the local small business operators that can work out of a van. Hence you see very few global corporates that operate effectively in the installation game of household hardware/appliances.

Not saying it cant work, but I would prefer that Tesla stay in the capital intensive arena of product development and manufacturing rather than getting in the space of installing solar panels on peoples roofs.

Please explain your reasons why smaller company would be more cost effective than larger company in terms of solar/battery installation.

 

[dakh]

The worst model for low cost installation is the big corporate behemoth model. They cannot compete with the local small business operators that can work out of a van. Hence you see very few global corporates that operate effectively in the installation game of household hardware/appliances.

This maybe one of the key points that folks don't quite grok. What you mentioned is only relevant if what we're talking about is commodity stuff that is well understood, training is commonly available, integration standards well established, etc. Nobody will question that statement about electrical work in the house or plumbing.

Tesla+SolarCity product that Elon is talking about doesn't exist on the market and cannot be easily assembled from off the shelf components. And it will require deep integration with a cloud service that will know how to twiddle the knobs on stuff to squeeze max efficiency out of it on any given day, hour and minute. Tuned to the specifics and habits of the installation/customer.

It's like saying anyone can make an iPhone. When they started selling them all the individual pieces were technically available but nobody managed to put them together in an intuitive and useful package. And Apple made a killing selling them because nobody came close. Now, could they do that a few years earlier? Probably not, some of the pieces were just not there or too expensive for mass market.

Same situation exists here. The pieces are just getting good enough to build such a system and make it economically viable. But someone has to do the heavy lifting, like Apple did at the time.

 

[Norbert]

One of the most critical factors for electric cars to compete has always been the price of the battery pack. Hence the Gigafactory, aside from ensuring the necessary volume. The most important way to reduce battery cost comes with economies of scale, increasing the volume of battery production, and the associated research and engineering improvements.

A while ago JB Straubel talked about expecting Energy Storage to become a large volume user of batteries, to the degree of significantly contributing to the future Gigafactory volume.

So Energy Storage will help reduce the price of batteries and thereby increase the market for Model 3, of which Tesla wants to sell as many as soon as possible.

So I think the proposed merger is also a consequence of Tesla believing in Energy Storage becoming a significant market.

Since building out the Gigafactory involves many commitments, Tesla needs a way to sell and install these systems that it can completely rely on. Tesla cannot risk that any partner some day decides to sell only 2 of 3 products, for example.

So this is one strong synergy between Tesla as an electric car company, and Solar City: via the Energy Storage products and their contribution to the economies of scale of battery production.

 

[neroden]

That's a good thought. But Elon said SolarCity won't be a financial liability for Tesla, and it won't affect Tesla financial at all.

Sure. He needs to prove it, because the numbers say otherwise. (See the Solar City Bailout thread.) The primary problem is bond refinancing -- SolarCity nees to raise *lot* of capital in the next 3 years to refinance expiring recourse debt, something like a billion dollars. How on Earth do they plan to do that? Just being "cash flow positive" isn't sufficient to do that.

He said that he will release more financial detail later, before the shareholder vote.

He'd better!

SolarCity's financials are opaque enough that it's possible that there's some source of financing I'm missing. It's also possible that there's a source of financing at Tesla which I'm missing. But it seems like nobody else among the stockholders sees these sources of financing either. So Musk is going to need to explain it in great detail.

 

[Quant]

My 2 cents ( take it for what it's worth, just one solitary guy's opinion ) :

1. It will be interesting to see if the Board OK 's this deal. If they do, it will be stuck in court at least until 2017, minimum. See Delaware law on this....despite the very recent by law changes,

2. In the interim, we will see how SCTY fares with cash and new financing for the next 3-4 quarters. And, how TSLA does on 2nd and 3 RD quarter 2016 sales, vs. current expectations. IF ( only IF ) TSLA has to notch down their sales projections for full year 2016 by even 5 k, then TSLA stock will be hit further and the SCTY stock-based deal will be further under water.

Just as an FYI, I have never ever been short TSLA and never will.....I have been long TSLA, totally loved Elon Musk until this all stuff about the agreements that they made TSLA customers sign about not disclosing issues to regulators ( after the VW integrity issues I was appalled ). The changes to the by laws in the recent few days to thwart any shareholder suits, and the attempt at comingling these 2 companies' debt burden ( notwithstanding any synergies of which I am a sceptic ) , and the most recent CC on this proposed deal, where I thought Elon began to sound just a little bit like Donald Trump.

I have a Model 3 reservation and stood in line for hours for this....I have only driven MB's and BMW's for more than 20 years, and hope to have a Tesla Model 3, as a primary car. I have owned TSLA stock and did sell it in the 250's. Never ever shorted it ever. Not now and never will.

Nobody is a KIng, a God or above the law and integrity ( both explicit and implicit ) is totally important for me. And, in this regard I am totally taken aback by Elon's legal shenanigans ( yeah nobody please tell me they did not know exactly what they were doing ' cause I am not that stupid ) in the recent few weeks. I think his ego has run amok.

 

[wishing_for_S]

More FUD. Elon Musk said the deal is a 'no brainer':

Tesla offers $2.8 billion for SolarCity in 'no brainer' deal for Musk | Reuters

Some people here seem to question a genius and a CEO who made all of this possible.

I find this lack of faith disturbing.

Wow! You believe in blind faith. That is disturbing. Musk is human. He makes mistakes.


Is there somewhere stockholders can protest this merger? A petition or something? My thoughts are, regardless of any synergies, SolarCity is in a bad place financially. That will drag Tesla down, at least in the short to medium term. As a young company, Tesla cannot afford that.

 

[Gerardf]

It will be interesting to see if the Board OK 's this deal. If they do, it will be stuck in court at least until 2017, minimum. See Delaware law on this....despite the very recent by law changes,
.

Both the Tesla and SolarCity boards have already agreed with this aquisition and have given a positive advise.

It is now brought up to shareholder vote to confirm and move forward. Personally I am convinced that both boards feel very confident that the majority of the shareholders will follow that advise. They would not have made this public if they have any real doubt about that.

Why do you think this will be stuck in court ?
I am not familiar with Delaware law. What law would you refer to and why would it be applicable ?

 

[doggusfluffy]

The worst model for low cost installation is the big corporate behemoth model. They cannot compete with the local small business operators that can work out of a van. Hence you see very few global corporates that operate effectively in the installation game of household hardware/appliances.

Not saying it cant work, but I would prefer that Tesla stay in the capital intensive arena of product development and manufacturing rather than getting in the space of installing solar panels on peoples roofs.

Imagine the alternative from a SolarCity business perspective in which you're relying on those same guys working out of vans to do a quality and timely install of your products. They had set up a regional training center in Nevada they dismantled when they pulled out...but it ensured quality controls, safety and of course properly trained installers.
SolarCity opens training facility in Las Vegas

 

[arnolddeleon]

The worst model for low cost installation is the big corporate behemoth model. They cannot compete with the local small business operators that can work out of a van. Hence you see very few global corporates that operate effectively in the installation game of household hardware/appliances.

Not saying it cant work, but I would prefer that Tesla stay in the capital intensive arena of product development and manufacturing rather than getting in the space of installing solar panels on peoples roofs.

I've had four PV systems installed over the last 16 years (long story), the first two by a small local company and second two by SolarCity. When I experienced my first SCTY install it was apparent to me how they had reduced the cost of install and they could further reduce installation costs. The second install was several years later and they had continued to progress. Things that I saw: aggressive use of newer technology, specialization, standardization/simplification and volume.

arnold