SCTY Acquisition makes no strategic, financial or operational sense!

[neroden]

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.

No, you don't get it. They have to do their due diligence and look at multiple vendors for every deal as long as they're separate companies. Even if they were *totally* independent companies.

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?

Well, see, yeah, this is an argument *against* the merger. Maybe they should.

But Musk wants to sell a single integrated plug-and-play solar + storage product, and that's not so easy to do with deals with multiple companies.

Honestly I think Musk has had it with the sole-source outside supplier situation, which has been the bane of his existence at Tesla. His response has been to insource everything which he can't get as a commodity. He apparently does not consider solar panels a commodity yet.

 

[NigelM]

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.
<snip>
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.

True. I was just making the point that Tesla wouldn't inherit a "nationwide network" but further to your point a combined entity still has to continue building that network, either through partnerships or capital investments.

 

[RobertF]

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.

Agree, solar cells are a commodity no different from the cost of aluminum, steel or anything else. You can buy them from a number of different suppliers. No one has a break through proprietary panel today. The real difference is sales, service or warranty. Very competitive arenas. Tesla itself, however, has and continues to produce breakthrough capabilities. Hard for me to understand why 2 different companies need to merge.

 

[Drivin]

No, you don't get it. They have to do their due diligence and look at multiple vendors for every deal as long as they're separate companies. Even if they were *totally* independent companies.

I get it. It is a weak excuse.
1. If he can recuse himself from a multibillion dollar deal, he can recuse himself from much, much smaller deals that don't put the company at potential risk.
2. I would hope that Tesla has a management team, governance and operating scale that doesn't require the CEO to do the due diligence on every deal they look at.
3. Besides how many deals are we actually talking about here? It was mentioned that they could offer SCTY in the Tesla stores. Great, Home Depot does that (although not sure if it is SCTY or one of their competitors). I really doubt that the CEO of Home Depot had to do the due diligence on that. Maybe offer SCTY techs to do charger installs? That sounds even easier and wouldn't require the CEO of a 20B company to do the due diligence on - don't they have recommended technicians already? Did Musk do the due diligence on each of them.

 

[neroden]

Agree, solar cells are a commodity no different from the cost of aluminum, steel or anything else. You can buy them from a number of different suppliers. No one has a break through proprietary panel today.

If you listen to Musk on the conference call, which I did, he considers the new Silevo panel to be a breakthrough -- he thinks it will be comparable in cost-per-watt to the cheapest Chinese panels, if not lower, and much more space-efficient. He also thinks it's prettier.

Make up your own mind on whether he's right. But my conclusion from listening to the conference call is that *Musk wants Silevo*, and the rest of SolarCity is just coming along for the ride.

 

[deonb]

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.

How is this a conflict of interest? Elon isn't voting.

If the board disagrees they can advise to vote against.

If the shareholders disagree they can vote against.

If you don't like it, vote against it.

No need for a lawsuit.

 

[smac]

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.

FT Ran a piece (it's pay walled) http://tinyurl.com/gpqv8px


Long and short of it was Elon + the Rives + SpaceX have a big chunk of exposure on a Morgan Stanley borrowing secured against SCTY shareholding that was close to breaching a covenant.

 

[Khatsalano]

I worry about the future of my car now that toxic Solar City is in the picture. WTF.

 

[deonb]

I worry about the future of my car now that toxic Solar City is in the picture. WTF.

Better quickly cancel and get your refund before they can't afford to repay it to you!

(You're ahead of me in the queue, right?)

 

[neroden]

I should note that I'm not actually opposed to the idea of bailing out SolarCity. GM had to bail out Delphi, after all. And just look at the bizarre relationships between CocaCola and the CocaCola bottlers (some of which have been bailed out by CocaCola).

Tesla needs a reliable partner for Tesla Energy sales.

What I don't like is the large and unclear refinancing risks associated with SolarCity's shaky financing schemes.

 

[Raindog1]

Does anyone know if Musk created a "Master Plan" for moving energy towards renewables? I'm sure (praying) he wouldn't put Tesla at jeopardy just to save a company he chairs for without having a further reaching objective?!?

When can we expect him to add SpaceX as Tesla Areospace and watch the stock hit Saturn?

 

[beeeerock]

Something I ponder is how Tesla will pay for supercharger expansion and the power that goes into the fleet of cars. And where that power comes from. If they own a distributed network of solar installations, is there any reason they couldn't become their own equivalent of bullfrog power (bullfrogpower.com) and essentially supply their cars (and maybe competitors) with green electricity? Much like Ford buying Exxon... but green.

I can't help but think that Elon is thinking more steps ahead than we can fathom. The comments he made at the shareholders meeting about not wanting to risk investor's money might have been carefully timed... but his aversion to *other* people's risk seems legit. So if this was a really dangerous and self-serving deal, would he mastermind it? I'm not convince that he would. He has something up his sleeve, but the cuff is too tight for us to see it.

 

[smac]

I agree when critical suppliers are on the brink of bankruptcy (especially in the automotive space) the idea of buying them to protect your major company, and ensure ongoing supplies is a sensible (if forced move).

TSLA buying SCTY has none of those parallels. If SCTY folded tomorrow it would have no impact on Tesla's ability to produce cars.

The thing that makes me super nervous, is that in the GM / Delphi example. GM's CEO and shareholder was not Delphi's CEO's cousin or personally it's largest shareholder.

Aside from the financials, the incestuous nature of this deal stink. Whatever was going on must have been pretty bad to risk dragging this through the financial (and wider) press.

 

[electracity]

I can't help but think that Elon is thinking more steps ahead than we can fathom. The comments he made at the shareholders meeting about not wanting to risk investor's money might have been carefully timed... but his aversion to *other* people's risk seems legit. So if this was a really dangerous and self-serving deal, would he mastermind it? I'm not convince that he would. He has something up his sleeve, but the cuff is too tight for us to see it.

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.

 

[Drivin]

How is this a conflict of interest? Elon isn't voting.

.

I assume he is also not going to promote this deal or convince major shareholders and Wall Street and the press.

Is someone from the board going to do that?

He obviously would recuse himself from any discussions so he wouldn't influence anyone. Maybe spend more time on the X line to double check quality.

 

[Waiting4M3]

TSLA buying SCTY has none of those parallels. If SCTY folded tomorrow it would have no impact on Tesla's ability to produce cars..

If you only think of Tesla as a car company, yes this makes no sense at all. I personally wouldn't want to own TSLA stocks if it's only a car company.

 

[azred]

10.5% drop in one day. I guess bailing out a failing business isn't popular with Tesla investors, me included. I usually avoid buying individual stocks and this is a good example why.

 

[azred]

If you only think of Tesla as a car company, yes this makes no sense at all. I personally wouldn't want to own TSLA stocks if it's only a car company.

It's not just a car company. It's as much or more a battery company. But hopefully it won't also be a failed solar company. Solar City is a horrible company about to go belly up.

 

[smac]

If you only think of Tesla as a car company, yes this makes no sense at all. I personally wouldn't want to own TSLA stocks if it's only a car company.

It doesn't matter if it's cars or a coke bottling plant, or a piece of highly important IP in a software piece. Basically if you bail out a supplier, the biggest reason to do so is in order to protect your ongoing supply chain.

SCTY were a pin prick on an elephant's ass in terms of their significance to deliver Tesla's primary product.

How anyone cannot view this as a bailout when GS had issued warnings over SCTY's breach of covenants days earlier is beyond me.

So yes there maybe a super long term master plan that says TSLA will vertically integrate everything from solar panels, to an aquisition of Pirelli for the tyres, to Bic for the office supply cupboard, heck let's think big and they go all the way up to the federal reserve so they can own the payment system. (Elon has form here). May that work out for them.

Right now Tesla need to focus on building the Model 3, and finishing the Gigafactory. Not propping up Elon's cousins.

 

[Ken Fenske]

What Tesla is trying to do, become a successful large scale car company with a $35k electric car is as close to impossible as I can imagine. However, I bought Tesla stock anyway because I thought that if anyone could pull it off, EM could. Now adding the mess of Solar City? It's not a distraction that is needed.