doggusfluffy
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It's beginning to happen globally.
This $6-A-Month Plan Brings Solar Power To People Living Off The Grid
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This $6-A-Month Plan Brings Solar Power To People Living Off The Grid
Trust your gut and the market on this. Tesla lost $3billion in market cap on the announcement.
If Tesla wants in on solar (which they should), there are far better ways than buying SolarCity. Unfortunately with the relationship between the two companies, Elon would never want to compete with SolarCity, especially as SpaceX owns a quarter of a billion dollars in SolaCity bonds.
In happy to eat the poor value of the deal IF Elon articulates a business and sales model dramatically different to the current SolarCity model. The fact that Elon has been a key board member from the beginning makes me think he supports their business model, financial instruments, and sales practises.
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I get this. However....
So here's the problem. I've read enough about Solarcity's finances to make my head hurt. And I still don't really know what is going on. I think I understand Tesla's business. I know why a bunch of so called experts are wrong about Tesla. I know when they haven't done their homework since I have the data that proves them wrong. However, I know I don't understand Solarcity's business. And that lack of understanding, and worst, the likely inability to understand makes me very wary. And I suspect that is true for other people.
If the residential PPA part of Solarcity was dropped out of this equation, I'm all thumbs up and ready to go. Even as a yieldco, if this was commercial yieldco along the lines of what Sunpower/First Solar/other solar companies have done, I'm even ok with that. But this residential stuff with the various tranches and interest rates, transfers and warranties, and net metering legislation and the like? Ugh. Double ugh. I need Musk and others to sell me on this a whole bunch more.
Regarding the solar city deal, it seems unethical to me and others for Elon to guide Tesla into an acquisition where he will be making a 20-30% premium on his 22% stake in Solar City. If I were him, I would relinquish those SCTY shares (either give to charity, back to SCTY, back to shareholders) or something like that so he avoids this. He'll end up being richer overall because people will be more likely to support the deal and that support will be reflected in TSLAs share price. A 22% of 2 Bilion market cap is only $400 million. Its peanuts to him in the grand scheme of things. No one will be able to claim he is doing it for personal wealth and he'll gain a lot of good will. If I were him, I would gift his shares to Tesla which will lower the acquisition cost. Can something like this happen? I do remember Jack Dorsey did something along these lines with his shares. Elon, think about it!!
Agreed, but I think the original 10 kwh "grid outage" Powerwalls were going to use NCA cells.
Normally, when a corporation's unsecured bonds hit junk bond status (as 14% current yield for a 2 year bond certainly qualifies), they cannot raise any MORE money that way. Sure, SolarCity is only paying 2.75% for those bonds, but they come due in 2 years. That means Solarcity must pay the bondholders $200M in two years plus the $566M in the other bond maturing in three years. How will Solarcity raise that kind of cash? If things stay the way they are, they can't issue a new bond without paying 14% interest. And they don't happen to have $766M lying around.
Since these are bonds, not paying the principle when due effectively means automatic receivership - ie. common stock is worth nothing.
I mean, you don't have to know anything else about Solarcity than this (unless I'm missing something - I'm sure people will correct me if I'm wrong). Solarcity is obligated to pay $200M in 2 years, $566M in 3 years and the bond market is betting that that isn't a sure thing. Elon says they'll be cash flow positive end of this year. Will two years of cash flow be enough to pay off the bonds, or at least right the balance sheet enough so they can borrow again?
I don't know, but I do understand why people look at this deal and think it's a Solarcity bailout - their unsecured corporate bond yields show that.
BTW, Solarcity may have raised other money recently, but the money they raised was undoubtedly secured by PPAs or other assets. Again, I don't know if Solarcity can continue to raise enough money through securitization of their revenues, and probably neither does the bond market, hence the high yield on unsecured bonds (if their revenues fall off, there goes that funding avenue, for instance).
One last point - corporate bonds are normally bought and sold by sophisticated bond traders, bond funds, pension funds, etc. If a 2 year bond is trading at 14%, that is the best guess of really smart sophisticated investors of how shaky Solarcity is. They haven't written Solarcity off entirely (otherwise the yield would be 50% or more), but its getting close.
To the original poster who Seesaw is responding to, please note that the loss of market cap is 100% irrelevant. Tesla also lost several billion in market cap when they announced they moved 500k cars production from 2020 to 2018, more in fact than they lost when they announced this SCTY deal.
The market is irrational and almost always batshit incorrect (it's a bunch of emotional reactionary crap). Seesaw appears to be more directly affected by the short term impact on his portfolio and has shown a very strong emotional response to this deal as a result, so grain of salt. Don't trust your gut, trust what the numbers say. Tesla went down in value more than the market cap of the company they are purchasing. Clearly, the market is not behaving rationally.
If there is a better way to get into solar than purchasing the undisputed market leader with the largest customer base, highest install total, and almost double the runner-ups market share, that also has the only path to a differentiated product then please enlighten us. Also, just to get in front of "the chinese make the panels cheaper so just buy them," I invite you to research the cost of importing those panels, and the low efficiency of said panels.
You don't know much about solar city by admission, but you think their business model is so bad it should be scrapped in short order. Seems reasonable.
In the short term, the market is usually wrong. Based on the headlines and comments from analysts, it's clear either the market is wrong, or Elon doesn't know what he is doing. In my view, the market is clearly wrong. Also, Elon recused himself from voting for this's reason. I'm confident the board will vote with Elon. Elon and Lyndon wouldn't have made these announcements if the boards didn't support the decision.
I'll throw one more thing onto the bonfire (honestly, I'm an Elon fan, love Tesla, etc., etc.).
Over the years, Elon has been borrowing against his TSLA stock ownership to fund his lifestyle (not a huge $ amount), buy more TSLA stock (I think he borrowed something like $500M in the financing round before this one?), and possibly to fund SpaceX (although that isn't disclosed anywhere since SpaceX is a private company and the public doesn't know its ownership structure). If Tesla stock keeps dropping (like by a lot), at some point Goldman Sachs (his private broker/banker) will be forced to sell Tesla stock as a margin call.
If that were to happen, it would be a horrible downward spiral for the stock price. Basically, a huge amount of Tesla stock would have to be sold right away in a declining TSLA stock market environment. Not having done the calculations (and there is some information that no one knows), I have no idea what the trigger price would be for TSLA. I'm sure it is below $100/share.
But if the stock price does ever get below $100/share, gulp, that would be yet another thing to worry about.
Have a nice day!
Over the years, Elon has been borrowing against his TSLA stock ownership to fund his lifestyle (not a huge $ amount), buy more TSLA stock (I think he borrowed something like $500M in the financing round before this one?), and possibly to fund SpaceX (although that isn't disclosed anywhere since SpaceX is a private company and the public doesn't know its ownership structure). If Tesla stock keeps dropping (like by a lot), at some point Goldman Sachs (his private broker/banker) will be forced to sell Tesla stock as a margin call.
If that were to happen, it would be a horrible downward spiral for the stock price. Basically, a huge amount of Tesla stock would have to be sold right away in a declining TSLA stock market environment. Not having done the calculations (and there is some information that no one knows), I have no idea what the trigger price would be for TSLA. I'm sure it is below $100/share.
But if the stock price does ever get below $100/share, gulp, that would be yet another thing to worry about.
Have a nice day!
Menifeer
Member
I prefer to sell put options.
At the close today, share price was $193.15 (traded lower after the close, but the option pricing I'll mention doesn't change after the close).
The Jan '17 $200 put was about $32. I'd sell it and wait. I'm receiving, not paying money. I'm also not taking as much risk as buying a call and paying the time premium. If the stock falls to the point that the option might be exercised, I'd roll it to a later date and collect more money. I may be forced to buy the stock, but my net cost would be on the order of $168.
If you think the stock has really bottomed, sell the Jan '18 $300 put for about $144. If you're forced to buy, the net price would be about $156. In the meantime, the proceeds of the put sale are sitting in your account.
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Thumper
Active Member
I may be wrong, but it looks to me like Elon may well lose money on the deal. I think many of his recent buys of SCTY were in the $40s. At $40/share SCTY Elon would be paying $320/ share for one share of TSLS depending on the final exchange ratio and market price at the time, but certainly not a profit.
From page s-7 of the last offering's prospectus:
"Beginning in May 2011, Morgan Stanley Smith Barney LLC, an affiliate of Morgan Stanley & Co. LLC, has made various extensions of credit to Mr. Musk. Interest on this loan accrues at market rates. Morgan Stanley Smith Barney LLC received customary fees and expense reimbursements in connection with this loan. After giving effect to borrowings of $36.5 million to pay the exercise price to exercise his outstanding stock option to purchase 5,503,972 shares in connection with this offering, which option is set to expire on December 3, 2016, the outstanding balance under this loan will be approximately $299.0 million. In addition, beginning in June 2011, Goldman Sachs Bank USA, an affiliate of Goldman, Sachs & Co., made extensions of credit to Mr. Musk and the Elon Musk Revocable Trust dated July 22, 2003, or the Trust, a portion of which Mr. Musk used to purchase shares of our common stock in our public offerings in May 2013 and August 2015 and in private placements in June 2011 and June 2013. Interest on the loan accrues at market rates. Goldman Sachs Bank USA received customary fees and expense reimbursements in connection with these loans. Mr. Musk currently has no outstanding borrowings with Goldman Sachs Bank USA.
As regulated entities, Morgan Stanley Smith Barney LLC and Goldman Sachs Bank USA make decisions regarding making and managing their loans independent of Morgan Stanley & Co., LLC and Goldman, Sachs & Co., respectively. Mr. Musk and these banks have long-standing relationships of over a decade. We are not a party to these loans, which are full recourse against Mr. Musk and the Trust. These loans, as well as a loan of approximately $187.0 million Mr. Musk received from another financial institution which is not involved in this offering, are secured by pledges of a portion of the Tesla common stock currently owned by Mr. Musk and the Trust and other shares of capital stock of unrelated entities owned by Mr. Musk and the Trust."
Apologies if this has been repeated, but Tesla's $9bllion plant in China
Tesla signs $9 billion agreement to build factory in China, report says
Tesla signs $9 billion agreement to build factory in China, report says
What do you find wrong with a ppa? A person signs up for $/kWh for 20 years which is transferable to the next owner who is grandfathered into favorable net metering arrangement. If they don't want to do ppa, owner includes the price of the system in the sale of the house(am not sure if the grandfathering of the previous net metering arrangement if it changed over time of ppa with new ownership as opposed to lease/ppa transfer)
You already have a lifetime contract with local monolopy utility with absolutely no control over your rates what so ever. Locking in solar rates with grandfathering sounds much more enticing already to me right off the bat compared to that. How is this a negative?
Second, Solarcity raises money up front, to install systems. Most are lease/ppa, but they do also sell systems as well.
People chose lease/ppa much of the time, so they do these deals with consumers.
They use the revolver debt and solar bonds to start construction. bundlena bunch of installs into a tax equity vehicle. Use tax equity funds for upfront purchase of systems to be installed. Then package all those monthly revenue streams as ABS(sub 6%) use that money to pay off some tax equity and invest back into purchasing more systems and so forth.
In the end Solarcity has a piece of most systems monthly payments and in some limited cases they completely sell the monthly payments but maintain customer energy monitoring and maintenance relationship for 20 years. They then completely own the renewal periods of all systems.
Rinse, repeat, until next evolution to grid services in addition to the net metering regime is started...
Chickenlittle
Banned
Chickenlittle
Banned
Forgive my ignorance. Pull the trigger.. You mean you will close your long positions in sept 210 calls? Or, buy more call options?
Chickenlittle
Banned
The 500 million you reference was sale of stock not loan. Used to pay taxes on excised optionsI'll throw one more thing onto the bonfire (honestly, I'm an Elon fan, love Tesla, etc., etc.).
Over the years, Elon has been borrowing against his TSLA stock ownership to fund his lifestyle (not a huge $ amount), buy more TSLA stock (I think he borrowed something like $500M in the financing round before this one?), and possibly to fund SpaceX (although that isn't disclosed anywhere since SpaceX is a private company and the public doesn't know its ownership structure). If Tesla stock keeps dropping (like by a lot), at some point Goldman Sachs (his private broker/banker) will be forced to sell Tesla stock as a margin call.
If that were to happen, it would be a horrible downward spiral for the stock price. Basically, a huge amount of Tesla stock would have to be sold right away in a declining TSLA stock market environment. Not having done the calculations (and there is some information that no one knows), I have no idea what the trigger price would be for TSLA. I'm sure it is below $100/share.
But if the stock price does ever get below $100/share, gulp, that would be yet another thing to worry about.
Have a nice day!
Do SolarCity send out the power bills with the net difference, or is it the utility company?
I wonder as SolarCity gets more customers whether they could negotiate lower utility charges and pocket some of the difference or pass on the savings?
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