-
Want to remove ads? Register an account and login to see fewer ads, and become a Supporting Member to remove almost all ads.
- Status
MitchJi
Trying to learn kindness, patience & forgiveness
Are you being serious, because that's a ludicrous example, as you must know?
What he actually said was that this was unlikely, but if it did become necessary, because SCTY could not do it themselves at some point in the deal, Tesla would do it. Highly inaccurate portrayal of what he said.
Last edited:
jhm
Well-Known Member
Of course, the business model will change. That is the point of merging TE and SC. This does not imply any need to raise capital, however. But if there are some new investments to make, these will be judged on their own merits. We simply cannot know what new opportunities TE may wish to pursue.
That said, speculating is fun. I think there is a good chance that TESC would want to move solar and battery installation into new states and countries. SolarCity has already dipped its toes into Mexico, and TESC could really build on this. TE has already gone into Australia and South Africa and perhaps other countries I cannot recall right now. So bringing integrated solar-battery products and services may also be attractive to TESC. Wherever they may go, raising capital to enter new promising markets can be quite a good thing and rewarding to investors. So we can all debate these investments as Tesla brings them to light.
Of course, anyone who really does not see much value in TE or in incorporating solar manufacturing and installation with TE really should get out of Tesla now.
I'd also point out that SolarCity's business model has been changing over the last three quarters. They appear to be backing away from lease and PPA financing, offering loans from financing partners instead. Moreover, they have moved toward 100% monetization of the total installation cost. That is, they are moving to a cash positive business model. This transition has been part of what has disoriented investors and left the stock price vulnerable to attack. But I do believe they have been making steady progress toward righting the ship, as it were. In fact, it is possible that the timing of this acquisition is deliberately ahead of that full transformation to get SolarCity while undervalued.
This may frustrating to some SolarCity shareholder who would like to hold out for a better price, but I do think that the full potential of SolarCity will be better realized in combination with Tesla Energy than on its own. So I am not personally disappointed by this timing or the exchange rate. If TESC is able to address a richer and deeper international market this will better tap the potential of SolarCity.
One other speculation, especially since SolarCity seems to be backing away from PPAs and leases, Tesla could issue preferred stock with a dividend tied to the cash flow from these PPAs and leases, the PowerCo book. A PowerCo preferred stock offering could raise over $2B in capital. One of the problems with SolarCity's business model was that it attracted growth investors with its growth, while the market wanted to value it on its PowerCo book which were longterm cashflows. The PowerCo book is not inherently a growth asset. It is much better suited for income investors, but SolarCity as a growth stock was in no condition to offer dividends so as to attract income investors. So offering preferred stock could be an ideal way to attract income investors with a substantial and reliable dividend stream. Meanwhile Tesla can take the capital raised from preferred stock and move into growth opportunities, like building a second Gigafactory.
So contrary to the idea that this merger would necessitate capital raises, the PowerCo book as an asset could be monetized for capital.
jhm
Well-Known Member
Sure, sometime next week. The other possibility is that Tesla goes down to $210. That would close the gap as well.
jhm
Well-Known Member
This stuff is already baked into the stock price and then some. The merger should not make such refinancing any more costly than current expectations.
If you think SolarCity is getting a higher valuation (relative to Tesla) than it should, then you should sell your Tesla shares and buy SolarCity instead. That way dilution works in your favor.
On whether "Autopilot" gives people the wrong idea. Probably yes. I think it would be funny if Tesla, in a huff, just renamed it "handy driving feature" and be done. Something long and boring to make worse headlines. That way people wouldn't bring in misconceptions (Autopilot=take a nap) and the media wouldn't have as good a story.
If the Q2 SCTY ER is not substantial improved from Q1, Tesla may need to lower their bid.
How long has it been since they changed their growth plans to strategic rather than all-out? Shouldn't that be starting to kick in?
No. How many mergers have you watched? I've watched a few over the last 40 years. Bids almost never get lowered.
Tesla has no rational reason to lower their bid, even if SCTY drops quite a lot. It's a strategic purchase, and Tesla can quite defensibly say that the premium is worth it to get the Silevo factory. Lowering the bid would irritate the SCTY board and might cause the merger to fail.
The bid would only be likely to be lowered below the range stated in the initial offer if one of the following happened:
(1) SCTY stock dropped so much that it became plausible for Tesla to make a cash tender offer for less than the value of the all-stock bid. At that point, it would be considered financial irresponsibility not to try the all-cash approach. I don't think Tesla has the cash reserves for this unless SCTY drops a LOT -- more than 50%. If SCTY is trading at $10/share in the next few months, this might happen.
(2) TSLA stock rose so much that the dollar value of the TSLA shares on offer was way, way higher than the dollar value when they were originally offered. This seems unlikely, but you never know.
(3) Something unexpected and nasty showed up during due diligence which materially changed Tesla's view of the value of SCTY.
There are several reasons the bid might be *raised* out of the current range (SCTY stock skyrockets above the bid price, SCTY board makes a counteroffer, TSLA stock drops, third party bids on SCTY, outside bid for TSLA, good news for SCTY), but those are the only three scenarios where the bid is likely to be lowered.
I explained the likelihood of this to my Dad, and he said "Poor salesmen." All these guys and gals making good money working hard to sell panels -- laid off and out of work. I guess it is kind of sad if you think about it that way.
I remember computing a fair valuation range for TSLA some years back which looked something like "$100-$2000"
I belivee there is one analyst who regularly publishes ranges like that for TSLA but most try to be more specific. The problem with expanding service centers and service center coverage has been the most problematic problem for Tesla since at least 2013, I've been saying this since at least 2013, and you can probably find quotes from me about this since at least 2013. Tesla is certainly not expanding service centers fast enough. This isn't news. It would be news if they *were* expanding them fast enough.
anticitizen13.7
Not posting at TMC after 9/17/2018
The problem is that most people don't know what "autopilot" does in an airplane. They will assume that autopilot means completely automatic driving, which is not the case.
racer26
Active Member
Big auto is gonna have an awful lot of cars they struggle to sell in the next 2-5 years.
Especially the German luxury brands. If Model 3 does to the entry level luxury segment what S did to the full-size luxury segment, it won't be pretty for BMW and Mercedes.
Porsche won't be hurt quite as bad purely because of their motorsport following. EVs aren't able to cut it yet in many kinds of racing. Even once they can, there will probably be a fair amount of pushback because of the expectation that race cars are supposed to be loud.
- Status
Similar threads
- Locked
