Short-Term TSLA Price Movements - 2016

[eepic]

Makes sense to me in a lot of ways.

And the market's reaction, well, it's just objectively stupid, based on simple math. If SCTY is valued at 2.1b right now, and TSLA is buying it for 2.5b, sinking TSLA's mkt cap by 3.5b (which is where we currently are) suggests that the market actually thinks SCTY is worth -1b to TSLA. That doesn't make any sense. I could see TSLA's mkt cap going down by 400m based on the premium which is being paid for SCTY, but 3.5b? Nobody's doing the math on this one.

As a long time shareholder, this is probably the first move I really disagree with Elon. Tesla as a company to invest in had a simple and clean book, and easy to understand business and valuation. No offense to fans of Solarcity, but to me it has business model that is make-or-break depending on government policy and a very complicated book of long term leases and ownership of panels.

I really don't see any deep synergies beyond what could be accomplished in a tight partnership, except maybe unified branding. Maybe it's the right move longer term and Elon is picking up a deeply discounted business, but this will at best be a minor distraction for management in the coming months. Right now we're at a critical make or break phase for Tesla with the Model 3 launch, and I wish they would simply focus executing that to perfection.

 

[austinEV]

So much knife catching here. No rush folks.

 

[Jayjs20]

So much knife catching here. No rush folks.

You're probably right. The last few times I've rushed to buy or sell, they were pretty bad calls. I have a couple grand clearing in a couple days, I hope it stays down until then. Q2 numbers are right around the corner.

 

[austinEV]

And can some of you angry people please describe why you're angry instead of just saying you're angry? I really have no idea why someone would be angry about this.

@eepic said it well. TSLA was a nice pure play. Really, its a simple business. Make great things, sell for profit, repeat. SCTY is a messy business. It might work or could fail for a dozen reasons. I don't know. The fact is I am not an SCTY expert which is reason enough to be annoyed.

 

[generalenthu]

When this happens, Tesla Energy will be in a better market position. Right now, with Tesla Energy out of the loop on the whole Inverter process, I fear that Tesla Energy will be a mouse as compared to the cats of entrenched interests.

Is in't inverter a core part of the Tesla drivetrain, though I've heard they use some really old and inexpensive off the shelf technology.

 

[MitchJi]

It looks like it's a straight stock swap, meaning Tesla does not give any cash to SCTY. For the shares that TSLA gives to SCTY shareholders, that comes from TSLA creating new shares... thus dilution to current TSLA shareholders.

Anyone know how or if this effects Elon's control of TSLA?

And the market's reaction, well, it's just objectively stupid, based on simple math. If SCTY is valued at 2.1b right now, and TSLA is buying it for 2.5b, sinking TSLA's mkt cap by 3.5b (which is where we currently are) suggests that the market actually thinks SCTY is worth -1b to TSLA. That doesn't make any sense. I could see TSLA's mkt cap going down by 400m based on the premium which is being paid for SCTY, but 3.5b? Nobody's doing the math on this one.

Same as the accelerated M3 ramp!

 

[hoang51]

And can some of you angry people please describe why you're angry instead of just saying you're angry? I really have no idea why someone would be angry about this.

I'm more disappointed than angry. I believe this is more of bailing out SCTY and try to make use of it with TSLA rather than acquiring something that would normally happen for competition. TSLA doesn't need to own SCTY. Partnership would be more appropriate. Taking on SCTY is taking on more risks than rewards. That's why TSLA is tanking so much and causes many to be angry. TSLA is not allowed to grow for a long time. TSLA is very range bound.

 

[Cosmacelf]

Can anyone (maybe from SCTY thread, or SCTY owners) expand on how big SCTY's cash needs are going forward? I know they have a huge debt load. Is that debt at risk of default? I believe some of SCTY's future financial prospects are tied to current customers renewing their PPAs once the current ones expire. Is that a risk?

To the broader point of why this is a bad deal: TSLA institutional shareholders bought a car company, now they have to figure out if SCTY is worth anything, risks, etc. A combined company like this is very hard to figure out, and thus there will be less institutional interest in it.

 

[Jonathan Hewitt]

And can some of you angry people please describe why you're angry instead of just saying you're angry? I really have no idea why someone would be angry about this.

SCTY is super complicated to analyze. Analysts already have a hard enough time giving a proper value to TSLA as it is. There is also a lot of risk to SCTY stock. There is a reason why it was trading ~$20/share when it was a lot higher in recent history. Now TSLA is taking on all of that risk and it's share price will reflect that. Lower TSLA share price means harder to raise money without lots of dilution in secondary offerings and slower future growth.

 

[Drax7]

We weather the mess model X was and see the stock cut in half, now we barely surface
And get production for X sorted out, and expect to get rewarded ,
and this mess comes up.
Before achieving profitability at tesla this is reckless.

Had he waited some maybe solarcity could have been purchased in bankruptcy
For pennies.

 

[DaveT]

First things first... I actually like TSLA buying SCTY and I'll be voting for this with my shares. I'll probably have to explain this in further detail, but the short version is that Tesla Energy has immense potential and with SCTY they have a great management team, sales and installation to scale Tesla Energy in a very fast manner. The few billion dollars they pay for SCTY now isn't a big deal considering the tens of billions of dollars in revenue they'll have from Tesla Energy in several years.

Second, here's a section from the filing: (Tesla Motors - Current Report)
"We are committed to a possible transaction that is fair to SolarCity’s and Tesla’s respective stockholders. To help ensure that, Tesla is prepared to make the consummation of a combination of our companies subject to the approval of a majority of disinterested stockholders of both SolarCity and Tesla voting on the transaction. In addition, as a result of their overlapping directorships, Elon Musk and Antonio Gracias have recused themselves from voting on this proposal at the Tesla board meeting at which it was approved, and will recuse themselves from voting on this proposal at the SolarCity board as well. We believe that any transaction should be the result of full and fair deliberation and negotiation by both of our boards and the fully-informed consideration of our respective stockholders."

"Disinterested stockholders" are basically all stockholders minus insiders (ie., directors, officers, etc.). So, Elon Musk and the board won't be voting. And there needs to be a majority of stockholders approve this on both the SCTY side and the TSLA side. I can see the SCTY stockholders approve it fairly easily. But it's probably going to be a bigger challenge for TSLA stockholders to approve it (as evidenced by the general attitude against this on this forum).

 

[speedracer]

For those who say this is "Elon bailing out Elon," note that he recused himself from the decision on both boards, and they are doing a vote of "majority of disinterested shares" which I presume means his shares will not be voting on this.

The only reason that is coming up is because there is little validity in this deal. It doesn't make s

We weather the mess model X was and see the stock cut in half, now we barely surface
And get production for X sorted out, and expect to get rewarded ,
and this mess comes up.
Before achieving profitability at tesla this is reckless.

Had he waited some maybe solarcity could have been purchased in bankruptcy
For pennies.

I'm just hoping shareholders vote against this and that will probably be the road to recovery. Or a surprise in deliveries which will be another storm to weather in the coming weeks. The story has been repeating over and over.

 

[everman]

I think we need to summon @jhm from the SCTY thread to drop his opinion and perspective on us!

 

[Xpert]

SCTY is super complicated to analyze. Analysts already have a hard enough time giving a proper value to TSLA as it is. There is also a lot of risk to SCTY stock. There is a reason why it was trading ~$20/share when it was a lot higher in recent history. Now TSLA is taking on all of that risk and it's share price will reflect that. Lower TSLA share price means harder to raise money without lots of dilution in secondary offerings and slower future growth.

Maybe tesla doesnt need to raise any more cash. I'm in if it stays sub $200 tomorrow.
With solarcity integrated, Anyone think if possible to make the glass roof of M3 with solar beneath for extra charging, etc?

 

[theschnell]

I am definitely not happy about this. If I wanted to buy SCTY, I would have bought SCTY. But I think Musk sees two things. A good price and a way for him to cash Lyndon out and take a more direct control. Mostly, I think he sees a deal. I hope he is right. I don't have the time or energy to evaluate SCTY, but if musk thinks it's a good deal, I guess I trust him.

 

[TSLA_Hopeful]

Hey guys, I want to get everyone's opinion on if you would vote for or against the deal. Personally, I'm against it as we many of you have noted that we need to focus on Model 3 production and getting financials in house. Down the line, we can buy SCTY anytime but not at this price. However, please vote either way if you feel one way or another as we need to have our collective voices heard.

Poll: SCTY Acquisition Vote

 

[MikeInFL]

I also see this as TSLA bailing out SCTY. I heard horror stories of how SCTY operates in some locations making the price to lease the panels outrageous when compared to purchasing a system for your home.

 

[austinEV]

The Bear Thesis' write themselves.

There is a press call going on right now!

Tesla Makes an Offer to Acquire SolarCity [Live updates]

 

[tanner]

Maybe tesla doesnt need to raise any more cash. I'm in if it stays sub $200 tomorrow.
With solarcity integrated, Anyone think if possible to make the glass roof of M3 with solar beneath for extra charging, etc?

No, Fisker tried that.

 

[austinEV]

The Bear Thesis' write themselves.

There is a press call going on right now!

Tesla Makes an Offer to Acquire SolarCity [Live updates]

Ugh, another round of shares.
"

• Tesla will have to issue new shares to make the deal happen."