But how much of a premium should they be paying over SCTY's current share price, which is what the market has determined is fair value?
-
Want to remove ads? Register an account and login to see fewer ads, and become a Supporting Member to remove almost all ads.
- Status
But how much of a premium should they be paying over SCTY's current share price, which is what the market has determined is fair value?
"Market value" is not the current value which is at multi-year lows right now... Hasn't been in this range since after ipo 3.5 years ago.
Solarcity is suppress after NV Energy/PUCN Debacle in January (which is currently being sued, contested). Over the past 3.5 years, Solarcity has grown at a 80% compounded growth rate while reducing all in costs over 1/3 on installing long term revenue generating assets. I think their 12 trailing production is 1.5 terrawatt hours which is bigger then some traditional fossil fuel utilities in our country already. By 2019, they will have a 5 terrawatt hour trailing production and a customer base of 1,000,000 customers with 20 year reoccurring revenues in excess of $1bln/year... And that's at a flat no growth rate from 2016 levels... In just he next three years alone, let alone what will happen over the coming decades.
I feel the "market value" premium is non existent. The deal terms must be negotiated if this is to even come close to making sense for a scty investor.
If you have so much faith in SCTY, then why do you believe SCTY management would allow such a deal to go through?
This is like the least non-hostile takeover possible they could do, they'd have to be fully willing to do it, but not only do it now before supposedly big stock price impetus is on the way.
By definition, market value is the current price people are willing to pay. You may think the market is grossly mispricing it, and I think you're correct, but it is at market value right now. Elon talked about this on the call yesterday, in response to an analyst suggesting the premium TSLA is paying is too high.
You know Elon owns 23% of Solarcity, and many of the Solarcity boardmembers are tesla centric investors/employees.
Not even the founders Peter or Lyndon have more then about 5% stake in Solarcity, so the majority of big ownership is tesla centric. The deal will naturally tilt in Tesla's favor, but this is obscenely so.
Since ipo Elon has stated it is extremely undervalued on the market, he had bought hundreds of thousands of more shares in the $40 range and above to prove it.
Lyndon rive just came out with his CEO compensation goals and among the first one was hitting $80 within the next year or so based on the stated gws installed projections among other 2016-2018 goals.
Now Tesla's offering $26? This is an extremely low ball offer that any scty investor that has any history with the company stock action as well as knowledge of company expectations on performance, explicitly Elon and the Rive brothers, would flatly reject on the basic of "current market valuation."
Okay, if it is what the market is willing to pay, then Solarcity ought to shop around. That's what a market is, not reading a number of stock market value that I can buy one share at that price, we're talking about an entire company with thousands of investors in it.
If tesla is offering $2.7bln, then Solarcity should consider what other offers they can get for the company...
Tesla made the offer, doesn't mean Solarcity investors have to accept it.
I actually agree with you in the sense that I think the market is drastically undervaluing SCTY at the moment. But so what? "The market" is actually the existing and potential shareholders, and they have agreed on a price ($21.98 as I type), and I imagine there are quite a few of the existing shareholders who will agree to take a 20% upside offer.
Gerardf
Active Member
You might be correct, and personally I also value SCTY higher.
However if this deal will not happen now it has been agreed and announced, because it is rejected by either the SolarCity or Tesla shareholders, the SCTY SP might take a very big hit, not so sure how SolarCity will come out of that.
No they haven't. Solarcity is not for sale as a company on the stock market. Tesla made an offer to acquire Solarcity, not buy shares on the open market. The stock market valuation is just but one of many ways to assess the market value in order to develop offers. But that's not the actual market value.
Actual market value is a multiple bid offer among competing bids and thst has not happened. Solarcity was not even for sale in the first place, tesla technically just made an unsolicited bid. It was their desire, not Solarcity's, so if Solarcity is consider of the bid is fair, they must allow other offers to compete.
Like I said before, if Solarcity were a private company, it would fetch a massively higher "market valuation" based on the books and potential growth, as opposed to the "stock market valuation" which has been severely manipulated based on manufactured fears around short term illegal and unethical actions on behalf of buffets nv energy(which are currently in litigation).
I don't think TSLA is stopping anyone else from coming in with a better offer - there's just no one else making an offer.
Tesla made an unsolicited offer. Solarcity is/was not for sale. They are not on the market for sale as a company.
If anyone gets an offer to be bought, and they actually are considering it, they must now examine the actual market value with other offers... And this is if they want to be up for sale.
Solarcity did not say it was up for sale. Tesla made an offer to buy it without provocation.
If Solarcity is actually considering sale now that an offer has been put on the table, they have the obligation to seek out other offers, essentially say they are for sale now and compare bids.
That hasn't happened yet.
Soooo... Quick question for admin. After the merger, what happens to this thread?
As a long time investor in both I see combined value, but separate I see much more value.
Combined, every Tesla owner is a likely customer. Separately, every EV owner is a likely customer.
Combined, Tesla gets the potential 30% ITC on each sale. Separately solarcity manages the debt necessary to extract that value off Teslas books.
Combined, Tesla gets a financial services division similar to Ford's which can capture loan and lease value that otherwise goes to a bank and Solarcity has the warehouses regionalized to handle logistics and installation by their devco.
Today a merger looks like a good pair. 10 years from now it looks like Saudi Aramco with a motorcar/storage tank devision.
Combined, every Tesla owner is a likely customer. Separately, every EV owner is a likely customer.
Combined, Tesla gets the potential 30% ITC on each sale. Separately solarcity manages the debt necessary to extract that value off Teslas books.
Combined, Tesla gets a financial services division similar to Ford's which can capture loan and lease value that otherwise goes to a bank and Solarcity has the warehouses regionalized to handle logistics and installation by their devco.
Today a merger looks like a good pair. 10 years from now it looks like Saudi Aramco with a motorcar/storage tank devision.
What other measure could be possibly used? Someone can say Tesla is undervalued and some can say Solar City is about to go bankrupt so it's a bailout. Market valuation is the only common ground. Even if Elon and Rive bros agree that it's a lowball offer, there just isn't any other mechanism available to make the acquisition happen.
Every public company is on the market for sale as a company.
I assume that they didn't engage a banker to actively seek a buyer, so by that measure they weren't promoting to a select group of companies or PE firms that they were for sale.
In this case, we don't know whether or not it was unsolicited. Perhaps the Chairman of Solar City approached the Chairman of Tesla and said "you know that idea we kicked around a couple of months/years ago? Maybe now is a good time".
In that case, Elon spoke to Elon and here we are today... He's the chairman of both companies.
I don't doubt Elon spoke with his cousins at one of their family vacations they take together, probably one of their hot tub talks where Elon was allowed back in by not talking about AI and focusing on Solarcity-tesla future.
But legally, Solarcity is not for sale and tesla came to them with an offer.
- Status
Similar threads
