SolarCity (SCTY)

[mountaineer]

If you live in Dallas, then you are in the Oncor TDSP service area. Oncor is offering a very generous rebate for installing solar panels right now (at least they were 3 months ago when I installed mine, and the program has been going on for at least a couple of years).

If you get a lease with SCTY, then they will pocket your 30% tax credit, they will take away your generous Oncor rebate, and you will be left holding the bag when you try to sell your house and have to lower your asking price by $10k - $20k just to get people interested in buying your home.

But ignoring the home resale part, I also live in ONCOR TDSP area and just installed a 7.7kW solar system on my roof and it only cost me $9k out of pocket. This will give me a cost of about 2.5c/kWh ($0.025/kWh). Whereas, if I went with a solar city lease, I would probably have to pay 3x-6x (300% to 600%) more per kWh.

Do not lease a system from nobody, especially since Oncor offers very generous rebates. Find a reputable local installer that will do a solar system for around $3/W and then get your 30% tax credit and an Oncor rebate (mine was over $1/W) to bring your system cost down to about $1.30/W out of pocket.

BTW, ggr lives in San Diego, where the temperature is 75* year round and is nowhere near comparable to Texas. Get the biggest system that you can fit on your roof while Oncor is still offering these generous rebates. That way you will have about a 6 year payback period, and get to keep your solar system 30+ years. With a SCTY lease, you will have a 12-13 year payback period and then have to return the system to SCTY at the 20 year mark.

It is a no-brainer to buy in your situation if you are considering solar. Leasing a system in Dallas (with Oncor's generous solar rebate) is the worst financial decision you can make (unless you get an extremely good offer, such as $0.03/kWh on pre-paid lease or $0.06/kWh on a 20-year no money down lease).

Thanks a lot, I'm indeed in the Oncor service area. A few questions for you:
1. Any idea why Oncor is so generous?
2. At cost of around $3/W，who is the manufacturer of your panels?
3. how often do you need to wash the panels?
4. Any other maintenance so far?

 

[sleepyhead]

So since you hate leasing so much, what would you suggest someone like me to do? I dont have $9,000 just sitting around, but could get on solar immediately from someone like SolarCity. So do you want more people to move to sustainable energy or not?

Answer: Use common sense!!!

I really can't believe that this question keeps popping up, and I apologize if my response comes off as rude, since I am annoyed having to answer this same question every month. The reason I post all of this stuff is because I am trying to help you guys make sound financial decisions, so that you can save yourself tens of thousands of dollars. I have no other agenda behind this stuff. Seriously people, this is not hard. Every time I bring up the topic how much better it is to buy vs. lease, I always get this exact same annoying question. I have already answered it at least a handful of times in this thread.

What do you do when your car breaks down and you don't have $20k to buy a new one? What do you do when your AC/furnace breaks down and you don't have $8k to buy a new one?

The answer is simple: you get a loan!

Step 1: Go ahead and google "solar loans" or "credit union solar loans" (or something similar to find CU's or banks in your area that give out these loans). You can find loans for up to $60,000 (or more) and 4%-7% interest rates. My loan was for $21k at a 3% interest rate with $0 down:

Step 2: Apply for loan

Step 3: install solar system

Step 4: Sign up with Green Mountain Energy that offers net metering.

Step 5: Make payments on loan

It really isn't that hard and I feel like there is a lot of willfully ignorant SCTY investors here pretending that if you don't have money to buy a solar system that your only option is to lease. Banks are one by one finding out that solar is an extremely safe investment and there are more new loan products coming out every single day. SPWR for example just announced a partnership with Admirals Bank for loans up to $60k. But if you go with a local installer then get a loan at a credit union to pay off the solar system.

The only caveat is that you have to pay the full price of the system, and then wait a few months for your rebate as well as tax credit. But this is not a problem:

E.g. For someone who lives in the Oncor TDSP area (which is what this discussion is about): Say you want an 7.7kW (same size as mine) solar system at $3/W = $23,000
1. Take out a loan for $23,000 at 5% interest rate over 5 years.
2. Now you have a solar system on your roof and a $434 monthly payment
3. You will get your $8,000+ rebate check by the time your second (or 3rd) payment is due
4. You will get your $5k ((23k-8k)*30%) tax credit when you prepare taxes in less than 12 months.

Side note: if you don't have tax liability to take advantage of tax credit then you most likely can't afford a home anyway (unless retired or some other uncommon circumstances). If you don't have good credit to qualify for a solar loan, then you most likely will not be able to qualify for a solar lease either.

So you have a $23,000 loan and $13,000 cash back. You can use that $13k to pay down your loan principal and you are left with a $10k loan to pay off over 5 years, which knocks your payment down to $188/month. After 5 years, your loan is paid off and you are free and clear receiving free electricity for the next 20-30 years (might possibly need inverter replacement, but those have 10 year warranties and should last).

A 7.7kW system here in Texas produces on average 1000kWh/month, so you will be saving about $120/month on electricity. So effectively you have a $68 ($188-$120) monthly loan payment for 5 years. And then you will be saving $120/month (or more due to most likely higher electricity costs in the future) for the following 20 years.

Buying a system will cost you $68*60 = $4,080 over the first 5 years and then save you $28,800 over the next 20 years for a total savings of $24,000 over the life of the system. Leasing a similar system from SCTY might save you $30/month on electricity, which over 25 years would save you $9,000.

So you decide, do you want to save $24,000 or $9,000?

And before I get the next annoying question about "what if you sell your house...?" I recommend reading this Bloomberg article from last month:

Rooftop Solar Leases Scaring Buyers When Homeowners Sell

http://www.bloomberg.com/news/2014-...ases-scaring-buyers-when-homeowners-sell.html


If you lease a solar system you might have to lower your home resale value by $15,000. But if you own a solar system then it could increase your home resale value by up to $25,000. That is a $40,000 difference!!!

This why I always say that SolarCity's business model is built on preying on the uneducated customers. If people knew everything I said here then the lease model would not be so successful. I understand that people will most likely remain uneducated for a long time and most likely SCTY will be successful for many years to come. But I am not willing to bet my money on that.

The reason I make all of these posts is because I am trying to help my friends here at TMC make smart financial decisions when going solar. A lot of people here at TMC make great contributions and this is my way of giving back.

If you can find a way to buy a solar system then please do not lease one. It can give you huge headaches and cause big losses when selling your house, and it won't save you anywhere near as much money as buying a solar system outright...

 

[sleepyhead]

Thanks a lot, I'm indeed in the Oncor service area. A few questions for you:
1. Any idea why Oncor is so generous?
2. At cost of around $3/W，who is the manufacturer of your panels?
3. how often do you need to wash the panels?
4. Any other maintenance so far?

1. I really don't know the reason for this, maybe they had some kind of deal signed that they had to earmark dollars for solar systems. I think that they set aside something like $8m for this program last year, and I really can't believe that it hasn't been exhausted (it is possible that they renew the program every year, I am not sure; what I do know is that I got a rebate check for more than $8,000 for a 7.68kW system or more than $1/W).

It is very possible that this is simply good business. In Texas the high cap price for electricity is going up and will be $9,000/MWh very shortly and I heard they are trying to raise it to $14,000/MWh. My solar system offsets peak load perfectly, which means less investment necessary in transmission lines and other power plants. So if my system is producing 6kW's during a time when prices are at $14,000/MWh or $14/kWh, then I am saving that company $84/h. You get a couple hundred hours like this over the next few years and I saved them over $2,000. Then at other times when electricity is less expensive I am still saving them money at a lower rate.

IMO, the $8k that they gave me for this solar system will create a lot more value than $8,000 to Oncor. It truly is a win-win situation here.

2. I actually paid $2.50/W for a Sunpower solar system (best that money can buy). I got a great deal since a family member of mine works there and I got "scratch and dent" panels that have no downside at all (just aesthetic, but you can't see them anyway; I inspected them before they went up and wouldn't have known they were scratch and dent if I hadn't been told).

I would say that you can't go wrong with any tier 1 Chinese solar panel supplier. They all buy cells from Taiwan to ship to US to circumvent 2012 tariff scheme, so they are all similar in quality; and the Chinese do make high quality panels). With this new round of tariffs, the Chinese might start shipping using home made cells. In this case I would recommend using JA Solar (JASO) panels, since it appears that they put the most effort and pride into quality compared to peers. But in the end, I think that all should be similar. I am not an expert in this field, but a solar installer here on TMC said that you should stick to the tier 1 solar panel producers and you will be fine.

3. I don't wash my panels at all and let the rain wash them. It doesn't rain here much recently so I probably need to wash them. But all you do is hose them down and voila. I once had back to back 0% cloud cover days and did a test (since it hadn't rained for a month and the panels looked dusty): On day 2 I hosed them down and got about 5% more production. So you may want to hose them down from time to time if it doesn't rain, but no washing is really necessary (maybe once every 3-5 years). Note: it is possible that I get better production due to cooling the panels with cold water as much as washing off the dust. I really don't know, but did get 5% more for sure on virtually exactly similar days with 0% cloud cover.

4. No maintenance on solar is necessary, and that is why you don't need to lease a system to get the benefit of no additional cost for service and maintenance. I have only had my system for 4 months, but a solar installer here on TMC has installed many systems over the years and never had to perform any maintenance on any systems. That speaks louder than any one persons testimony. He said he only got called out once because of a faulty inverter, but that was the manufacturers fault for supplying a bad inverter. He replaced it with a new one and that is it.

The only problem with buying over leasing is if the inverter breaks down you have to pay for replacement. But you get a 10 year warranty and these things go for $0.15 - $0.25/W today, so for a 5kW system it is only $1000 to replace if necessary, and these things might get cheaper in the future too.

I think that if you shop around, you can get a system installed for $3/W minus $1/W rebate minus $0.60/W tax credit = $1.40/W out of pocket cost. I got a flyer from some random solar installer called longhorn solar and they were advertising prices of ~$3/W. But go to the SEIA or other solar websites to find reputable and accredited installers. I can't remember what the other website/organization was called.

I can get you a discounted deal on a SunPower solar system for $4.40/W installed. So after rebate and tax credit that is about $2.30/W out of pocket. But you can get a solar system for $3/W elsewhere from a reputable dealer then it probably isn't worth paying 80% more for a SPWR system. SunPower makes by far the best systems and if you want to build a forever home that could withstand a zombie a apocalypse and keep your AC running, then definitely go with SPWR (and buy a bunch of backup inverters). I recommend SPWR even if you have to pay 30% or more for it, since you will get your money back over time due to lower degradation, better performance, and most likely significantly longer useful life). But it is hard to justify a SPWR system at $4.40 vs. $3 for Chinese if you are not planning in living in that home for 30+ years.

Good luck with your research and let me know if you have any other questions.

Cheers,

sleepyhead.

- - - Updated - - -

*note This was not a complete quote

I don't agree that it is a no brainer. Depending on someone's situation I would argue there could be much better uses for that 9k depending on the person. For instance possibly buying 9k worth of Tesla Stock. Over the life time of the solar panels the stock could arguably go to 2000 a share which I think would be better than any additional savings you got from buying Solar vs Leasing.

I think for many people buying solar might be the best option but I think Lease will be the way to go for many other people.

That's why you take out a loan to pay for the system if you are worried about applying your cash elsewhere.

You may think that lease is the way to go for many people, but I know for sure that buying a solar system is by far the best way to go for the vast majority of people. Heck, even a solar inspector chimed in on the other page agreeing that buying is the way to go if you are willing to put in some legwork: a few hours of legwork to save thousands or tens of thousands of dollars.

 

[sleepyhead]

Sleepy - I'm not sure if I understand what you're trying to get at. Would love a clarification.

Here are all the Lyndon Rive stock transactions I could find from the SEC filings since IPO:

7/3/14 - Lyndon Rive exercises 12982 shares for $1.62 and sells those shares and 30293 more shares for an avg of $71.57. (The sales reported on this Form 4 were effected pursuant to a Rule 10b5-1 trading plan adopted by the reporting person on August 30, 2013)

6/27/14 Lyndon Rive exercises 76725 shares for $1.62 and sells those shares for an avg of $70.75. (The sales reported on this Form 4 were effected pursuant to a Rule 10b5-1 trading plan adopted by the reporting person on August 30, 2013.)

5/6/14 Lyndon Rive exercises 89,580 shares for $1.62 and sells those shares and 30,420 more shares for an avg of $54.15. (The sales reported on this Form 4 were effected pursuant to a Rule 10b5-1 trading plan adopted by the reporting person on August 30, 2013.)

4/19/14 Lyndon Rive sells 160,000 shares for an avg of $52.25. (The sales reported on this Form 4 were effected pursuant to a Rule 10b5-1 trading plan adopted by the reporting person on August 30, 2013.)

10/21/13 Lyndon Rive acquires 107,434 shares for $46.54/share during SCTY secondary offering.

6/11/13 Lyndon Rive sold 220,743 shares at $14/share. (As previously disclosed in the Issuer's Definitive Proxy Statement on Schedule 14A, filed with the SEC on April 30, 2013, and in the Issuer's final prospectus dated December 12, 2012, filed with the SEC pursuant to Rule 424(b), on December 30, 2011, the reporting person granted an option to 137 Ventures, L.P. to purchase 330,520 shares of reporting person's common stock at $14 per share. On June 11, 2013, 137 Ventures, L.P. exercised such option on a cashless basis, resulting in the reporting person transferring 220,743 shares to 137 Ventures, L.P. and withholding 109,777 shares to cover the exercise price.)

Note: From the 12/12/12 sec filing, Lyndon Rive had about 3 million shares (1,000,000 personally and 1,952,378 in a family trust). In addition to these 3 million shares, he has 2 million more shares that he could own via options (presumably milestone/achievement based). 1,000,000 of those shares have a $1.62 strike price (10 year period from 2009-2019), and the other 1,000,000 has a strike price of $5.07 (2011-2021 period).

In context, here's what I'm seeing:
1. Lyndon Rive had 3 million shares at IPO and an additional 2 million shares in options.
2. Lyndon Rive sold 220,000 shares in June 2013, apparently Lyndon Rive sold some options on Dec 2011 to a company and they exercised them.
3. On August 30, 2013, Lyndon Rive submits a 10b5-1 to sell some shares.
4. On October 21, 2013, Lyndon Rive buys a bit more than 100,000 shares in SCTY's secondary offering.
5. From April to July 2014, according to the 10b5-1 plan he sells about 400,000 shares. (There could be more shares he's selling in coming months, I haven't seen the 10b5-1 plan.)

Lyndon Rives still has 2.6 million shares as well as a possible 1.8 million options (until 2021).

It's also likely that SolarCity will give him (and other executives) more incentive plans in coming years as well. So he'll likely end up with more shares than he currently has.

If things are strange with insiders selling, then I'm definitely a person that would point that out. (see Short-Term TSLA Price Movements - 2013 - Page 376 and Short-Term TSLA Price Movements - 2013 - Page 377.)

But in this case, it looks like a normal selling of a small portion (ie., 10%) of Lyndon Rives holdings. To sell 300,000 shares (since he bought 100k and sold 400k shares) at let's say $50/share is just $15 million. After taxes, it's probably under $10 million. Probably just enough to buy a nice house in the Bay Area.

If that is all that you are "seeing" then you have been fooled by Lyndon Rive as well. These guys are purposely misleading shareholders and I may have to write an article about it. I don't have time right now to respond to your post, but I have done the research and they are obviously screwing around here; probably hoping that nobody will notice how they tried to "trick" the shareholders into believing that Lyndon Rive is buying more shares in the company as a "vote of confidence."

Thanks for your post, this story is getting better every minute for me. On second thought I have to do a little more research on this subject, because there is still a couple things that I need to check that might make the story even better.

Stay tuned...

Edit: changed Give to Rive. Thanks autocorrect

 

[NuclearPowered]

NigelM - I agree with you that 10b5-1 sales are nothing to worry about and good corporate governance. Heck, I just put half my money in GTAT, right after the CEO sold about 100,000 shares via a 10b5-1. But in the case of SCTY, I see something EXTREMELY WRONG with Lyndon Rives sale of 120,000 shares; let me connect the dots for you guys:

You guys remember last October when SCTY was trying to raise capital, and they couldn't get enough interest from people to buy the shares (not sure if the last part is true, but my understanding was that they couldn't get interest)? So SCTY, completely out of left field, decided to issue 2015 guidance in order to jack up the stock price to raise more capital. On top of that Elon Musk and Lyndon Rive agreed to buy 560,000 shares of SCTY as part of the capital raise to show the rest of the investment community that they have faith in SCTY. Well in the end the bought less than 400,000 shares, o/w Lyndon Rive bought 107,434 shares.

If what NigelM says is true that Lyndon Rive put his 10b5-1 plan in place last August (just a couple months before the capital raise) to sell 120,000 shares of SCTY (just 8 months after the huge "vote of confidence" that Lyndon Rive gave SCTY by buying 107,434 shares), then this whole thing is a slap in the face for SCTY shareholders and Lyndon Rive is a joke and making a complete mockery out of investors and shareholders.

SCTY already diluted the heck out of shareholders by doubling share count over the past 2 years, and now we see that they are dishonest and misleading shareholders by playing these "vote of confidence" games. I am sure that Elon does have confidence in SCTY, and probably will not be selling his shares. But what Lyndon, the CEO, did is completely unethical and the guy is a joke in my book for trying to fool shareholders. The truth always comes out, and I am always happy to do the detective work to point out these jokesters.

Disclosure: I just recently cashed out my deep ITM SCTY J15 30/40 Bull Call Spread for 92% of max value (I wanted to hold to maturity, or at least Sep. for LTCG, but I needed to raise capital somehow to buy more GTAT on this illegally fabricated pullback by UBS, who had notes due July 10-15 that cost UBS a lot more money the higher GTAT's stock price was. This is another example on Wall St. how the big players, i.e. CEO's and investment banks, screw over the little guy, i.e. retail investor. But I digress). Therefore, I now do not have any SCTY positions, and absolutely do not have any short positions in the stock either. But I do hope that the stock keeps going up, because I will be looking for an entry point to short once it goes all bubbly again. At the same time, I will go long the stock if it crashes another 30%. I think that SCTY is a good trading vehicle. I actually think that the stock will be a lot higher 5-10 years from now, but fear that there is a 20%-30% chance that the business model will fail the shareholders, i.e. not deliver decent returns, and therefore I don't buy as a long-term investment due to huge perceived risks.

But the main reason I am not a fan of SCTY is because they are an unethical company as proven by this whole capital raising mockery they made out of shareholders, ripping off customers by pocketing the whole benefit of installing a solar system for themselves while the customer is left holding the bag on a lease in the form of depreciated home value due to solar lease (yes your house may lose as much as 10% in value due to solar lease, while owning a system can increase your property value by up to $25,000); note I am not a fan of SPWR (or any other company) leasing either. On top of that they screw over the taxpayers by jacking up the "appraised" system value price in order to maximize MACRS depreciation, so that Goldman Sachs can pay less in taxes and screw over the taxpayers (just what we need: an investment bank screwing over the taxpayers even more).

I am sorry, but SolarCity is a complete joke of a company to me! Extremely unethical in my book...

edit: jacking up the "appraised" solar system value price also means that SCTY is screwing the taxpayers over by pocketing 30% on this higher "appraised" value than the actual value of the system, which would be a much lower value; but that would mean less taxpayer dollars for SCTY to pocket for their own coffers, so that the executives can get their tens/hundreds of millions of dollars.

Also, make sure to read my hyperlink in the last paragraph about how solar leases can significantly lower the value of your home during resale, and how owning a system can actually increase the value of your home (I point I have been arguing here for over a year).

I am not a solar installer, and I have no positions in SCTY. Everything I write here is my own, unbiased, and honest opinion on this matter; and I understand that many people will disagree with me. That is what makes a market...

I agree with all the solar analysis. I own my system and would absolutely recommend ownership to anyone looking to go solar.

However the note about GTAT interested me. Mind expanding on it in the "Other Investments" thread?

 

[DaveT]

If that is all that you are "seeing" then you have been fooled by Lyndon Rive as well. These guys are purposely misleading shareholders and I may have to write an article about it. I don't have time right now to respond to your post, but I have done the research and they are obviously screwing around here; probably hoping that nobody will notice how they tried to "trick" the shareholders into believing that Lyndon Rive is buying more shares in the company as a "vote of confidence."

Thanks for your post, this story is getting better every minute for me. On second thought I have to do a little more research on this subject, because there is still a couple things that I need to check that might make the story even better.

Stay tuned...

Edit: changed Give to Rive. Thanks autocorrect

I had a chance to go back and read your other post again. It appears that your claiming that Lyndon Rive was insincere(?) in his purchase of 100k shares in last October's secondary offering and you go on to say that he's "purposely misleading shareholders". I'm assuming you're claiming that he's trying to boost stock price for the secondary by purchasing 100k shares while knowing that he'll be dumping 400k shares in 6-8 months (with the 10b5-1 already filed in August 2013).

It seems like you're reading into it a lot. Lyndon Rive is free to buy shares and to sell shares as he wants, as long as he follows SEC regulations which he did. You might have interpreted his October secondary purchase of 100k shares as a big "vote of confidence" that wasn't sincere because he knew he was going to sell 400k shares the following year. But it could also be that he instituted his 10b5-1 plan with the idea of divesting 10-15% or so of his holdings in 2014. But when the secondary offering came along, he thought it was a good deal to buy some more shares. This is totally legal and understandable. Could have there been other motives as well, like showing support for the company and helping the secondary? Sure. But I don't think it's stock price manipulation or deceiving shareholders, since his later selling of stock (ie., this year) is done publicly. And if he thought him buying 100k shares was going to boost the stock price, then surely he would think that selling 400k shares later would tank the stock price (which would not be good since they might need to raise more money). The reality is he's probably not thinking on those lines. A few hundreds thousand shares here or there isn't a significant number compared to his total holdings.

On another note, I've seen Elon Musk if he thinks the stock price is low (ie., the company is undervalued) he will go in and buy more shares at the secondary. Elon Musk doesn't actually have the money, as practically all his money is vested in TSLA, SCTY and SpaceX. But he's using a line of credit from Goldman Sachs to make purchases like for his house and other things. And he uses that line of credit (kind of like margin) to buy more shares of TSLA (ie., at $92/share in May 2013), and at SCTY's IPO and at SCTY's Oct 2013 secondary offering. Elon thinks the stock is cheap and he buys more stock, even on margin. Now Elon is unique in that he's okay with holding hundreds of millions of dollars on margin, but most people are not like that. So, in the case of Lyndon Rive, he's more of a normal human being (compared to Elon Musk) and he's going to buy and sell stock and that's fine. As long as he follows SEC guidelines, I'm fine.

 

[NigelM]

I can see the points from both sides of the argument and the questions sleepy raises could have very simple answers; as an ex-CEO I know how difficult it is to juggle personal financial planning with laws and regulations. (FTR: I'm not in SCTY right now just because I'm uncomfortable with nailing down what the true potential really is, and I'm personally not a fan of their leasing model).

On a slightly different note, SCTY missed an opportunity here:

With Leilani's connections to Tesla and her driving a Model S etc...

 

[ggies07]

E.g. For someone who lives in the Oncor TDSP area (which is what this discussion is about): Say you want an 7.7kW (same size as mine) solar system at $3/W = $23,000
1. Take out a loan for $23,000 at 5% interest rate over 5 years.
2. Now you have a solar system on your roof and a $434 monthly payment
3. You will get your $8,000+ rebate check by the time your second (or 3rd) payment is due
4. You will get your $5k ((23k-8k)*30%) tax credit when you prepare taxes in less than 12 months.

I get what you are saying, short-term work for long-term gain. But someone like me doesn't have an extra $434 a month until 3 and 4 kick in. I guess we would have to save that much money first and then do it this way, because the only debt my wife and I have is the house. We do the Dave Ramsey thing and try to not use debt as a way to have things in our lives. Houses and cars are the only thing loans are used for, but maybe solar panels will have to be an add on to the list.

Part of getting panels is to save money, but it's also to get onto sustainable energy. So if others out there can use a company like Solarcity to automatically get it with a lower price on their electricity bills, then that's great to me. I thought there was talk that Solarcity could eventually one day become like a utility company, where they are supplying the equipment, and you pay for the energy, so owning doesn't really matter. It's more about getting people to switch. I don't know....I see it both ways...

 

[DaveH]

here is some bad news for my man sleepyhead.

"The world trading body ruled that the U.S. improperly imposed duties on Chinese steel and solar products. "

http://news.investors.com/business/071414-708616-us-steel-and-solar-firms-impacted-by-elimination-of-tariff-on-chinese-products.htm

 

[sleepyhead]

here is some bad news for my man sleepyhead.

"The world trading body ruled that the U.S. improperly imposed duties on Chinese steel and solar products. "

http://news.investors.com/business/071414-708616-us-steel-and-solar-firms-impacted-by-elimination-of-tariff-on-chinese-products.htm

What's with the personal attacks again?

And you couldn't be more wrong. This is really good news for me, so I have no idea what you are talking about.

Go look at the charts: as soon as the news came out JASO went vertical and so did my smaller positions in JKS, SOL, and TSL. My only other solar positions in CSIQ and SPWR finished in the green as well. As I wrote over the weekend, I sold off my SCTY deep ITM bull call spreads for 92% of max payout and I now have no SCTY positions at all.

Now can we stop with the personal attacks! Please?

 

[NigelM]

Everyone play nice please or we'll go back to zero tolerance. Thanks.

 

[woof]

IElon Musk doesn't actually have the money, as practically all his money is vested in TSLA, SCTY and SpaceX. But he's using a line of credit from Goldman Sachs to make purchases like for his house and other things.

I've seen this mentioned before...and often wondered: with his salary very low, and claiming he won't sell TSLA shares, and cannot sell SpaceX shares, does that mean the only "income" Elon gets is from selling SCTY shares? He has to pay back this line of credit somehow.

 

[sleepyhead]

I had a chance to go back and read your other post again. It appears that your claiming that Lyndon Rive was insincere(?) in his purchase of 100k shares in last October's secondary offering and you go on to say that he's "purposely misleading shareholders". I'm assuming you're claiming that he's trying to boost stock price for the secondary by purchasing 100k shares while knowing that he'll be dumping 400k shares in 6-8 months (with the 10b5-1 already filed in August 2013).

It seems like you're reading into it a lot. Lyndon Rive is free to buy shares and to sell shares as he wants, as long as he follows SEC regulations which he did. You might have interpreted his October secondary purchase of 100k shares as a big "vote of confidence" that wasn't sincere because he knew he was going to sell 400k shares the following year. But it could also be that he instituted his 10b5-1 plan with the idea of divesting 10-15% or so of his holdings in 2014. But when the secondary offering came along, he thought it was a good deal to buy some more shares. This is totally legal and understandable. Could have there been other motives as well, like showing support for the company and helping the secondary? Sure. But I don't think it's stock price manipulation or deceiving shareholders, since his later selling of stock (ie., this year) is done publicly. And if he thought him buying 100k shares was going to boost the stock price, then surely he would think that selling 400k shares later would tank the stock price (which would not be good since they might need to raise more money). The reality is he's probably not thinking on those lines. A few hundreds thousand shares here or there isn't a significant number compared to his total holdings.

On another note, I've seen Elon Musk if he thinks the stock price is low (ie., the company is undervalued) he will go in and buy more shares at the secondary. Elon Musk doesn't actually have the money, as practically all his money is vested in TSLA, SCTY and SpaceX. But he's using a line of credit from Goldman Sachs to make purchases like for his house and other things. And he uses that line of credit (kind of like margin) to buy more shares of TSLA (ie., at $92/share in May 2013), and at SCTY's IPO and at SCTY's Oct 2013 secondary offering. Elon thinks the stock is cheap and he buys more stock, even on margin. Now Elon is unique in that he's okay with holding hundreds of millions of dollars on margin, but most people are not like that. So, in the case of Lyndon Rive, he's more of a normal human being (compared to Elon Musk) and he's going to buy and sell stock and that's fine. As long as he follows SEC guidelines, I'm fine.

My previous post on this topic was incomplete and there is more to this story, but I just don't have time to spare to research this.

That said, your response is very reasonable if you assume that the part I bolded is correct. But it isn't correct...

Here is the timeline of events:

June 18, 2013: SCTY announces secondary offering. In order to prevent the stock from tanking, as a vote of confidence Elon Musk and Lyndon Rive announce they will purchase up to 560,000 shares.

http://www.streetinsider.com/Corpor...ondary;+Elon+Musk+Plans+Purchase/8425605.html

Stock tanks anyway over the next few months...

Aug 30, 2013: Lyndon Rive submits 10b5-1 plan (that "no one" reads) to sell 400,000 shares over then next 6-8 months (possibly a lot more shares than 400,000, I really don't know if there will be more sales based on that filing; just going off of what DaveT posted, and I know I can trust his research).

Oct 16, 2013: SCTY stock is still weak so they announce 2015 guidance outside of normal announcement time to jack up the price of the stock, so they can issue shares 5 days later.

Oct 21, 2013: SCTY raises capital and Lyndon and Elon purchase 400,000 shares, of which Lyndon buys 107,434 shares.

Over the next half year, Lyndon Rive unloads 400,000 shares...


I hope that with additional detail you now see that Lyndon Rive, CEO of SolarCity, is purposely misleading shareholders that he is buying shares as a vote of confidence, when in fact he was planning on dumping 4x the amount of shares that he actually purchased.

I see this as extremely unethical and they are screwing around with shareholders. All you guys who own SCTY, should be asking them a lot more questions...

Even though I have no skin in this game, this whole situation still bothers me immensely. How can you trust a CEO when he makes a mockery out of shareholders like this?

 

[ggies07]

So you're telling me Elon and his cousin are the best con artists we've ever seen? Slap me silly. Pull out your TSLA shares too then....come on man. If this ever was true and brought to attention, this would sink TSLA and the Tesla name. You think Elon needs and wants that attention?

 

[DaveT]

My previous post on this topic was incomplete and there is more to this story, but I just don't have time to spare to research this.

That said, your response is very reasonable if you assume that the part I bolded is correct. But it isn't correct...

Here is the timeline of events:

June 18, 2013: SCTY announces secondary offering. In order to prevent the stock from tanking, as a vote of confidence Elon Musk and Lyndon Rive announce they will purchase up to 560,000 shares.

http://www.streetinsider.com/Corpor...ondary;+Elon+Musk+Plans+Purchase/8425605.html

Stock tanks anyway over the next few months...

Aug 30, 2013: Lyndon Rive submits 10b5-1 plan (that "no one" reads) to sell 400,000 shares over then next 6-8 months (possibly a lot more shares than 400,000, I really don't know if there will be more sales based on that filing; just going off of what DaveT posted, and I know I can trust his research).

Oct 16, 2013: SCTY stock is still weak so they announce 2015 guidance outside of normal announcement time to jack up the price of the stock, so they can issue shares 5 days later.

Oct 21, 2013: SCTY raises capital and Lyndon and Elon purchase 400,000 shares, of which Lyndon buys 107,434 shares.

Over the next half year, Lyndon Rive unloads 400,000 shares...


I hope that with additional detail you now see that Lyndon Rive, CEO of SolarCity, is purposely misleading shareholders that he is buying shares as a vote of confidence, when in fact he was planning on dumping 4x the amount of shares that he actually purchased.

I see this as extremely unethical and they are screwing around with shareholders. All you guys who own SCTY, should be asking them a lot more questions...

Even though I have no skin in this game, this whole situation still bothers me immensely. How can you trust a CEO when he makes a mockery out of shareholders like this?

Thanks for explaining the timeline more. Now that you mention it, I do recall that it did take quite a while between when they announced the secondary (June 2013) and when it closed (Oct 2013). And so Lyndon Rive first decides to buy 100k or so shares in the SCTY offering (June 2013), then files his 10b5-1 plan in August to sell 400k (at least) shares 8-10 month later, and then closes his 100k purchase in the secondary in October.

While it does seem a bit strange, I'm hesitant to jump to conclusions because we don't know the whole story. And there could be some financial planner helping Lyndon with his personal/family finances. Maybe the financial planner was pushing Lyndon for the longest time (i.e., since IPO) to divest some of his SCTY shares (ie., 10-15%) and Lyndon finally agreed to it (maybe in Spring 2013 but he filed the 10b5-1 later). And maybe he wanted to buy 100k more shares to support the company's secondary, but also because there's some kind of reason that we're not aware of. Or it could have been he decided to buy 100k shares in June, then his financial planner went bezerk on him and told him he was crazy and that he needs to be divesting, and then Lyndon Rive's wife also disagreed with the 100k purchase and wanted to divest to buy a house, etc, etc, etc. So, it's too late for him to go back and cancel his 100k share purchase in the secondary, so he decides to sell 400k shares by filing his 10b5-1 plan to sell in April-June 2014.

Is it strange? Yes, somewhat. Is it clearly a misleading of shareholders? I don't think it's that clear. It somewhat of a grey area because we don't have the full story. And he didn't break any SEC rules.

Also, in the bigger picture Elon's purchase is much bigger than Lyndon's. And Elon is the company's largest shareholder as well. And to my knowledge, he hasn't sold any shares yet. If anything, Lyndon Rive's confusing purchase/selling of SCTY shares is dwarfed by Elon's monster stock position in SCTY and him borrowing money to buy even more shares.

- - - Updated - - -

I've seen this mentioned before...and often wondered: with his salary very low, and claiming he won't sell TSLA shares, and cannot sell SpaceX shares, does that mean the only "income" Elon gets is from selling SCTY shares? He has to pay back this line of credit somehow.

Yes, somehow Elon will need to pay back his line of credit with Goldman (and maybe others). He could either sell shares of SCTY, or SpaceX, or TSLA (which he said he'd be the last one out). Or perhaps he has some other investments that strike it big (I know he's made several investments in some startups but probably not very large investments, so this probably won't be enough to pay off his debt). Or he could wait until his companies start issuing dividends (ie., 10-15 years later) and use those dividends to pay down and eventually pay off his debt.

Elon's situation is quite fascinating to me. It's really interesting that he's chosen to use a line of credit to not only fund his lifestyle (ie., buy house, etc) but also to buy more stock in his companies. He's really gone all-in, and then some. Most people in his position would be divesting and diversifying, but he's putting more in.

I personally lean on the following scenario... Elon is thinking of keeping his TSLA, SpaceX and SCTY shares "forever" (at least until he dies and passes them on) and doesn't want to sell a single share. He's content with a large line of credit in the hundreds of millions of dollars range to fund his lifestyle and even investing more in his companies. He figures that all his companies will eventually pay handsome dividends and he'll use those to pay off his debt. He doesn't care much, if at all, about divesting or diversification into other assets. He'd be happy of all the assets he ever had were shares of TSLA, SpaceX, and SCTY. He did buy a house though but it wasn't necessarily because he really wanted to buy a house but he wanted to remodel and such and couldn't do that as a renter. He did buy the house across the street from his house but that was more for security purposes. So, he'll buy stuff but his real/true assets/investments are TSLA, SpaceX, and SCTY. And he doesn't intend on selling ever.

Now, this "scenario" might not be true. We do know that his intention with TSLA is to be the "last one out" (meaning never sell his shares unless the company is sold). We don't know what his intentions are for SpaceX or SCTY shares. But it's an interesting thing to ponder.

And the day if/when he starts to sell SCTY shares, my theory will be destroyed.

 

[Chickenlittle]

Dave spacex is not a listed company. We do not know his salary from that venture. Another potential source of income. I have known people who inherited their wealth and are scared of it going away. They have no confidence in their ability to replace it. He has had 5 ventures all paying off well. I doubt he has any fear of losing it, he knows he can make it again

 

[DaveT]

Dave spacex is not a listed company. We do not know his salary from that venture. Another potential source of income.

Yes true that he could be getting a salary from SpaceX, but I doubt it's much since they run SpaceX as a fairly tight ship regarding expenses. Also, a few hundred thousand a year from a salary is not going to put a dent in Elon's total debt, nor is it going to fund his lifestyle either (ie., private jet, ex-wife/child support, etc).

I have known people who inherited their wealth and are scared of it going away. They have no confidence in their ability to replace it. He has had 5 ventures all paying off well. I doubt he has any fear of losing it, he knows he can make it again

I agree Elon's not afraid of losing it all, since he knows how to create value. I just find it interesting that he'd go into debt to buy more shares of his companies. It strikes me as fairly uncommon.

 

[DaveT]

Just FYI, as of Feb 2014 (according to Tesla's annual report) Elon has a $275 million line of credit from Goldman Sachs (a large portion used to buy TSLA and SCTY stock during secondary offerings) and a $25 million loan from Morgan Stanley.

 

[AudubonB]

Based on my own situation, which is...well, not quite the size of Mr Musk's!.....a $275mm line of credit at Goldman is going to run him LIBOR + ABOUT 100bps, or 1.2%, more or less. So as long as we're conjecturing, let's conjecture what gross salary he would need to service, say, $200mm of that: about $2.4mm. Less of a salary - at that borrowing level - and he's falling a bit behind all the time.

Now, I really think that neither he, Goldman, MStanley nor we should worry much over this situation. On the other hand, someone I've known since we were lads put his full faith and credit behind loans to one of his companies, securing it with $1bn of his own fortune. However, when things turned nasty, and the stock price plummeted, his own $30bn turned to ashes, he couldn't make good on his promise, creditors seized what was left...and Eike Batista became known as losing the largest amount of money a single person has incurred in history.

 

[DaveT]

Based on my own situation, which is...well, not quite the size of Mr Musk's!.....a $275mm line of credit at Goldman is going to run him LIBOR + ABOUT 100bps, or 1.2%, more or less. So as long as we're conjecturing, let's conjecture what gross salary he would need to service, say, $200mm of that: about $2.4mm. Less of a salary - at that borrowing level - and he's falling a bit behind all the time.

Are you getting a line of credit for 1.2%? If so, that's amazing. I didn't know that was possible.

Now, I really think that neither he, Goldman, MStanley nor we should worry much over this situation. On the other hand, someone I've known since we were lads put his full faith and credit behind loans to one of his companies, securing it with $1bn of his own fortune. However, when things turned nasty, and the stock price plummeted, his own $30bn turned to ashes, he couldn't make good on his promise, creditors seized what was left...and Eike Batista became known as losing the largest amount of money a single person has incurred in history.

That's one amazing story. I had to look up his wiki page to read more about it, Eike Batista - Wikipedia, the free encyclopedia .