Investors and finanical analysts have been baffled by a $2.86 billion bid by electric car manufacturer Tesla to acquire SolarCity:
Musk, the largest shareholder of both companies, said he and Antonio Gracias, who is also a member of both boards, will recuse themselves from voting on the takeover offer. The all-stock deal is worth $26.50 to $28.50 for each SolarCity share, Tesla said. That calculates to a premium of as much as 35 percent from Tuesday's closing price. The average 12-month price target among analysts surveyed by Bloomberg is $29.82. "In my personal opinion, this is obviously something that should happen," Musk, who is chief executive officer of Tesla and chairman of SolarCity, said in a conference call. "It's a no-brainer." With 100.2 million SolarCity shares outstanding, the offer is worth as much as $2.86 billion.
[...] Tesla fell as much as 12 percent in extended trading while SolarCity rose as much as 29 percent.
Related Stories
The USA Today and Reuters report that Tesla Motors and Panasonic announced their intention to open a factory in Buffalo, New York. Photovoltaic cells, and modules containing them, would be made there. Production might begin in 2017.
The two firms signed a non-binding letter of intent to make the cells for Tesla's stationary power storage units, the Powerwall and Powerpack.
The companies are already collaborating in the production of storage cells for rechargeable batteries.
previously:
- Tesla Soars on Financials and Ratings
- Elon Musk's Tesla Offers to Buy Elon Musk's SolarCity, Shares Tumble
- Tesla and SolarCity Reach Agreement to Combine
A rally in Tesla shares [...] briefly vaulted the company's market capitalization past the German luxury carmaker in early Friday trading. The amount of ground Tesla covered was vast: BMW was valued at a $30 billion premium as of early December.
[...] Short interest represented about one fourth of the shares as of the latest quarterly filing.
According to The Drive the three most valuable auto makers are "Toyota, Daimler, and Volkswagen."
Tesla stock sat at $357.32 after market close after trading as high as $376.87 on Friday.
—Silicon Valley Business Journal
related stories:
Tear-Down/Reviews on new BMW i3 Electric Car
BMW X3 May be Emitting a Greater Amount of Poisonous Gases than VW
Electric, Autonomous Cars Will Drive BMW's Continued Growth
BMW Boosts i3 Battery Capacity by 50 Percent—and it's Retrofitable
VW Responds to Diesel Scandal, Says "the Future is Electric"
Bob Lutz Thinks Tesla is Doomed
One in Seven New BMWs Sold in the US is an Electric Vehicle
Elon Musk's "Top Secret Tesla Masterplan, Part 2"
Elon Musk's Tesla Offers to Buy Elon Musk's SolarCity, Shares Tumble
Wall Street Values Tesla Motors at $620,000 for Every Car Delivered Last Year
Tesla Soars on Financials and Ratings
Tesla Stock Price Falls as Sales Target Cut to as Few as 50,000 Vehicles
Tesla Reaches 325,000 Preorders for Model 3, But Can It Deliver?
(Score: 0) by Anonymous Coward on Wednesday June 22 2016, @02:34PM
-de-nada-dept
(Score: 2) by VLM on Wednesday June 22 2016, @02:49PM
"It's a no-brainer."
As discussed on other sites, both tesla and the solar company have the same cashflow problem, although fundamentally both are good ideas with a future.
So naturally the company with bigger cash flow problems is being "rescued" by the company that also has cashflow problems (although somewhat smaller problem)
Its kinda like the fattest guy in the gym getting a personal trainer, and that trainer being ... the second fattest guy in the gym.
One of the players BEING a car company I'm having trouble coming up with a good automobile analogy.
I guess a bad car analogy would be if you accept GM as having a bad reputation for quality, the best solution wouldn't be for Yugo to buy them.
(Score: 2) by ikanreed on Wednesday June 22 2016, @03:02PM
I'm not exactly sure how Tesla has a cashflow problem since they're perpetually sold out of stock.
(Score: 5, Insightful) by Dunbal on Wednesday June 22 2016, @03:10PM
At the same time they keep gearing up for larger and larger production facilities. Which takes cash. How much cash? All of it. Thus - cash flow problems.
(Score: 2) by ikanreed on Wednesday June 22 2016, @03:12PM
Ah, the startup "invest every penny you see until you implode" strategy.
(Score: 5, Insightful) by Dunbal on Wednesday June 22 2016, @04:10PM
Every single person who has bet against Tesla to date has lost money. While past performance is no guarantee of future success, just be careful when listening to the media clowns who swear that THIS TIME Tesla is going to go bust.
(Score: 2) by n1 on Wednesday June 22 2016, @08:09PM
Depends how long you are on TSLA and how much you trust Musk, for those that shorted a year ago, I doubt they're regretting that decision.
(Score: 2) by Dunbal on Wednesday June 22 2016, @10:18PM
Hindsght is 20/20. Are you talking about the guy who shorted last year at $280 in July, or the guy still sitting on his short at $185 in March? TSLA has swung up and down. If you want to day/swing trade go ahead. But if you want a "safe" bet you won't get it even with shorting TSLA. Go ahead and short it today and let me know when you get your margin call next month...
(Score: 0) by Anonymous Coward on Thursday June 23 2016, @03:34AM
Surely you understand that you are moving the goal posts?
You'd be better off just admitting that you were employing hyperbole rather than being literal.
Because now you look defensive and weak.
(Score: 2) by Dunbal on Thursday June 23 2016, @06:25PM
I really don't care how I look. I've traded enough to know it's incredibly easy to look wise about the stock market when you've got no money on the table. TSLA is and has been extremely volatile. Money CAN be made in both directions. The reverse is true - money can be lost in both directions too. But my point is the stock is far from imploding like many suggest.
(Score: 2) by VLM on Wednesday June 22 2016, @03:31PM
Dunbal more or less hit it out of the park with that one, although there's a side dish that its not just raw capex like new CNC milling machines and buildings, but long term R+D costs and crash test dummies and stuff like that. Cash flow is a pain for all car manufacturers in general.
So there's this awesome car that'll be profitable every quarter on my income sheet and make bazillions over the life of the car model on my balance sheet sitting in my CAD files today, but the revenue isn't going to be rolling in until sales start in 2018 while the engineers want to get a paycheck today and I can't build the prototype until I send digikey the cash for the parts for the worlds newest motor controller or WTF all the above made up but true in spirit.'
Somewhat stereotypically small growing businesses die of cash flow problems, or at least big companies commonly have a lot of company history of barely making payroll despite the income and balance sheets being healthy. Likewise somewhat stereotypically big companies die when their balance sheet rolls over and stops working even when the income and cash flow look good for awhile longer. "Oh look depreciation and environmental regulations mean our former asset of a billion dollar mfgr plant is now worth negative $1M" So its "good news" that their only problem is cash flow. Or they're massaging the message to make people think its the only problem.
(Score: 5, Interesting) by frojack on Wednesday June 22 2016, @05:20PM
One of the players BEING a car company I'm having trouble coming up with a good automobile analogy.
The one that is a car company is also a huge battery company (or will be shortly).
Now THAT makes sense. Forget that grid inter-tie and just go self storage, and charge your car all in the same package. In fact just charging your electric drive car would probably be reason enough to install solar when you buy a Tesla automobile.
The stock is taking a hit because nobody can see where the money is going to come from in the short term, and Tesla is going to issue stock to accomplish this buy out. Issuing stock depreciates the value of stock held by current share holders.
The market seldom fails to notice this.
No, you are mistaken. I've always had this sig.
(Score: 4, Insightful) by Thexalon on Wednesday June 22 2016, @02:55PM
If you put the two together, then the overall vision becomes: "This is the company that will create the products you need to live entirely on home-scale renewable energy." If they were to expand, they'd add in a division focused on windmills to help those of us in places that usually don't see all that much sun. This doesn't strike me as a terrible thing, so long as the various components aren't set up so they can only work with each other using something like the Grand Cable Conspiracies to force people to only use a certain company's components.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 1, Informative) by Anonymous Coward on Wednesday June 22 2016, @03:26PM
Home-scale windmills are unlikely to ever become a significant market. A couple of years ago I looked into what it would take to get a windmill for my home and what I found was that (a) you have to get pretty high off the ground (30+ feet) to get a decent level of consistent wind (versus mostly buffeting with poor directionality at ground-level) and (b) they are also relatively noisy. Both of those characteristics run right up against building codes because they will annoy your neighbors. That's not a problem in rural areas. But there just aren't that enough people living in rural areas to make for a tesla-scale market.
(Score: 2) by frojack on Wednesday June 22 2016, @06:17PM
See: http://www.seao2.com/vawt/ [seao2.com]
Small home-scale QUIET vertical axis windmills are available. But the companies are dropping like flies due to there being no market.
The FAA and the military doesn't want the radar clutter these things generate and nobody wants to look at them, and mostly, they just don't generate enough power to make them worth while.
No, you are mistaken. I've always had this sig.
(Score: 0) by Anonymous Coward on Wednesday June 22 2016, @06:30PM
And as said above many municipalities don't allow them to be installed in the first place. Even though I'm in an unincorporated area my county only allows rural properties of 2 acres or more to install them.
(Score: 2) by Zinho on Wednesday June 22 2016, @09:54PM
...nobody wants to look at them...
I've never understood this. I checked out your link, and several of those turbines were quite artistic. I wouldn't mind seeing those on my neighbor's rooftop, and I'd be proud to have one on mine.
Of course, I also think that an orderly arrangement of cables [rollernet.us] for a server rack is aesthetically pleasing, so perhaps that should be
...nobody whose opinion matters wants to look at them...
"Space Exploration is not endless circles in low earth orbit." -Buzz Aldrin
(Score: 3, Interesting) by danmars on Wednesday June 22 2016, @03:00PM
I wonder what buzzwords will be trotted out in support of this. What's the logic? That they both can use batteries? So spin the battery division off of Tesla and have them both buy batteries from it, then. Or else make Tesla the battery company and spin off the car division. A car company doing home solar is not something that obviously should happen. Or does Tesla already think of itself as a battery company that happens to sell cars like a Duracell flashlight?
Oh yes, here's Tesla the battery company that sells you all kinds of trinkets that are just showpieces for the battery. A car. Home solar. Maybe next a smartphone, flashlight, or weather radio. Tesla, fine provider of batteries and battery accessories.
(Sorry for the rant.)
(Score: 2) by richtopia on Wednesday June 22 2016, @03:13PM
Tesla sells the Powerwall, and their super charger stations are supposed to have SolarCity cells on the roof. I can see some synergies, however you are correct; the two industries are relatively separated so I'm not sure where there is room to grow.
Tesla is a manufacturing company, and SolarCity is largely a financing company (they don't manufacture cells, just finance and install them). Maybe SolarCity will start giving out autoloans!
(Score: 4, Interesting) by VLM on Wednesday June 22 2016, @03:21PM
My semi serious answer is instead of paying $100K for a roadster and plugging it into a coal power plant, they'll sell package deals of a garage worth of solar cells and some batteries along with the roadster for $150K. I mean you already got them in the showroom, they're already gonna have to hire an electrician to put in the wiring for a fast charger, why not have the guy rough in the solar panels? If you thought your car dealer was a PITA over $800 rustproofing underbody treatments or $400 worth of floor mats at closing time, wait till he tries to slip in a $50K solar panel system at closing.
Also that makes it sticky. So you "need" to socially signal your holiness by being a good acolyte of environmentalism, and here's your highly visible solar panels (and your sexy sports car). But when the car isn't cool anymore or its time for a new one, instead of getting a Porsche this time, well you go these solar panels and those give you twitter and FB street cred so you can't let them go to waste, so I guess you kinda gotta buy sexy electric sports car 2.0, probably from Tesla. You're not buying a sexy sports car for two years, you're buying 25 years of solar panels that kinda sorta need a companion sexy sports car in the garage, conveniently made by Tesla. Like ipod vs itunes and once your itunes account has enough money blown into it, you want to keep using ITMS. I guess I threw out about $200 when I eventually went full android.
The real answer as always is in the financial reports. I have not analyzed them myself but I've read they're both having cash flow sheet problems but are otherwise quite healthy. Musk seems pretty good at running companies into cash flow issues. Whatever plan he's got to fix cash flow issues apparently scales really well with size because he'd prefer running it once on one big company not twice on two smaller companies. Stereotypically I'd say most mergers happen because someone with a sick balance sheet thinks merging with a sick income statement will fix them both or whatever, its usually asymmetric. Its all very alchemical like brewing a magic potion. Also modern management is only about as effective as alchemy or astrology in practice. So its unusual but not unheard of for two companies both with similar problems to merge. Noteworthy and unusual but not unheard of. Anyway I look forward to seeing what his plan is.
(Score: 2) by bob_super on Wednesday June 22 2016, @04:13PM
I'll add that people leasing from SolarCity will likely be told regularly how well the new Tesla matches their system, or how it could be expanded to fit a bigger one.
Also, using your Tesla as a Powerwall can make sense, based on your driving habits (a convenient app to know you need the full charge on mistress-Wednesday only). And that's easier done if it's the same company.
(Score: 4, Insightful) by Anonymous Coward on Wednesday June 22 2016, @05:03PM
Please drop such tripe as "So you "need" to socially signal your holiness by being a good acolyte of environmentalism". Every area in life has its annoying people, religious evangelists, politic-heads, gun enthusiasts, etc. Obviously you've been annoyed by the environmental trend, but it really is a factual necessity. I would argue that supporting environmentalism in general is being a sensible human being concerned with future survival.
Are there ridiculous examples of environmentalism being stupid? Sure. Should you go mocking a large section of humanity because you have some gripes? No. That is the path of prejudice, where you slide people into your own mental categories to reinforce your worldview.
(Score: 0) by Anonymous Coward on Thursday June 23 2016, @03:32AM
The best part about VLM's post complaining about people needing to signal attitudes that he disagrees with is that he's signaling how great he thinks he is by whining about them. He is literally exactly what he is complaining about. Too fucking clever for his own good.
(Score: 2) by frojack on Wednesday June 22 2016, @05:29PM
But look, they are moving in the opposite direction. Towards a 35-thousand-ish priced car.
The market for people wanting to spend 100k on a car is very small. The market for people buying a 35K car and tossing in another 10 or 20K for home charging all under the same car/home loan.
No, you are mistaken. I've always had this sig.
(Score: 2) by VLM on Wednesday June 22 2016, @09:44PM
That is insightful, think about some random dude buying a generic sedan that happens to be electric.
Now the electrician has to come out and install a fast charger station and thats costing some serious bucks, too much to roll into the car and hope the bank doesn't notice and too small to pay the enormous fees and paperwork of a home equity loan.
But... what if they're like, so dude, why pay $2K for a charger and electrican and buried lines to the garage if you can take out a loan for $10K and cut, not raise, your electric bill using solar panels all while installing the charger you need anyway? I could see that package deal selling pretty well. The bank that gives the loan for the car is chill, the bank that loans the panels is chill...
(Score: 2) by Gravis on Wednesday June 22 2016, @08:51PM
Tesla sells directly to the consumer, so there is no car dealer bullshit. Frankly, I hope Tesla puts car dealers out of business. ;)
(Score: 3, Insightful) by Anonymous Coward on Wednesday June 22 2016, @03:23PM
Tesla, fine provider of batteries and battery accessories.
Actually, when you put it in this context, it makes more sense. This is exactly the business model that Honda uses. They develop engines well, and they make all sorts of products that make use of their core strength: Automobiles, Motorcycles and Scooters, Airplanes, Boat Outboard motors, Lawnmowers and Snowblowers, Electrical Generators and more. Seems to be working for Honda. Maybe it makes even more sense that Tesla follow the same model in markets with fewer competitors than Honda has to face in all of their markets.
(Score: 3, Insightful) by VLM on Wednesday June 22 2016, @03:43PM
I'd agree with and extend your remarks with the example of General Electric. One decade they're making electric motors and alternators, next thing you know they're making home appliances with motors in them, then somehow they start squirting out MRI machines (not entirely sure how that happened).
Another example of vertical integration would be good ole Standard Oil.
As a tech analogy I'd propose Microsoft. Superficially spreadsheets, video game consoles, and mice do not seem to have anything in common to an end user, but there are similarities in the core technologies of those products. MS is an example of the arrow of time in business where nobody would believe the story if run in reverse; if a startup today said their stated goal was to sell wineglasses, pesticides, and gray market non-FCC or UL listed cellphone chargers, everyone would WTF although its not unlikely if one of today's startups lives long enough it could end up selling that stuff. Actually I think I just described amazon.com. Whatever.
(Score: 3, Interesting) by fritsd on Wednesday June 22 2016, @04:29PM
Maybe they want to become a conglomerate like Schlumberger [wikipedia.org] (but then with the "evil bit" turned off)?
A colleague of mine once worked for Schlumberger. She said it was an astonishingly large and powerful corporation, that almost nobody has ever heard of. They're never in the news.
Have you ever seen any news about Schlumberger? They're in the S&P 100, and active in 85 countries. If you want to drill for oil, you need them. But there's no news about them.
(Score: 2) by takyon on Wednesday June 22 2016, @05:41PM
Musk is building the ultimate vertical monopoly. Battery production, solar panel production [technologyreview.com], home solar financing via SolarCity, home battery packs to store the solar energy, and electric cars. And finally, SpaceX rockets for when you decide you want to die on Mars.
[SIG] 10/28/2017: Soylent Upgrade v14 [soylentnews.org]
(Score: 2) by takyon on Wednesday June 22 2016, @05:56PM
When I read your post, I immediately thought of Halliburton [wikipedia.org]. And would you look at that, it's in the same sector: "Oilfield services & equipment". Both companies provided services to the Deepwater Horizon oil rig. Halliburton would not be a household name if it weren't for its former CEO becoming the U.S. Vice President.
[SIG] 10/28/2017: Soylent Upgrade v14 [soylentnews.org]
(Score: 0) by Anonymous Coward on Wednesday June 22 2016, @06:32PM
I interviewed with them once when I was straight out of the military, when oil was booming.
They paid to fly me to their training site, put me up in a Hilton for a week, and had open bar each night.
Looking into them for the interview I was super surprised I had never heard of them. They are huge.
(Score: 2) by Non Sequor on Wednesday June 22 2016, @03:06PM
“We believe investors are likely to view this transaction as a bailout for SCTY and a distraction to Tesla’s own production hurdles,” said Rusch in the note.
Write your congressman. Tell him he sucks.
(Score: 0) by Anonymous Coward on Wednesday June 22 2016, @05:59PM
I saw an article which said exactly this was going to happen. Maybe it was a few months ago? Maybe I am remembering a bunch of articles all globbed together?
It was making a case for the stock value of each of his entities (SpaceX, Tesla and SolarCity) being a house of cards and, as each company lost the credibility to justify the negative cash flows, Elon Musk would start folding his companies together to keep the valuation up. I googled the article but now I cannot find it. Anybody else remember this article?
(Score: 2) by takyon on Wednesday June 22 2016, @06:18PM
Sounds like a SeekingAlpha [seekingalpha.com] type of article, but I don't see much.
A custom date range on Google from sometime to June 1, 2016 may help you find it. Here's an older article:
https://www.zacks.com/stock/news/209430/is-elon-musk-buying-solarcity [zacks.com]
[SIG] 10/28/2017: Soylent Upgrade v14 [soylentnews.org]
(Score: 1, Informative) by Anonymous Coward on Wednesday June 22 2016, @06:58PM
Ok I think it was a WSJ article... here's a link with a blurb and link back to the original WSJ article. Sorry I do not have my WSJ login handy so no copy pasta on the article itself.
The gist is that he is taking out personal loans backed by his own shares in Tesla and Solar City to finance operations at those companies. Logically, a significant drop in stock value is going to cause a margin call... that may not hurt him too much directly; however, indirectly, I do not think the effect on the share price of Elon Musk selling off significant shares in his companies to pay margin calls can be underestimated. Remember, Tesla and SolarCity are running on the faith investors have in their future ability to generate profits. He is very sensitive to cash flows as they are still mostly in the R&D stage for the product everybody is anticipating, the "mainstream" priced all-electric Model 3. Any crimp in their cash flow could set them back years on their production schedule; a margin call that dries up cash for a quarter could potentially tank the company in this scenario.
FT.com [ft.com]
WSJ.com [wsj.com]
(Score: 0) by Anonymous Coward on Wednesday June 22 2016, @08:14PM
Can mean a lot of things. Just let others do the thinking.
(Score: 0) by Anonymous Coward on Wednesday June 22 2016, @08:26PM
SolarCity is in financial trouble and if they go down, Tesla (and SpaceX) will also be in trouble. Who wants to own shares in a firm whose largest investor and key figure has a history of bankruptcy? That is why funds like Fidelity who own shares in both firms are open to the deal.