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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.
(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.