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1) It was always Elon's plan to make Tesla and SolarCity one company.
2) SolarCity's stock is dirt cheap. SolarCity is approaching a few major milestones.
3) Too many things to list.
Sounds fidelity is in support of the merger Investors see trouble in Musk's dream for Tesla-SolarCity tie-up
Tesla is not a investment bank, scty cheap or not, esp. as it's already busy enough to expand s sales, x productions, and 3 ramp-ups as well as tesla energy.
Honestly, it's cheap, it's being attacked relentlessly attacked by utility monopoly interests(including hedge funds related to those interests) and the legal entanglements with them working together as seperate companies would distract from accelerating scaled production.
Together they have a deeper well of political and regulatory clout that can combat incumbent monopoly attack on emerging competition from both tesla and Solarcity.
There are a menu of many different reasons of why now in addition to this...
Moreover, it doesn't have the financial strength to assume all scty's debt because its own condition is kind of shaky.
I am surprised with so much opposition to this deal. If the deal falls apart, SolarCity is done. There are no two ways about it. There is a reason why the buyout is even being done - SolarCity is dead and the plan is to absorb it within Tesla so one notices. If everything was peachy at SolarCity, their board wouldn't approve of a buyout at $25 (70% off peak). Its either $25 now or $0 later. There is also a reason why the Rive brothers would be so willing to not mind losing control of a company they founded.
A dead SolarCity will drag Tesla down with it. Reputation, Margin call, whatever the reason or whatever you call it, it won't be pretty. If you are a TSLA investor you should be for this deal. Down 10% if it goes through is not as bad as down 30% if SCTY declares bankruptcy (Also making bonds sold to SpaceX worthless). The reason TSLA board and major investors are on board with this is because they understand the consequences of an insolvent SCTY.
The topic of If SC will drag TM down with it is for another day.
A dead SolarCity will drag Tesla down with it. Reputation, Margin call, whatever the reason or whatever you call it, it won't be pretty. If you are a TSLA investor you should be for this deal. Down 10% if it goes through is not as bad as down 30% if SCTY declares bankruptcy (Also making bonds sold to SpaceX worthless). The reason TSLA board and major investors are on board with this is because they understand the consequences of an insolvent SCTY.
The topic of If SC will drag TM down with it is for another day.
The idea of combining solar power with automaking is a bit like Ford Motors buying ExxonMobil—if both were losing hundreds of millions a year.
Elon Musk’s Bonkers Plan to Join Tesla and SolarCity
Elon Musk’s Bonkers Plan to Join Tesla and SolarCity
r u on behalf of SCTY share holders? why Tesla wants to acquire if it may be worth $0? What if acquiring SCTY later on can sink the ship of tesla?
How well would searching Tesla net loss per quarter inform you on how Tesla is doing? Don't you think that may be short sighted?
On the topic of this merger gets around the dealership restrictions: Why does anyone think that? If selling something other than cars was all it took, Tesla could just claim to be a clothing and accessories boutique that also sold cars. Not sure how adding solar suddenly fixes things.
On the appearance of a bailout: I think Johan has it right. It probably is a bailout and if they didn't intervene the company would lose actual value in the marketplace. This way, for a relatively small valuation they can pick it up and get the TE distribution network they need. It isn't much of a stretch to imagine a failing SCTY would stink up the other businesses in Musk inc. If SCTY can have material problems and financial concerns, why not the others? Best to avoid that, even if it means paying a premium.
On Elon's tiredness and opaque answers: I really think Elon is pushing too hard into "just trust me" territory. He is starting to believe his own legend, that he can do no wrong. (the list of mistakes made at the shareholders meeting was a self indulgent victory lap, not a mea culpa). When he says its a "no-brainer" all I hear is "don't worry your pretty little head about it, I have it all worked out". This was the issue I had with pivoting away from financial results in favor of M3 acceleration. That was the first foray into "just trust me". This is a second, much larger addition of faith he is asking for. He will probably get it but the more shareholders he alienates, the lower the share price goes and the lower faith he will engender. Eventually even Elon will need to care about this.
On Elon not caring about the share price: Earlier in the year, the more jubilent versions of "DTU" theory(that I promulgated with others) had that Elon had our back and was gaming for a share price rise to fuel goodies later in the year. He has taken the bewildering approach of grabbing the goodies at the expense of share price instead. Its fine and appropriate for a CEO to not attempt to manage share price, but he will find all his plans will unravel in a material way if the share price unravels.
On TFTF running Bull lines at us: Hilarious. My hat is off. I had pushed for a "bear cave" thread earlier in the year and we got it! Thundering herds of "Merger-Bears" trample the once peaceful Short Term Thread meadows. Also, hats off to the regulars who are showing that we were never in Kool-aid drinking lockstep.
On Elonism: Investing in TSLA is a combination of due diligence using available data and filling the gaps with faith in a top notch CEO. No amount of research will get you all the way certain, we just don't have the data. But I always felt that TSLA was like 80% certainty 20% faith. I was comfortable with that. Falcon wing doors well, 76/24. Announce plans to accelerate the M3 and THEN do a cap raise... ok... 65/35. Buy SCTY, an opaque strange solar service provider. 30/70? Everyone has a fact/faith ratio they can live with and by driving the ratio down the stock price sinks as less religious investors bail.
On whether the deal passes: If it failed, Elon would be pissed and sulk and blame absolutely everything that went wrong thereafter on it. So we take the bad deal or get a pissy distracted Elon.
On "Q2 deliveries must be a beat because only with that knowlege would Elon do this": I don't buy it. See above about Elon not caring about stock price. He is really just trying to grab his pieces on the chessboard and damn the cost. Since he is truly convinced that the stock valuation of his company(ies) will be much higher later he doesn't think it matters the impact of his actions now. Also, it is possible that he thought the merger would cause a rise in both tickers.
On price action: We are crazy lucky to only be down 11%. I predict this will take 3-5 days to play out. After the suspension failure crap came out I cautioned it would not settle in a day and indeed it was 4 days of down. This will probably be 3-of-5 down days as well. I would normally think of a few down weeks, but sidelined longs and shorts will start to fear being out next week and missing potential Q2 announcement. If, as some have argued, the Q2 deliveries are a beat, this could be exactly what the doctor ordered. A delivery beat, an upbeat GF party (I don't expect anything but a pep rally for that), could do wonders to change the narrative. Q2 good financials might get us back to the 240's or something. A Q2 miss on the other hand.... That would cause an unprecedented run for the exits. TM has gone far too long now without doing-what-you-say, and way too much promising-the-world. Elon cannot ask us to trust him and miss achievable near term goals. Patience is running low and Fear of biting too much too high.
This is the first change to TM in many years that really causes one to stop and think about if the company is going in the right direction. Others pointed it out, but this is not in the master plan. And while you can say it is to save the Earth, just partnering would have done the same thing.
I am lucky I was mostly out of calls and into vanilla shares. I bailed on those in the AH last night for ~196, not a great price. This could be a mini February "V" dip and recovery in which case it is a good way to leverage up and make money on good Q2 results in July-Aug. Or, Brexit, merger concerns and lackluster Q2 could send this thing into the toilet in a serious way. Sitting and stewing for a few days.
On the appearance of a bailout: I think Johan has it right. It probably is a bailout and if they didn't intervene the company would lose actual value in the marketplace. This way, for a relatively small valuation they can pick it up and get the TE distribution network they need. It isn't much of a stretch to imagine a failing SCTY would stink up the other businesses in Musk inc. If SCTY can have material problems and financial concerns, why not the others? Best to avoid that, even if it means paying a premium.
On Elon's tiredness and opaque answers: I really think Elon is pushing too hard into "just trust me" territory. He is starting to believe his own legend, that he can do no wrong. (the list of mistakes made at the shareholders meeting was a self indulgent victory lap, not a mea culpa). When he says its a "no-brainer" all I hear is "don't worry your pretty little head about it, I have it all worked out". This was the issue I had with pivoting away from financial results in favor of M3 acceleration. That was the first foray into "just trust me". This is a second, much larger addition of faith he is asking for. He will probably get it but the more shareholders he alienates, the lower the share price goes and the lower faith he will engender. Eventually even Elon will need to care about this.
On Elon not caring about the share price: Earlier in the year, the more jubilent versions of "DTU" theory(that I promulgated with others) had that Elon had our back and was gaming for a share price rise to fuel goodies later in the year. He has taken the bewildering approach of grabbing the goodies at the expense of share price instead. Its fine and appropriate for a CEO to not attempt to manage share price, but he will find all his plans will unravel in a material way if the share price unravels.
On TFTF running Bull lines at us: Hilarious. My hat is off. I had pushed for a "bear cave" thread earlier in the year and we got it! Thundering herds of "Merger-Bears" trample the once peaceful Short Term Thread meadows. Also, hats off to the regulars who are showing that we were never in Kool-aid drinking lockstep.
On Elonism: Investing in TSLA is a combination of due diligence using available data and filling the gaps with faith in a top notch CEO. No amount of research will get you all the way certain, we just don't have the data. But I always felt that TSLA was like 80% certainty 20% faith. I was comfortable with that. Falcon wing doors well, 76/24. Announce plans to accelerate the M3 and THEN do a cap raise... ok... 65/35. Buy SCTY, an opaque strange solar service provider. 30/70? Everyone has a fact/faith ratio they can live with and by driving the ratio down the stock price sinks as less religious investors bail.
On whether the deal passes: If it failed, Elon would be pissed and sulk and blame absolutely everything that went wrong thereafter on it. So we take the bad deal or get a pissy distracted Elon.
On "Q2 deliveries must be a beat because only with that knowlege would Elon do this": I don't buy it. See above about Elon not caring about stock price. He is really just trying to grab his pieces on the chessboard and damn the cost. Since he is truly convinced that the stock valuation of his company(ies) will be much higher later he doesn't think it matters the impact of his actions now. Also, it is possible that he thought the merger would cause a rise in both tickers.
On price action: We are crazy lucky to only be down 11%. I predict this will take 3-5 days to play out. After the suspension failure crap came out I cautioned it would not settle in a day and indeed it was 4 days of down. This will probably be 3-of-5 down days as well. I would normally think of a few down weeks, but sidelined longs and shorts will start to fear being out next week and missing potential Q2 announcement. If, as some have argued, the Q2 deliveries are a beat, this could be exactly what the doctor ordered. A delivery beat, an upbeat GF party (I don't expect anything but a pep rally for that), could do wonders to change the narrative. Q2 good financials might get us back to the 240's or something. A Q2 miss on the other hand.... That would cause an unprecedented run for the exits. TM has gone far too long now without doing-what-you-say, and way too much promising-the-world. Elon cannot ask us to trust him and miss achievable near term goals. Patience is running low and Fear of biting too much too high.
This is the first change to TM in many years that really causes one to stop and think about if the company is going in the right direction. Others pointed it out, but this is not in the master plan. And while you can say it is to save the Earth, just partnering would have done the same thing.
I am lucky I was mostly out of calls and into vanilla shares. I bailed on those in the AH last night for ~196, not a great price. This could be a mini February "V" dip and recovery in which case it is a good way to leverage up and make money on good Q2 results in July-Aug. Or, Brexit, merger concerns and lackluster Q2 could send this thing into the toilet in a serious way. Sitting and stewing for a few days.
Solarcity debt is tied to revenue generating assets that are cash flow positive year one. 99.5% of all payments due to Solarcity have been paid to them since 2006.
They have not one dollar of debt that isn't tied to revenue generating assets so I think it needs to be highlighted.
Even in Nevada, which is by far, the worst case scenario political/regulatory decision to face Solarcity, now or in the future, is being dismantled as I write this. Grandfathering under current rates is the norm for all solar customers across the nation, which will be the same even in Nevada soon, so all solarcity debt(which every cent is tied to revenue generating assets) becomes even more secure since rates are locked in for those customers as traditional utility rates go up making the solar system (revenue generating asset) even more valuable over time of grandfathering period.
Bottomline, Solarcity debt is not an issue and I would ask anyone that would like to challenge that belief to offer a counter argument
EM got what he wanted today, not much gain for SCTY share holders, while big losses for TSLA stock owners! Quoting him, the merger proposal "Probably Unwise".
Actually, this plan is exactly what all those oil men did in the early 1900s. I'm re-reading Internal Combustion, and the major executives from the oil and coal companies, like Standard Oil, would join the board of a new EV startup or the company that started electric trains, Milwaukee Electric Railway, and eventually ruin them for profit. Except this time, Elon is on both these companies and wants to combine them for the greater good of our future and not for profit.
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Thanks for your insights into SCTY debt! One more question, unless SCTY has unlimited financial resources (like federal reserve), how can it sustain its 'install now, pay later' business model?
I already gave you the counterargument:
-- SolarCity is trying to finance the installs (20-year income streams) with 3-month bonds. These have to be refinanced every three months.
-- in a financial crisis where people lose their homes like 2008, default rates will go up, and lenders will be skittish about refinancing. Lenders could be skittish about refinancing for any number of other reasons.
-- Accordingly, a financial crisis could cause SolarCity to be unable to refinance its debt. At which point they go bust due to a liquidity crisis, future income stream or no future income stream.
-- Alternatively, lenders could agree to refinance SolarCity but demand much higher interest rates (either because interest rates go up in general, or because they fear default risk). So SolarCity could find themselves borrowing at 12% interest rates -- and as a result, losing money. On existing installs.
It's basically a bank run scenario, because *SolarCity is a shadow bank* right now. A bank without access to the FDIC or the Federal Reserve, so a bank with a high risk of bank runs.
As I said in another thread, if SolarCity had 20-year non-callable bonds, or equity, financing all its solar installs, they'd be secure. They don't.
Just some lighthearted fun to end a long day. Sorry for the OT
https://s31.postimg.org/6urr6pm7f/SYNERGIES.jpg
https://s31.postimg.org/6urr6pm7f/SYNERGIES.jpg
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