SolarCity (SCTY) to be acquired by Tesla (TSLA)

• Tesla's bailout of Elon Musk cousin's company, SolarCity.

    

SolarCity (SCTY): Elon Musk proposes combining his electric-car Tesla Motors (TSLA) and solar-power companies in a potential $2.8 billion deal. (6/21/16)

Elon Musk proposed combining his electric-car and solar-energy companies, in a bold effort to consolidate his holdings and offer widespread clean-energy products from vehicles to power in homes.

Tesla Motors Inc., Mr. Musk’s Palo Alto, Calif., electric-car company, on Tuesday offered to acquire SolarCity Corp. in a stock deal valuing it at up to $2.8 billion. Mr. Musk is the chairman and largest shareholder of both companies.

Tesla in a letter to SolarCity’s chief executive said its offer represented a value of $26.50 to $28.50 a share, or a premium of roughly 21% to 30% over SolarCity’s Tuesday closing price of $21.19.

***** The following day / reaction:

To many, the buyout looked like a bailout of one Musk company for another. SolarCity has more than $3 billion in debt and Goldman Sachs claims it is very close to breaching its loan covenants.

Corporate governance questions are being raised because Musk owns 21.1% of Tesla and 22.5% of SolarCity. And two Musk cousins are the CEO and CTO of SolarCity. In addition, only two of Tesla's directors have no ties to SolarCity and only one SolarCity director has no ties to Tesla.

Another factor raising eyebrows is the fact that Elon Musk has pledged four million of his 22 million SolarCity shares as collateral against his personal borrowings from Morgan Stanley.

SolarCity shares have plunged this year. Was Musk near getting a margin call? That's a very legitimate question many are asking.

For his part, Musk called the deal a “no-brainer.” He sees it as the next logical step in his vision of the future of sustainable energy and transportation. The newly-merged firm would be an “integrated sustainable energy company” that would become the first company with a trillion dollar valuation, says Musk.

One thing is certain. Existing Tesla shareholders will see their stake further diluted as Tesla will issue another $2.5 billion in stock in order to buy SolarCity. Tesla is offering between 0.122 and 0.131 of its shares for each share of SolarCity.

If one includes the stock offering in May, Tesla's existing shareholders are seeing nearly a 14% dilution of their shares in just a few short months.

Clean tech companies poised for 2014 IPOs

SolarCity (SCTY) shares hit a record high earlier this week after Goldman Sachs upgraded the stock to buy, making it easy to forget the solar-panel installer’s rocky road to market just over a year ago.

SolarCity’s debut in December 2012 was ultimately successful, with its shares surging nearly 50% on the first day of trading, but that was only after a price cut to $8 a share. The stock has since rocketed 700%, prompting calls from investors for the clean-technologies sector to throw open the IPO floodgate.

Despite the clamor, though, it could be slim pickings in 2014.

SolarCity’s IPO “has not unleashed the flood of clean-tech IPOs that market participants expected in 2013,” said Kathy Smith, a principal with Renaissance Capital. In fact, she said there are “very few” such offerings in Renaissance’s 2014 pipeline.

Sahir Surmeli, an attorney who co-chairs the energy technology practice at Mintz Levin, is more optimistic. Energy-technology companies are becoming more integrated into the conventional energy infrastructure, for which, he said, he sees a “strong year” in IPOs.

The companies are growing their revenues and prospects, and their business models are becoming more real for investors, whereas, just three or four years ago, such firms were sold as representing “the future” rather than the present, he said.

If the global economy continues to improve at a reasonable pace, there will be enough stability in the markets to open the doors for more public offerings, he added.

Biofuel makers are the likely exception. These could have a hard time drumming up interest, since there’s already a fair number of public companies available for investors — and their gains have lagged the rest of the sector.

That said, here are the companies industry analysts believe are most likely to go public this year:

Opower Inc., which runs energy-efficiency programs for utilities, is in the home stretch, having hired Morgan Stanley and Goldman Sachs to lead its public offering.

The Arlington, Va.–based company has been preparing its IPO since at least last year and recently added some key people to its board of directors. A market debut is expected in early 2014.

Opower serves more than 90 utilities, including eight of the 10 largest in the U.S., according to its website. Daniel Yates and Alex Laskey founded the company and serve as CEO and president, respectively.

Sunrun Inc., headquartered in San Francisco, is a solar-power installer, and its business model is power-purchase agreements, where users pay for the electricity and lease their PV panels rather than buying them.

In June, Sunrun announced it had secured financing for more than $630 million in residential solar projects. Its main competitors are SolarCity and SunPower Corp. SPWR -0.33%  . Edward Fenster and Lynn Jurich co-founded Sunrun and are the company’s co-CEOs.

Bloom Energy of Sunnyvale, Calif., makes solid oxide fuel cells around which it builds on-site power-generation systems. Its star-studded customer list includes Wal-mart, Google and AT&T, and the firm in August started a leasing program with Bank of America Merrill Lynch (terms weren’t disclosed). K.R. Sridhar, with a background in aerospace, is co-founder and CEO of Bloom.

In the past couple of years, several clean-energy companies have filed and then withdrawn IPO applications. Any of them could, however, toss their hats back in the ring this year.

Clean-energy and related companies that shelved IPO plans in the past include biofuel makers CosKata Inc. of Illinois, which halted its IPO process twice; Fulcrum Bioenergy of California; and Smith Electric Corp. of Massachusetts, a maker of commercial electric trucks and buses.

The Class of 2013, besides SolarCity, included BioAmber Inc. BIOA +0.12%  , a renewable chemicals company that debuted in May and also reduced its initial pricing range, and smart-grid company Silver Springs Networks Inc. SSNI +6.32%  , which went public in March at $17 a share, in the middle of its anticipated price range.

SolarCity (SCTY) IPO rises 47% from reduced price

• Shares of SolarCity, the solar energy company backed by entrepreneur Elon Musk, jumped nearly 50% on their first day of trading Thursday.
• The stock soared 47% above its $8 IPO price to close at $11.79.
• The company, which sets up financing for individuals and companies to install solar equipment, raised $92 million from its IPO — it sold 11.5 million shares at the $8 IPO price. That was a bit of a downgrade from the 10.1 million shares it expected to sell for between $13 and $15 a share.
• SolarCity is just the latest company for Musk to bring public. His electric car company, Tesla Motors, on June 28, 2010 raised $226 million by selling 13.3 million shares at $17 a share. Shares of that company now trade for $35.05.
• Musk is also founder of SpaceX, the aerospace company that is launching low-cost rockets into space, seen as a economical alternative to the pricey near-orbit systems previously operated by the U.S. government.

SolarCity executives and employees ring the opening bell on the Nasdaq Stock Exchange

SolarCity Corp. (SCTY) traded at $11.79 a share for a gain of 47%  over its $8 price in its initial public offering on Thursday. The IPO from San Mateo, Calif., installer of solar power systems raised $92 million by offering 11.5 million shares of common stock.

Earlier this week, SolarCity cut the price of the deal from its estimated range of $13 to $15 a share. Solar City also increased the size of the IPO from 10.07 million shares. Elon Musk, the chairman of SolarCity's board, planned to buy 1.88 million shares in the deal at the IPO price, the company said in a filing with regulators. Goldman Sachs, Credit Suisse and Bank of America Merrill Lynch served as representatives of the underwriters and joint book-running managers for the offering.

** 2 months later **