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.

Tesla Motors (TSLA) reported earnings on Tue 3 Nov 2015 (after close)

** charts before earnings **

** charts after earnings **

Tesla Motors Q3 earnings: co lowered delivery guidance, as expected; demand remains strong; Gigafactory ahead of schedule :

• Q3 financials were roughly in-line.
• Co lowered FY15 deliveries for the second quarter in a row (to 50-52K from 50-55K), as many had anticipated, due to supplier capacity constraints in ramping production for the Model X SUV.
• Q4 deliveries are expected to grow 55% QoQ.
• Tesla expects the supply headwinds to abate and reaffirmed 1600-1800 production and deliveries for the Model S and X in 2016.
• Since the Model X launch event, order rates have accelerated for both Model S and Model X.
• Co also said there is strong demand for its Tesla Energy products.
• Perhaps most importantly, the co is ahead of schedule on the Gigafactotry.
  • Recall that the gigafactory will enable Tesla to produce a mass market Model 3 at scale.
• Tesla will unveil the design for the Model 3 in late March, 2016.
• Sentiment on the stock had grown negative due to the Model X production issues and a general conservative view on the co's lofty goals.
• The $230 area offered resistance in the after hours; the $210 area has provided recent support... 23% of the float is sold short.

since IPO in 2010, monthly chart

Tesla Motors (TSLA) : 4-year performance

** weekly **

** monthly **

Tesla Motors (TSLA) started trading on the NASDAQ on June 29, 2010

 

Elon Musk, CEO of Tesla Motors, stands with his fiancee Talulah Riley and his twin sons Griffin, left, 6, and Xavier at the Nasdaq’s opening bell to celebrate the electric automaker’s initial public offering on Jun. 29, 2010.
 

Tesla Motors, Inc. designs, develops, manufactures and sells electric vehicles and advanced electric vehicle powertrain components. The Company owns its sales and service network, and markets and sells its vehicles directly to consumers through the phone and Internet, in-person at its corporate events and through its network of Tesla stores. The Company commercially produces an electric vehicle, the Tesla Roadster. The Tesla Roadster offers acceleration and performance without producing any tailpipe emissions. In addition, it provides services for the development of electric powertrain components and sells electric powertrain components to other automotive manufacturers. On July 1, 2010, it introduced the Roadster 2.5, with new styling and an upgraded interior. As of December 31, 2010, it had delivered over 1,500 Tesla Roadsters to customers in 31 countries, almost all of which were sold in North America and Europe.

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Tesla CEO Elon Musk waves in front of the Model S at the Tesla factory in Fremont, Calif.