Stocks Plummet and Musk seeks Bail-Out
What is the SolarCity Controversy?
For many consumers, the installation of solar panels means clean energy and savings in the long-term, so what’s the controversy and why has Tesla offered to acquire the company if it is such a success?
SolarCity leases solar panels to consumers for home installation, and one-third of the costs for each panel are subsidized by the government. This means taxpayer money.
The panels provided do not include the latest up-to-date technology, and because technology for panels is constantly changing, consumers agree to a 20 year lease on a panel that fails to account for future technological. Meanwhile, the numbers are telling us that, while its market value has surged tenfold in a two year time frame, stock value is down by 70% from its 2014 peak, and the company has acquired 4.9 billion in subsidies to help finance a mission that might be doomed for failure.
Who are the Key Players involved?
Elon Musk is the founder, CEO and CTO of the corporation SpaceX, and the co-founder of SolarCity and Tesla Motors- a company with a longstanding record of sustainability and success. Recently, given the plummeting stocks on SolarCity, Musk proposed a deal with his cousin Lyndon Rive, the CEO of Tesla Motors, which may be a game-changer for investors. According to USA Today, the deal involves Tesla buying SolarCity for $2.8 billion. Not only does the familial relationship between the companies pose as a potential conflict of interest, Tesla’s stock has gone down by 10 percent since buzz about the deal began. It’s no secret that SolarCity is banking on the promise of short term success while operating in a volatile and changing industry, but will they take Tesla Motors down the same doomed path?
Sources
http://www.wsj.com/articles/valuing-companies-like-solarcity-requires-bold-assumptions-1466620974
