The slippery slope of a debt-filled company
SolarCity’s value quickly evaporates and even goes negative if we just discount the company’s cash flows at an appropriate discount rate. And I would argue that the assumptions that go into the current NPV calculation are too aggressive, and the 8% discount rate is also too low.
It looks like SolarCity is desperate for cash, and the only way investors are going to give it to them is by raising the cost. That’s a slippery slope for any solar company.
This is a growing problem for SolarCity, and will become a problem for Tesla Motors if it acquires the solar installer. Debt is fuel for SolarCity’s business, and the cost of fuel is going up big time.
Read more "SolarCity Has a Big Problem On Its Hands"
NASA has been studying the pyschological effects of automation for decades, and thus may have something to teach Tesla, notes Scientific American.
“News flash: cars in 2017 equal airplanes in 1983,” Stephen Casner—a research psychologist at NASA’s Human Systems Integration Division—told the magazine.
For the public at large, the name “Autopilot” seems to imply a similarity to the automated systems that help fly planes, although the capabilities of the Tesla system are much more limited.
Read more "Why NASA thinks the Tesla Autopilot is a bad idea"
The problem for Tesla, and anyone who bid up its stock Tuesday afternoon, is that it has already pushed investors’ horizons out so far, in the interest of raising more capital, that even going beyond “ludicrous speed” on its flagship car doesn’t get pulses racing. If your CEO has spent months and months talking about a new mass-market vehicle, home batteries, buying SolarCity, electric trucks and robo-taxis, then cutting that zero-to-60 lag by 3 tenths of a second seems rather humdrum.
Read more "Tesla has faster cars, but we were promised Jetpacks"
Meanwhile, SolarCity plans to offer integrated power-generating roofs in addition to the solar-power panels it has been installing on existing structures.
Neither company has yet become fully profitable, and the share prices for both companies trended downward in today’s trading. This week, Musk and other SolarCity executives reported that they purchased tens of millions of dollars worth of bonds issued by the company – a move that CNBC said stirred concerns among some industry observers.
Read more "Feds approve $2.6 billion Tesla-SolarCity merger, but stock market says ‘meh’"
In usual Musk fashion another project has been delayed.
Musk had always promised to get his rocket up for all to see, but the plan was delayed In because the factory is so close to Hawthorne Municipal Airport and the FAA was worried about the flight risk. It will join the company’s first Dragon capsule to make it back to earth on permanent display, although that hardware is stored inside the facility.
Read more "Gaze in awe at Elon Musk’s historic 156-foot erection"
In short, SolarCity shareholders know what they’re getting with this merger — an unexpected bailout. Tesla shareholders are not so fortunate, and SolarCity’s bad balance sheet may be the least of what they have to deal with.
Read more "Are Tesla Investors Getting A Raw Deal In SolarCity Merger?"