Tesla’s Elon Musk Buying Over Half of SolarCity Bond Offer

Musk’s purchase of the so-called “solar bonds” comes after money-losing SolarCity last week said it would cut operating costs to bring expenses in line with its reduced solar installation outlook.

SolarCity CEO Lyndon Rive and Chief Technology Officer Peter Rive are each buying another $17.5 million of the $124 million offer, according to the SolarCity filing.

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SolarCity Has a Big Problem On Its Hands

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.

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Feds approve $2.6 billion Tesla-SolarCity merger, but stock market says ‘meh’

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.

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Elon Musk’s Tesla plans are all futuristic promise with no product

Author: Edward Niedermeyer Source: AFR Elon Musk’s second “master plan” for Tesla Motors arrived much like one of the electric automaker’s cars: brilliant and inspiring, but late and rough around the edges. And like Tesla’s desirable yet quality-challenged cars, Musk’s vision is sure to be embraced and evangelised by anyone who was already convinced that […]

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