Tesla is already the subject of a Securities and Exchange Commission investigation into whether it breached securities laws by failing to disclose the Florida crash prior to selling $2 billion worth of shares. The January crash would seemingly raise similar concerns.
With Tesla, still a minnow in the global auto market, soon facing new competition from deep-pocketed rivals including General Motors’ Chevy Bolt, its brand reputation has never been more important. The longer questions linger about the safety of its vehicles, and the company’s willingness to discuss potential issues, the more that reputation is put at risk.
Read more "China Crash Raises Fresh Questions About Tesla’s Disclosures"
There are a couple of implications from the new financing announcement. One is that SolarCity’s funding costs are getting higher over time, meaning it’s generating less value for investors. Another is that it’s selling most of the cash flows it will get from customers, meaning there’s less and less upside potential in the future.
The flip side is that SolarCity has been able to get funding for its projects, keeping the company’s operations afloat for now. That’s a positive as SolarCity attempts to be bought out by Tesla Motors and transitions its business from financing leases and power purchase agreements to selling solar systems to customers with third-party financed loans.
The final point may be most important for those looking at the company today. If SolarCity can transition to cash sales or loans, it will generate up-front cash, lessening its reliance on financing transactions. If that’s the case, today’s rising financing costs won’t matter nearly as much as they would otherwise. But that’s a lot for a company like SolarCity to juggle, especially in the middle of a buyout process.
Read more "SolarCity Raises $305 Million, but There’s a Catch"
“SolarCity is in dire need of cash. It’s already gotten two bridge loans from Tesla and it needs this deal to go through,” said Gordon Johnson, an Axiom senior analyst, told Real Money this week. Axiom, in its June 28 report on SolarCity, estimated the company wasquickly burning through its cash and would likely fall to near zero, or $1.4 million, by the fourth quarter. As a result, some Wall Street watchers have been whispering the “bankruptcy” word as it relates to SolarCity.
Read more "2 Reasons SolarCity May Be Headed for a Power Failure"
Jim Chanos called Tesla Motors’ proposed merger with SolarCity”crazy” and “the height of folly” while outlining his short positions in the stocks on Tuesday.
The short-seller from Kynikos Associates estimated the combined company would burn through $1 billion per quarter and “constantly need access to capital markets.” He described SolarCity’s business model as “just plain uneconomic.”
Read more "This shows why Tesla-SolarCity is a ‘crazy’ merger, Jim Chanos says"