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.

SolarCity (SCTY) reported earnings on Mon 9 May 2016 (a/h)

** charts before earnings **

 

** charts after earnings **

SolarCity misses by $0.19, beats on revs; guides Q2 EPS below consensus, revs below consensus :

• Reports Q1 (Mar) loss of $2.56 per share, excluding non-recurring items, $0.19 worse than the Capital IQ Consensus of ($2.37); revenues rose 81.6% year/year to $122.57 mln vs the $110.02 mln Capital IQ Consensus.
  • MW Deployed 214 MW, +40% y/y (Guidance was for 180 MW).
    • "We significantly exceeded our projected 180 MW mostly due to the earlier completion of a large utility-scale project in Maryland that was originally anticipated for Q2 2016".
  • Cost per Watt of $3.18 increased 19% from the fourth quarter of 2015 largely owing to lower volumes. Installation costs decreased 6% year-over-year, albeit rising 3% quarter-over-quarter to $1.98 due strictly to a larger mix of higher cost commercial projects.
  • structured financed team recorded one of its strongest quarters yet with $728 million in total project financing raised in the quarter (and $1.1 billion through April).
  • Portfolio is 74% residential and 26% C&I and is geographically diversified across 18 states plus D.C. (38% East Coast, 34% California, 13% Arizona, 8% Nevada, and 7% other).

This week's biggest % winners & losers : May 2 - 6, 16 (wk 18)

The following are this week's top 20 percentage gainers and top 20 percentage losers, categorized by sectors (over $300 mln market cap and 100K average daily volume).

This week's top 20 % gainers

• Healthcare:TRXC (1.95 +30%),SRPT (17.7 +24.74%),GKOS (23.03 +22.24%)
• Materials:RYAM (14.4 +40.49%)
• Industrials:QUAD (16.1 +28.29%),TPC (19.44 +22.88%),NSP (64.71 +22.63%),AAWW (46.79 +17.15%)
• Consumer Discretionary:NTRI (26.14 +18.71%),IBP (31.49 +18.47%),CCO (5.88 +15.07%),APOL (8.95 +14.74%)
• Information Technology:OPWR (10.33 +30.76%),FARO (34.26 +17.98%),IAC (53.78 +16.06%),CGNX (40.61 +14.3%)
• Energy:EPE (6.03 +22.81%),ATW (11.52 +19.25%)
• Consumer Staples:CENT (18.95 +16.47%),CENTA (18.6 +14.18%)

This week's top 20 % losers

• Healthcare:ENDP (16.17 -40.11%),KTWO (11.53 -29.09%),RLYP (13.51 -25.36%),AMAG(19.85 -25.15%),PBYI (23.49 -23.46%),RMTI (7.09 -23.35%)
• Materials:CLF (3.51 -33.4%)
• Industrials:RRTS (8.05 -31.9%), SCTY (21.84 -27.97%)
• Information Technology:SQ (10.22 -31.36%),IMPV (33.79 -27.3%),RUBI (14.15 -26.95%),DDD(13.16 -25.61%),FEYE (12.95 -25.39%),FIT (13.62 -25.37%)
• Financials:ONDK (5.12 -40.67%)
• Energy:CHK (4.59 -33.19%),WFT (5.67 -30.26%),AROC (7.34 -25.48%)
• Utilities:VSLR (2.46 -26.35%)

SCTY — is it a buy?

• Apr. 5 : Is SCTY a buy?

• A month later:

SolarCity (SCTY) reported 4Q earnings on Tue 9 Feb 2016 (a/h)

** charts before earnings **

 

** charts after earnings **

  

SolarCity reports Q4, beats on revs; guides Q1 EPS below consensus :

• Reports Q4 (Dec) earnings of $0.04 per share, which may not be comparable to the Capital IQ Consensus of ($2.59); revenues rose 60.8% year/year to $115.48 mln vs the $105.67 mln Capital IQ Consensus.
  • MW Installed: Record 272 MW, up 54% year-over-year (Guidance 280-300 MW)
  • MW Deployed: 253 MW, up 44% year-over-year
  • Value of MW Deployed under Energy Contracts: $3.64 per watt at a 6% discount rate ($3.32 per watt contracted and $0.32 per watt estimated renewal)
  • Cost per Watt: $2.71 per watt, down 5% year-over-year;
  • Asset Financing in Q4 2015: $2.40 per watt.
  • As of December 31, 2015, unrestricted Cash and Investments totaled $394 million, as compared to $418 million on September 30, 2015. The quarterly decline in cash of $137 million.
  • Residential has consistently performed above expectations over the last year, and missed guidance largely on commercial installations.
  • Going forward, plan on removing from guidance any large projects with construction deadlines late in the quarter.

Guidance

• Co issues downside guidance for Q1, sees EPS of ($2.65)-($2.55) vs. ($2.36) Capital IQ Consensus Estimate.
• Looking ahead to 2016, continue to target 1.25 GW Installed. Though the ITC extension certainly provides more tailwinds to growth, the primary focus is goal of generating positive cash by year-end.
• "Though we are projecting a lower rate of growth in 2016 than in years past, our guidance still implies over 40% annual growth in 2016, a rate of growth that would be the envy of most industries and companies in this country".
• For Q1 2016 expect to install 180 MW, representing growth of 18% y/y, and a 34% decline as compared to Q4 2015. This represents a higher-than-usual seasonal slowdown that have historically experienced after strong fourth quarters
• Expect installations-and cash generation-to ramp throughout 2016.
• For Q1 2016, expect GAAP Operating Expenses of $230-240 mln.

SCTY — is it a sell?

• Feb. 4: Is SCTY a sell?

• 9 days later (and after earnings)

SolarCity (SCTY) reported earnings on Thur 29 October 2015 (a/h)

** charts after earnings **

=== 2nd day after earnings, Mon 2-nov-15 ===

This week's biggest % winners & losers : Oct 26 - 30, 15 (wk 44)

The following are this week's top 20 percentage gainers and top 20 percentage losers, categorized by sectors (over $300 mln market cap and 100K average daily volume).

This week's top 20 % gainers

• Healthcare: RVNC (39.17 +48.43%), HRTX (27.42 +26.77%), NVDQ (13.05 +24.76%),CEMP (22.2 +23.33%)
• Industrials: ARII (57.72 +22.73%)
• Consumer Discretionary: LOCK (14.01 +45.18%), RGS (16.52 +27.57%), CTRP (92.97 +25.06%), PBY (15.04 +23.79%), QUNR (48.54 +22.82%)
• Information Technology: CRAY (29.63 +33.83%), TRMB (22.75 +22.84%), BDC (64.03 +21.96%)
• Financials: BMA (61.73 +35.14%), GGAL (26.75 +25.59%), BFR (23.25 +24.33%), TREE(121.36 +23.84%)
• Consumer Staples: RAD (7.88 +27.51%)
• Telecommunication Services: TEO (19.51 +31.03%)
• Utilities: PNY (57.31 +35.74%)

This week's top 20 % losers

• Healthcare: ELGX (8.54 -38.16%)
• Materials: IPI (3.86 -32.52%)
• Industrials: RRTS (10.64 -40.22%), SAIA (23.61 -28.3%), DGI (14.93 -26.92%), ICA (1.54 -24.51%), SCTY (29.65 -24.44%), FCN (34.01 -23.52%), SBLK (1.58 -23.3%)
• Consumer Discretionary: AAN (24.67 -33.13%), RCII (18.39 -28.14%), LRN (9.71 -24.96%),EROS (11.17 -23.75%)
• Information Technology: AFOP (13.61 -24.35%), GRUB (23.98 -22.74%)
• Energy: BTU (12.79 -45.13%), CNX (6.66 -29.89%), FELP (5.91 -23.05%), ECR (2.15 -22.66%)
• Telecommunication Services: STRP (31 -37.65%)

Long trade : SCTY +17% (6/14)

• bot calls $1.17 and $1.25