The Tesla Effect: SolarCity’s Stock Price Mostly Unchanged After Weak Earnings Report

SolarCity
Image credit:By BrokenSphere (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0) or GFDL (http://www.gnu.org/copyleft/fdl.html)], via Wikimedia Commons

In June of this year, Tesla Motors offered to buy SolarCity in an all-stock transaction, for a price of 0.122 to 0.133 shares of Tesla stock for each share of SolarCity stock. Given Tesla’s share price at the time of the announcement,  that worked out to about $26 to $29 per share of SolarCity.  This represents a premium over the current price, but a hard pill to swallow for those investors who bought SolarCity stock for as much as $40 per share in January of this year.

SolarCity reported their Second Quarter 2016 financial results yesterday, and despite a $250 million loss and a previous sales target cut, their stock price remained mostly unchanged in the $24.25 – $24.31 range.  Bloomberg.com’s Liam Denning believes this is due to the impending merger with Tesla, as he wrote yesterday:

Tesla’s earnings hardly matter anymore — it’s all about the vision. Now that SolarCity’s stock is a function of Tesla’s, the solar leasing company’s numbers don’t matter anymore, either.

That herculean target for deploying panels in the fourth quarter, for example, will start to fade in the collective mind once SolarCity becomes a subsidiary of Tesla — which is scheduled to happen later this year. Ditto for SolarCity’s objective of positioning itself “to report one of the lowest Cost per Watt in our history in the fourth quarter of 2016,” given it likely won’t make that report as a separate company. For SolarCity’s shareholders, who will likely soon own Tesla stock, their former company will be but one small part of Elon Musk’s much broader ambition.

And Elon Musk hinted during the earnings conference call yesterday that SolarCity would be launching a new solar roof product, saying that “It’s not a thing on the roof, it’s the roof” and that it will be part of a differentiated product strategy for the solar company.

One thing is for sure, there is never a dull moment where Elon Musk is involved.

 

 

Tracey Smith About Tracey Smith
Tracey is an accountant and entrepreneur with a passion for nature. This passion is what spurred her interest in renewable energy, and the rest is history as they say. Tracey is a principal in Energy Think Group, the publisher of Solar Thermal Magazine and Tek-Think. She is also the principal at Women's Financial Help Desk. She spends her free time in the outdoors with her horses and dogs. She loves to travel.

Leave a Reply

Your email address will not be published.