Tesla’s Race to the Sun


Tesla shareholders will receive 1 share of SolarCity in exchange of 0.11 of each of their own shares. The transaction is allegedly expected to create an integrated sustainable energy company and leverage cross-selling opportunities. However, Elon Musk’s – Tesla’s CEO’s – significant ownership in both companies and the presence of interested directors on the boards create a great deal of ambiguity around the transaction, particularly given the not-so-shining financial position of SolarCity.

About Tesla Motors

Founded in 2003 by a group of engineers in Silicon Valley, Tesla Motors is a producer of electric cars, aiming to accelerate the world’s transition to sustainable energy. Tesla owners enjoy the benefit of charging their cars at home, while for long distance journeys, Tesla’s Supercharger network provides them with access to high speed charging, connecting popular routes in North America, Europe, and Asia Pacific.

On June 29, 2010, the company went public on NASDAQ stock exchange and listed its shares at $17: On the first trading day, the shares soared 41%. The new funds allowed the company to grow further, and in 2012 Tesla launched Model S, the world’s first premium electric sedan. With more than 50,000 vehicles on the road worldwide, Tesla also launched Model X, a crossover vehicle, and presented Model 3, a new vehicle starting just at $35,000. As of the end of the last reporting year, the company is still losing money. In 2015, Tesla generated $4,046m in revenues (26% y.o.y) and $716m in operating losses (3.8 times as much as the year before). 44% of operating expenses are comprised of expenditures on research and development.

About SolarCity

SolarCity is a vertically integrated company that provides renewable electricity directly to homeowners, businesses and government organizations by taking care of everything from design to monitoring and maintenance. The company installs solar panels for commercial and residential properties on sale or lease terms.

On December 12, 2012 the company went public at 8$ (down from initial range of $13-$15 due to negative market sentiment), but the price rose 47% on the first trading day.

As of June 30, 2016 SolarCity has $5.2bn in solar energy system assets on its balance sheet, contracted to create $3.1bn in future payments on a net present value basis (assuming 6% discount rate). However, SolarCity’s business depends on debt — the company offers homeowners the chance to install solar-power systems with little to no money down, and collects monthly payments instead. Such business model led to the high level of indebtedness.

[Continua a leggere su bsic.it]

All the views expressed are opinions of Bocconi Students Investment Club members and can in no way be associated with Bocconi University. All the financial recommendations offered are for educational purposes only. Bocconi Students Investment Club declines any responsibility for eventual losses you may incur implementing all or part of the ideas contained in this website. The Bocconi Students Investment Club is not authorised to give investment advice. Information, opinions and estimates contained in this report reflect a judgment at its original date of publication by Bocconi Students Investment Club and are subject to change without notice. The price, value of and income from any of the securities or financial instruments mentioned in this report can fall as well as rise. Bocconi Students Investment Club does not receive compensation and has no business relationship with any mentioned company.

Copyright © Sep-16 BSIC | Bocconi Students Investment Club