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by chollida1 3604 days ago
link to the investor presentation if you want to read it:

http://files.shareholder.com/downloads/ABEA-4CW8X0/254764622...

After the deal closes, expected to be Q4 2016, the ownership split will be:

93.5% Tesla / 6.5% SolarCity

Interestingly, this is an all shares deal. With most people assuming Telsa will need to raise another large round soon to fund full scale production of the Model 3 it will be interesting to see what sort of terms, if any, Tesla will need to give investors to raise.

Current shareholders don't seem too put off the by constant dilution of this acquisition or the constant equities raises. Tesla's short interest is high as always, so they continue to be one of the most polarizing companies around:)

Fun note in the presentation, Solar City has a shop window in the deal where they can take this deal and shop it to other companies to try and get a better deal. Anyone want to take a bet as to whether or not they actually try and shop this deal at all?

2 comments

As a Solar City shareholder, I think I'm getting screwed. Solar City, at $26.70/share last Friday has a lot more upside than TSLA at ~$235. Hell, I lost almost 5% over the weekend due to where they priced this deal.
The dollars per share are meaningless, but SCTY was heading rapidly towards $0. I think you got the better end of the deal (I don't currently have shares in either firm).
The biggest reason SCTY went up to ~$26.70 was because of the announcement a few weeks ago (which speculated $26 to $28 buyout price).

I don't think anything unfair happened to you.

Usually buyouts like this are priced well above the current trading range of the acquisition, presumably in order quell shareholder opposition. In this case I think it is probably a more than fair price for SolarCity, even though it is lower than where it has been trading. SolarCity's future prospects at this point mostly hinge on integrating with storage technology, now that net metering is starting to get killed off slowly. Tesla can provide that, so it is only fair they get them at a bit of a discount. If someone else who can pay comes along and thinks they are worth more, they will.
What's your basis for thinking that SolarCity has more upside than Tesla?
Why would the price of the share be relevant (as opposed to e.g. the market capitalization of the company)?
I agree. I should have referenced market cap to give a useful argument. My thinking may be wrong, but here's what I have:

1. TSLA is close to it's all time high. SCTY is well below it's all time high (Granted, I don't see it going back to $80+ anytime).

2. TSLA market cap (34.5B) is 70% that of Ford (49.3B) or GM (49.7B). I know Ford and GM are probably undervalued and there are many differences between them and Tesla, but this suggests to me that Tesla is overvalued.

3. Solar City market cap is 2.4 billion. Solar City has a market share in the US of 34% (approx). Solar City market cap compared to the rest of the industry makes sense.

4. The Solar Industry is here to stay. Solar City, as the US leader, is not going bankrupt (the Tesla board of directors agrees with me on this or they would not approve the deal). Investments would swing back to SCTY at some point pushing the stock to $40-$50 (or ~4-5 billion in market cap).

If anything, Solar City is a (the?) money-making engine for Tesla now. You're correct that your investment is undervalued in the stock split. Contact a good attorney and begin a lawsuit (avoid class-action) against Tesla for this bargain-sale buyout. Makes me wish I had bought SCTY stock for the opportunity to file on my own.
jaynos is saying that TSLA is unlikely to go much above $235, but Solar City had a lot of potential to move above $26.70. By converting them now, they've basically thrown away all the potential future movement.
The point is, that share prices are absolutely meaningless without the number of shares which just gives you market capitalization. Tesla could just do a 8:1 split and their per-share price would be $30/share -- Would that change their upside? Of course not.
Presumably jaynos meant those prices are relevant in relation to historical prices: Tesla is near all-time highs, while SolarCity's share price has been around $75 at one point.

I do agree with another poster that SolarCity was more likely to be heading towards $0, rather than back to $75.

Potential upside is considered by the market in current pricing.
You're completely right. TSLA investors are being used to save a company with uncertain future.
Except jaynos is claiming the opposite -- that Solar City shareholders are getting screwed over to benefit Tesla shareholders.

It's easy to understand your point of view; jaynos's is a little more mysterious.

You're only getting screwed if a higher offer isn't made by someone else.

Disclaimer: TSLA investor.

Reading the presentation, Musk seems to be saying, "Solar City is great and will be even better if I run it like I do Tesla". And a hand wavy, "we have the same customers."

This seems like an unusually sketchy move from him.

Feels like a "thanks cousin, but now it's time I run this company too" pseudo takeover thing. Personally I don't mind, as an investor in both SCTY and TSLA.
> "we have the same customers."

Well, I assume that means the Powerwall, in which case I agree, they do have a lot of the same customers.

I think there's a lot of potential to market Tesla cars/batteries to Solarcity customers, and Panels to Tesla car/battery owners. I wouldn't be surprised to see combo packages sold in the future.

He means the cars. When you buy a Tesla the first thing they do is send you marketing materials to get a Solar City install to charge your car at home, as they are an "approved vendor".

So a lot of people with the cars have Solar City installs on their roof.

Isn't Solar City run by his cousins?
And he owns a lot of its stock.