What a disaster. The purchase makes no real sense, unless you bend over backwards to try to force a rationalization. Anyone who thinks this is a good idea can't read a financial statement. Solar City as an investment is terrible, and even Goldman Sachs recently said they were one of the worst performing companies in the sector.
I'm expecting a ton of shareholder lawsuits at this point. The idea that Tesla was buying SCTY bonds is sketchy enough, the idea of buying the entire company is just insane.
1) TSLA is spending money it doesn't have to purchase a money losing company that does very little to help spur electric cars. Even if they did, the purchase and association with TSLA would have to somehow have a halo effect that doesn't currently exist. This will not happen because there's no way to increase sales of either. They could have just had a licensing deal or something, instead of purchasing the company at a premium.
To purchase a company that is so far away from your core-business model, ie. electric cars, is insane and fiscally irresponsible. Terrible ideas like this are what distract companies and cause them to fail. Look at Time-Warner purchasing AOL. SCTY is a financing play, that just happens to use solar power as its vehicle. It's maniacal rationalization to believe that this actually helps either business or will justify the purchase price.
2) See #1.
3) Anyone who thinks this is a good purchase can't read a financial statement, because otherwise they would see what sort of cash-flow-negative situation both TSLA and SCTY are in. Companies like this do not go and buy money losing companies that also burn cash.
These are both dream projects to change the world. Sure they don't look that good on paper but more power to them, I hope they succeed. They are both moonshots though, if there is any synergy or overlap it might make some sense.
> The purchase makes no real sense, unless you bend over backwards to try to force a rationalization.
Makes plenty of sense. SolarCity has a failing business model, but they have a nice facility in the works. Tesla Energy makes batteries that right now are only appealing to commercial players. If they combine the two in a good way, they may be able to make a product that's appealing to the consumer. As with any purchase, it all depends on how it'll be executed.
This is weird by American standards, but there are plenty of conglomerates who have their hands in many industries. Samsung, Hyundai, Mitsubishi, etc.
Neither are proven profitable businesses. $2.6B is a hell of a bet to make on the hope of something working out, with a company that is bleeding money. Two cash-flow-negative companies combined together doesn't magically result in more money, if anything it hastens the death of both companies.
The only profitable business is a business that has reached market saturation. A business that can't grow its market share by re-investing the margin on its products. Both businesses are in fledgling industries and are nowhere near saturation. In fact, both companies are expanding their respective markets, not merely gobbling up the shares of other companies. It would make no sense for either to be profitable.
> $2.8B is a hell of a bet to make on the hope of something working out
That's a relative statement. Relative to what? Microsoft just bought a shitty website for $26.2 billion.
> Two cash-flow-negative companies combined together doesn't magically result in more money
Their cash-flow is irrelevant, Tesla has had little difficulty raising capital.
> if anything it hastens the death of both companies
So the death of both is already etched in stone and this just hastens things? Nonsense.
I'm pretty sure based on your answers you have no idea how things work in the real world. Reading "The Lean Startup" or "The Art of the Start" doesn't really qualify you to make such nonsensical statements about how a multi-billion-dollar publicly traded company should behave. A startup burning through $10M of VC funding is completely different from a publicly traded company burning through $2B in funding. You can't even justify it at this point. Tesla Energy is a dream, you can't waste $2.6B on an unproven dream and then buy a completely unprofitable cash-bleeding company when you yourself are bleeding cash. He needs to have much better sense than that as a CEO, his duties to his shareholders demand it.
> Reading "The Lean Startup" or "The Art of the Start" doesn't really qualify you to make such nonsensical statements about how a multi-billion-dollar publicly traded company should behave.
I've read neither, I do have a degree in economics though... does that count?
Do you have a short position on SCTY? If so, then I understand your "comments" and why you're pissed. Sorry? LOL
> He needs to have much better sense than that as a CEO, his duties to his shareholders demand it.
Last time I checked, he recused himself and the shareholders have to approve the deal ... what are you going on about?
> I've read neither, I do have a degree in economics though... does that count?
Nope. Economics != Finance, sorry. And it shows from your misunderstanding of "running" a business. A profitable business only happens when you have market saturation? LOL that's some economics education...
> Do you have a short position on SCTY? If so, then I understand your "comments" and why you're pissed. Sorry? LOL
Nope.
> Last time I checked, he recused himself and the shareholders have to approve the deal ... what are you going on about?
He's the one that came up with the deal, and bid on SCTY with a 30% premium. Given the dire situation the company is in, and given how it's the worst performing solar company, they will have no choice but to accept.
I'm expecting a ton of shareholder lawsuits at this point. The idea that Tesla was buying SCTY bonds is sketchy enough, the idea of buying the entire company is just insane.