Tesla s acquisition of SolarCity for investment what does it mean

Polaris solar PV net news: June 21, 2016, Tesla Motors announced a $ 2.8 billion takeover of United States for residents of the largest photovoltaic SolarCity all shares of the company. Although Tesla said the acquisition was out of strategic considerations, from which it is clear that both companies will gain short-term benefits: SolarCity will gain a new source of cash, Tesla’s closest business partner was incorporated. So what does this acquisition mean for investors?

• Why buy SolarCity? This high-end electric car with battery manufacturers in their blog post lists the five main acquisition interests: vertical integration, expanding the potential market, excellent “core competencies” and culture, as well as large-scale economic costs of installation services. This acquisition will also integrate corporate family relationships and expand existing partnerships. For example, Tesla, SolarCity can provide residential, commercial, and mass storage.

• The move, SolarCity is way out, Tesla is also a beneficial deal? SolarCity face many challenges to business models, including in the United States to the photovoltaic power generation systems from third-party ownership ownership of the main changes, policy changes at the State level and high installation costs. SolarCity’s $ 5.6 billion of market value from June 22, 2015 fell to June 21, 2016, $ 2.1 billion, loss of 63% a year.

• Tesla’s acquisition of SolarCity there may have broader intent, as Tesla will receive a complete solution and resources, will help to develop into a power company. Tesla’s energy can be used in electric-vehicle charging device and rooftop photovoltaic power generation system with energy storage devices for effective integration between.

• Tesla what risk? Investors are unlikely to benefit the perspective of this acquisition. To accelerate the production of Model3, Tesla in May, through equity financing, but had raised only $ 1.4 billion. Upon completion of the acquisition, SolarCity the worth $ 5.8 billion company’s $ 3.2 billion in debt will be included in the Tesla’s balance sheet, this can also cause investor concern. (After the market close on June 21), after the deal was announced, at 9:50 as of June 22, Tesla’s shares have fallen by 7%. Investors may believe that Tesla has too many tasks to be completed, to be completed in 2017, Gigafactory large battery factory, then in 2018 Model3 quickly put into production.

• Sources of financing? SolarCity and Tesla have cash flow issues, mergers and acquisitions are not only unable to solve this problem, it could make it worse. SolarCity’s financial business model depends on sustained and stable cash flows working capital to support new development. SolarCity tried the past two years new ways to pump cash back into the business development process. SolarCity has led to sponsor development of securitization markets, six securities issued for a total of $ 692 million portfolio. In addition, SolarCity has introduced Enterprise “solar bonds”. But with this acquisition event similar to SolarCity currently the biggest buyer of the issue is the musk of SpaceX.

• The deal too complicated? Analysts and investors believe the SolarCity and Tesla for individual valuation is very challenging. The merger is likely to be set for all of the two companies issue and lead to a deterioration in investor relations. But even so, according to Bloomberg data, Tesla 66% shareholders also own shares in SolarCity, SolarCity62% shares are held by Tesla investors.

• For some investors, the investment musk claimed “the only company in the world to provide end-to-end clean energy products vertically integrated energy company” is extremely attractive. Thomas g three company-owned Tesla, and SolarCity, and SpaceX, financial relationships are complex, there is a potential problem, and the merger is expected to clear up that part because Tesla and SolarCity will operate within the same corporate structure, and can also be assigned to the same SEC quarterly archives.

• Strategic alignment: musk move was aimed at achieving synergy Tesla and SolarCity product line. Electric car owners prefer installing rooftop photovoltaic systems, and vice versa. Residential and storage and maybe to Tesla ModelS and ModelX potential buyers at a low cost. In addition to providing product, Tesla energy (SolarCity) may participate in virtual integrated services in the future, solar, storage, management, and an electric-vehicle charging device business. In the overall ecosystem of Tesla-SolarCity, companies can control the biggest source of demand (electric cars), the largest demand response units (family storage system), and the only power generation systems (rooftop photovoltaic installations). But at least in the solar energy sector, full vertical integration currently few good results.

• Solar energy competitive advantages in the areas of: other residential installation service providers are marketing to consumers such as Sunrun Tesla Powerwall household batteries. After the merger, it is not clear how these service providers will respond, nor is it clear whether Tesla will continue to sell products to these enterprises. Sonnen residential storage company will continue to focus on this area.

• Trust in Mr MASKEY: as the largest shareholder of the two companies, musk plans to formally abandon the merger agreement the right to vote. But investors can get in the merged companies is that the musk and his grand vision of a more direct betting opportunities. Risk to the clean energy industry as a whole have gone up tremendously, because Tesla/SolarCity success/failure reflected not only electric or solar energy industry structure, but also macroscopic concept of the new clean energy economy.

Data:

• 340–residential battery installed by SolarCity, Tesla estimated quantities

• 260,000–as of the first quarter of 2016 SolarCity photovoltaic installations installed capacity

• 114,900–as of the first quarter of 2016 Tesla EV sales

Original title: Tesla’s acquisition of SolarCity for investment, what does it mean?

Posted in Solar Charger.