Polaris solar PV net news: SolarCity was recently musk has his own money to buy a $ 65 million bond after he repeatedly through the purchase of debt and equity financing for SolarCity and Tesla, however, this financing method is controversial, some analysts think this is a red light warning, investors think it’s nothing to worry about.
August 23 Tesla CEO musk announced that its electric car will be equipped with the new batteries, including 16.7% ModelS top speed will increase as the world speeds of the fastest production car, but investors responded coldly. Subsequently, Reuters reported SolarCity23 day regulatory filings, musk bought SolarCity $ 65 million in debt.
Although known United States 90 years the only successful car start-up, but on August 4 Tesla announced Q2 earnings did not seem optimistic, according to Tesla has lost 13 consecutive quarter, second-quarter net loss of $ 293 million, sales of $ 1.5 billion below Wall Street expectations of $ 1.6 billion. Gap loss continuously, the musk is how to solve the problem?
“Unusual” financial instruments
Analysis of the Wall Street Journal wrote, according to regulatory documents, when SolarCity and Tesla get into financial crises, the musk in addition to buying bonds, also use the line of credit to obtain $ 475 million purchase of their shares, the line of credit to musk in SolarCity and Tesla have stock holdings as collateral. Article said that musk many unusual financial means for the Tesla, SolarCity financing:
End of 2008 Tesla Roadster electric car delays and difficulty in financing and risk capital collapsed, musk put $ 20 million of funds of persons into Tesla, as part of the company for $ 40 million in financing;
In early 2009, musk to SpaceX borrowed $ 20 million in his own name. In an interview, he said, the loans “to finance Tesla”; Tesla went public in June 2010, musk to sell 1.4 million shares at a price of about $ 23.8 million in Tesla stock, SpaceX’s loan repayment and interest;
The beginning of 2013, little cash flow because of the production ModelS car Tesla and SolarCity in need of cash to run its leasing business for solar panels. According to regulatory documents, Thomas k lines of credit increased from $ 85 million to $ 300 million, he held 9.5 million shares of Tesla shares (29% per cent of its total shareholding), 6 million shares of SolarCity shares (29% per cent of its full stake) is used as a line of credit guarantees. From May 2013 to October 2013, musk used part of the funds obtained through lines of credit to buy $ 100 million of Tesla shares shares and 10 million dollar SolarCity, to pump money into the two companies.
March 2016 at SolarCity sold $ 105 million of debt, SpaceX bought $ 90 million. August 23 musk individuals to buy SolarCity6500 dollars worth of bonds.
Devonshire and independent research institutions have published reports that Tesla’s financing model is like a Ponzi scheme, noting that Tesla’s development depends to a large extent manufactured Award and zero emissions credits, can not be separated from the State and Federal Government subsidies.
Mr MASKEY, the Wall Street Journal pointed out that executives rarely receive loans through mortgage stock, because it would pose risks to other shareholders, and may cause the executives ‘ interests conflict with the interests of the company. Some analysts say, SolarCity and Tesla are large public companies, musk based on their practices of large amounts of stock as collateral to borrow large sums of money is open to question.
In February, shareholders agency according to InstitutionalShareholderServicesInc data, United States 3,000 top executives or directors of a listed company, only 13% shares as collateral for loans.
Independent Research Institute founder and senior analyst UnitEconomicsLLC NathanWeiss said:
“As an analyst, and the management of the company in which they have personal or financial interests between entities of direct loans, which for me is usually lit a red light signal. ”
Musk believes about his large personal loans and SolarCity, Tesla and SpaceX between for financial operations is suspected to have “legitimate reasons” because “when a company’s performance is much better than another, I borrowed money from the company. “But he defended:
“If I require investors to put more money, morally, I feel I should put my money. I should not ask others to do something, but they don’t do. ”
“More important is that if faced with certain fluctuations, Tesla, SolarCity and SpaceX of the pyramid does not appear-House of cards collapses. ”
He thinks he’s lending activities will not give shareholders at risk, because their shares add up to less than his total net assets 5%, this figure does not include his SpaceX holds a majority share. If you need to, says he can more easily be SpaceX and Tesla’s shares as collateral.
SpaceX and Tesla’s Director Stephen Jurvetson said musk these actions not aroused people’s concern, when asked if the musk’s personal loan in the shareholders ‘ best interests, and whether the directors had discussed the issue, he said:
“For this issue, you will see his stake. As long as Thomas g shares below its holdings of mortgage 5%, you don’t have to talk about it too much, although it is also cause for concern. ”
In addition, the 23rd is the musk in his own name for the first time purchase bonds directly from SolarCity, in addition to his, founder and CEO of SolarCity joint Lyndo nRive and Peter Rive, the Chief Technology Officer also purchased $ 17.5 million, respectively, and when asked why she bought SolarCity bonds, Lyndon response:
“For the company, which is an efficient way of financing, and not have to pay for the expensive bank charges. ”
Rive said the investment will bring a lot of revenue, and with the development of projects, “we will eventually become the minority investors”.
Original title: musk and buying their bonds, the finance controversy