Why Tesla's Acquisition of SolarCity is Unpopular?
Author: Source: Datetime: 2016-11-08 11:35:33
Following last week's launch and the solar panel maker
SolarCity solar roof and new cooperation household solar power batteries, American electric car manufacturer Tesla (Tesla Motors, Inc.,
TSLA) recently issued a eight page "notice" to investors to persuade
shareholders to release two companies merger.
Since June this year, Tesla announced its intention to acquire SolarCity, both shareholders and Wall Street generally bearish on the deal. Up to now, Tesla's stock price has dropped by 10%.
Nevertheless, its chairman and CEO eilon - musk (Elon
Musk) did not waver with determination, that the parties to the merger is
"obvious thing". Therefore, before the merger vote deadline arrived
in November 7th of both shareholders, Tesla doing all it can to show the
benefits of exchange.
Tesla released within 1 days of the "notice" to investors said, with the Solarcity26 billion dollar merger will be in the next three years for Tesla's balance sheet more than $500 million in cash in 2017 with an additional $1 billion in revenue. And reiterated that, thanks to the combination of the two sides of the sales, manufacturing and key technologies, Tesla and Solarcity at least in conjunction with the first year to save $150 million in costs.
In addition, Tesla also said that the synergies generated by the merger of the two companies will bring $150 million investment in the project each year after the merger. Tesla believes that the company's 180 thousand owners and Solarcity30 million installed users will bring the benefits of cross selling strategy, announced last week's solar roof is a good example.
"It's a huge opportunity to increase sales," said, co founder and chief technology officer of Sun City. "It's a very simple process to transform from a return visit to a customer's sales increase," said Rive Peter, co founder and chief technology officer."
In addition, some time ago announced three quarter earnings also gave Tesla emboldened the deal must adhere to. After 12 consecutive quarters of losses, Tesla finally realized the first quarter earnings. 1-9 months of this year, Tesla's car sales in the global range of 24821 units, sales of $2 billion 298 million, net profit of $21 million 880 thousand. Over the same period last year, sales of only $937 million, a loss of $230 million. Mask said that from the current shipments point of view, the fourth quarter of this year will continue to achieve profitability.
SolarCity company was founded in 2008, is a company specializing in home solar power generator projects in the United States, the business includes solar panels leasing, system design, installation and other comprehensive solar energy services. SolarCity co-founder Lyndon reif (Lyndon Rive) and Peter reif (Peter Rive) and musk is the relationship between the cousins, holding 22% of the musk is also the company's chairman and largest shareholder.
As of the first three quarters of this year, Tesla has spent $759 million, and plans to increase spending in the four quarter, the super battery factory for its upcoming Model 3 mass market cars, Nevada and other plans to supply funds. As of the first half of this year, SolarCity's business operations and investment spending reached $two, about 1 billion 300 million times the Tesla, and the company's debt has reached $6 billion 340 million.
September, SolarCity's four shareholders filed a lawsuit against Tesla, said its executives and board members in the approval of the existence of violations of the trust liability of the transaction.
In addition, Solarcity is a powerful competitor of the United States, another renewable energy giant SunEdison, in April this year due to liabilities of $16 billion 100 million to apply for bankruptcy protection, the United States this year, the largest bankruptcy case.
In view of the Solarcity high debt and spending, opponents of the deal will be regarded as Tesla on SolarCity's "rescue", that massive spending Tesla itself and ambition planning will be compromised.
In the past five years, the company has become the leader in the domestic solar market through the rapid expansion of the United States. Solarcity to install solar power generation system for users free of charge, the monthly rent as the main profit. With this business model, the company currently has 300 thousand of the customer base.
Tesla expects the rental service will bring $8 billion in revenue for the company over the next 20 years. However, for the 20 year lease period makes Solarcity income relatively slow, rely on debt financing. In the two quarter, SolarCity loss of $55 million 500 thousand.
In this regard, Tesla responded that in the announcement, Solarcity more than half of the debt is used for project financing, without recourse, and can pass the customer's cash flow offset, and said, compared to the two quarter, Solarcity three quarter cash balances increased, but did not disclose the specific amount. It is reported that, Solarcity will be released in November 9th three quarter earnings.
In recent years, SolarCity began to slowly shift from the leasing of solar backup generator system to manufacturing, while providing different types of Solar Financing transactions. Tesla stressed in the announcement, reduce lease transaction will create a more healthy early and regular income ", in September this year, SolarCity has nearly 30% domestic solar products trading is through the purchase, rather than lease or power purchase agreement to complete, compared to the first quarter increased by four times.
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