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Tesla Is Buying SolarCity for $2.6 Billion (thenextweb.com) 80

Tesla Motors announced Monday that it has reached a deal to buy SolarCity (San Mateo-based provider of energy services), the next step in Elon Musk's plan to combine his electric-car and solar-energy companies. It's already a family affair: Musk, Tesla's chief executive, owns about 21% of SolarCity and serves as chairman. His cousins Lyndon R. Rive and Peter J. Rive are SolarCity's chief executive and chief technology officer, respectively. The independent members of both companies' boards approved the $2.6-billion all-stock deal, Tesla said. Tesla said it expects to have cost synergies of $150 million in the first year after the deal closes. Tesla said it expects the deal to close in the fourth quarter, although the proposal must still be approved by a majority of the disinterested shareholders of Tesla and SolarCity and requires regulatory approval. It also contains a "go shop" provision that gives SolarCity 45 days to "solicit, discuss or negotiate alternative proposals from third parties."
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Tesla Is Buying SolarCity for $2.6 Billion

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  • by Anonymous Coward

    a fluffy white cat to stroke and a subterranean volcano layer.

    • The fluffy white cat, that is easy.
      The Subterranean volcano layer. What do you think the hyperloop is all about.

    • a subterranean volcano layer

      While he may indeed build it in some geologic layer involving a volcano's structure, the word you're look for is "lair." Lair.

      • a subterranean volcano layer

        While he may indeed build it in some geologic layer involving a volcano's structure, the word you're look for is "lair." Lair.

        You just missed his emphasis on a southern accent.

        • Well then he should have TYPED it that way! As in, "Gentlemuhn, we shall have to folluh this beast into its layuh in orduh to dispatch it befoah it can spawn moah of its kahnd."
        • You're both missing it. Do you even know why sharks have frikkin' laser beams?

  • If a main player was to sell shares in the primary business it would reflect a lack of belief in the future of that business and negatively affect the share price. If however you happen to own a large slice of a lesser company and contrive a buyout the chances are that the share price of the primary business will be unaffected and it's asset book improved, and the value of the lesser company is defined by the purchase and the share price rises accordingly, founders and venture capital get to cash-out.

    • Tesla has a cult like investor following, Solar City no longer does, so making it all Tesla keeps the share price propped up.....for now.
      • Re: (Score:3, Insightful)

        by dave420 ( 699308 )

        Or maybe Musk is a better entrepreneur than you are. Naaah - can't be! We all know you are way better at making electric cars and rockets.

        • Re: (Score:3, Insightful)

          Or maybe Musk is a better entrepreneur than you are. Naaah - can't be! We all know you are way better at making electric cars and rockets.

          And what does that personal speculation of yours have to do with anything? If you'd like to offer a deeper explanation of your take of the transaction, I'm all ears.

          • by im_thatoneguy ( 819432 ) on Monday August 01, 2016 @04:00PM (#52623957)

            If you'd like to offer a deeper explanation of your take of the transaction, I'm all ears.

            Tesla will soon be the world's largest lithium ion battery manufacturer, and with the size of batteries each Tesla will need... perhaps the largest customer if they meet sales goals. If solar city starts leasing a lot of residential solar panels with batteries built into the unit they'll probably be the 2nd largest customer for batteries after Tesla.

            People think there are a lot of lithium ion batteries out in the world... and there are. But each Tesla 85KWh battery is equivalent to ~1,500 laptop batteries.

            The two most battery intensive industries are energy storage and transportation. You have to start thinking of Tesla as a "Battery Company" not an "Automotive company". And as a "battery company" it makes perfect sense to buy up one of the largest "battery charger companies". Renewable energy doesn't work on its own. You need some form of storage to make renewable power work. We're not very heavily invested in solar power so the power companies are just taking it on the chin to supply regulated constant power. If Solar City wants to grow, they have to be able to eliminate the need for baseline generators (fossil fuel and nuclear) otherwise the legacy power generators will rightfully complain that they can't affordably maintain energy security.

            • Thanks for putting some effort into that response, unlike your previous one. Much better!

              Of course until Tesla batteries actually are produced at low cost, and we don't know when that will be, they can both suffer together and together play the "we are growing so we cant make profits" card. Unless, as I've stated elsewhere, Musk can prop up initial battery production as a capital cost.
      • by MachineShedFred ( 621896 ) on Monday August 01, 2016 @11:01AM (#52621911) Journal

        Yeah, because there is absolutely no synergy between a company that produces electric cars, and a company that empowers people to produce their own electricity at home... where they keep their car.

        • by Mr D from 63 ( 3395377 ) on Monday August 01, 2016 @11:24AM (#52622055)
          Synergies don't require acquisitions to work. In fact, one could argue that Tesla has restricted their supplier options by this move. What does Solar City really bring to the table that they could just get as needed?

          If you think it is all about synergies and not about shareholder value you are fooling yourself. Solar City has been struggling due to tight margins in that competitive industry, and the future doesn't look any better with reductions in subsidies and tax assistance going forward. Its a remarkably convenient time to be getting a premium price for such a company. I am sure that Solar City shareholders unanimously support the move, whilst some Tesla shareholders will have concerns.
          • by yodleboy ( 982200 ) on Monday August 01, 2016 @11:51AM (#52622195)
            "What does Solar City really bring to the table that they could just get as needed?"

            The ability to provide an Apple like end to end ecosystem and the attendent lock-in. Solar hardware and storage optimized for your Tesla. Go ahead, laugh, but people will buy it, just like they buy Monster HDMI cables because the bits are cleaner.
            Then again, maybe it's not bad. Imagine a person that would like to go solar and get an EV, but man that crap is expensive. What if Tesla/Solar City could give you a bundle deal? Maybe even amortize your Tesla payments out over the 20 years they estimate for a Solar City installation? Do an iPhone-like upgrade program, maybe every 5 years, you pay a fee and get a new car? Damn it, now I'm starting to get myself interested.
            • No, I won't laugh, that is a good answer. While these days its not that hard to source such integrated systems from different suppliers, it can make sense to integrate them. But Solar City doesn't really bring any of that key technology to the table, they just bring the power supply side of it. The only place that becomes integrated is at the inverter, for all practical purposes.

              They do bring the installation service. But that could be contracted out as well, as likely Solar City would (or maybe even doe
              • Doesn't the Tesla Powerwall include the inverter components as well? So they can provide all the hardware, plus the installation (whether or not it's subcontracted out).

                Which brings in another very important aspect they can streamline: financing. As any car dealership can attest, financing is a MAJOR profit center, and Tesla now stands positioned to not only finance your shiny new electric car, but also your home solar upgrade at the same time - hardware and installation as one big, shiny, easy to finaliz

              • SolarCity does their own installs, and they are the fastest install you can get in the US. And, they are leading the market in price per watt installed, which is only going to go down once they open their own manufacturing facility in New York next year, and are not beholden to the import tariffs on all the other panels coming from China.

                • You sound like a Solar City sales person, or employee. They may claim to be the fastest, but I doubt anybody really knows, as there are many installers out there.
                  • Yeah, or I can use Google.

                    "The total installation time for a standard 3-kilowatt solar system of about 20 solar panels is usually somewhere between 1 and 3 days. Average labor time is 75 man-hours, which can be further broken down into electrician installation labor (49 man-hours) and non-electrician installation labor (26 man-hours)." - source [energyinformative.org]

                    You can do the next one: go ahead and find the numerous references to SolarCity getting installs done in a few hours, or YouTube timelapse videos of the whole thing

                    • Do you think that massively reducing install labor by having better mounting hardware might have some effect on installed cost per watt?

                      No, I think that would be negligible. Installation labor is pretty cheap per hour. They may make claims of 'massively reducing' install time, but there are plenty of clever installers out there that have optimized the process.

          • SolarCity gets something out of it too - cheaper access to the same PowerWall energy storage solutions they are already selling. Also, they can more deeply integrate smarter charging of a Tesla car, and use the car as energy storage during off-peak hours. And a retail presence where their target demographic is already walking in the door - eco conscious people with above average annual income.

            This really is a smart move if you spend more than 10 seconds to think about it.

        • The amount of power required to charge a Tesla is vastly higher than most home solar arrays provide (even if you dedicate them to charging the car, which you can't since most people take their cars with them during the day and solar arrays don't produce at night.) Solar City was facing hard times due to the economics of solar and shifting the ownership to Tesla isn't going to change that, it will just shift the costs. (I installed an 11kw solar array at my home so i do realize what's involved regarding c
    • by swb ( 14022 )

      Wait, you're saying Musk might be dabbling in an accounting/balance sheet/share price gambit and not unifying Tesla and Solar City for the benefit of humankind?

  • I did a contract job as a PC disconnect/reconnect tech for a moving company in 2011. We had to move Solar City to a new location on the weekend after their company Christmas party. I came across a small table in the middle of a bullpen where it looked like someone — or maybe the entire department — raped a Christmas tree to death. Saddest thing I've seen during the holidays.
  • They used the word "synergy". I'd flip the stock-sell switch on that alone.

    • by dave420 ( 699308 )

      Did you lose your dictionary? The word has a very specific meaning, which is entirely applicable to its usage here. Wait, you're right - it's always better to denigrate people for using words you don't understand than to learn what words mean. Sorry.

      • by Tablizer ( 95088 )

        Let me put it a different way. The occurrence of that word from executives about mergers often corresponds to a lame future for the merger. The mindset of those using it appears to correspond to naivety about merger success. Why the correspondence, I don't know, it's just an observation of association I and others have made. You are welcome to present your own observations. (I don't have any statically-reliable analysis to back up these anecdotal observations.)

  • Musk is an alien (Score:5, Insightful)

    by trybywrench ( 584843 ) on Monday August 01, 2016 @10:32AM (#52621729)
    What Musk is getting done in one lifetime is surreal. An old gf of mine thinks Musk is an alien and enlisting humans to help him build the technology he needs to get back home.
    • by Anonymous Coward

      That's ridiculous. Everyone knows Cylon Musk is a robot.

    • by Anonymous Coward

      He said he wants to retire on Mars. I figure if there's one person on Earth who might be able to pull that off, it's him. Which is a pretty remarkable thing to say about someone.

    • by LWATCDR ( 28044 )

      I fear that Musk may be falling prey to his own PR. Space X is doing some really cool work but it is also not meeting it's predicted launch rate. Tesla has some big problems with quality and the "beta" autopilot. If you do too much, you will do nothing well.

      • Re:Musk is an alien (Score:5, Informative)

        by DarkOx ( 621550 ) on Monday August 01, 2016 @12:27PM (#52622405) Journal

        Space X is doing some really cool work but it is also not meeting it's predicted launch rate.

        True, but I think most outsiders 'priced' a bit of optimism into Space X's press releases. Overall they are enjoying a lot of success considering the complexity of what they are trying to do.

        Tesla has some big problems with quality

        Is that statistically true? I did some google searches and its hard to find good data. All the other big manufacturers are doing recalls with some frequency. Quality problems have always been a thing in the auto industry. Do you have proof Tesla is doing worse than average on per vehicle basis.

        Tesla has some big problems with quality and the "beta" autopilot.

        No the media has big problems with it, namely understanding and evaluating risk. Many of the known cases where auto pilot has caused problems have been in situations where it was not being used as directed. In terms of accidents per miles driven its a got a good record, with caveat that most people are using it in situations where humans typically do have a lower than average accident rate too.

        • The problem is that their "use as directed" means "behave in utterly non-human fashion" by maintaining attention just in case a situation arises that, statistically speaking, will take years to manifest. I think that makes it perfectly reasonable to hold them responsible. This isn't a "don't hold lawnmower overhead to trim trees" situation.

        • by LWATCDR ( 28044 ) on Monday August 01, 2016 @02:44PM (#52623453) Homepage Journal

          "Is that statistically true? I did some google searches and its hard to find good data."
          Consumer Reports no longer gives the Tesla S a recommended because of problems with reliability.

          "No the media has big problems with it, namely understanding and evaluating risk. Many of the known cases where auto pilot has caused problems have been in situations where it was not being used as directed. In terms of accidents per miles driven its a got a good record, with caveat that most people are using it in situations where humans typically do have a lower than average accident rate too."

          Yea that is really making excuses. The Ford Bronco II had no problem with roll overs if you drove it like a short wheelbase, high center of gravity truck and not like a car...

      • Someone once said "if you're not failing regularly, you're not trying hard enough", and I have to agree. A long trail of success means you never truly challenge yourself.

        We could debate whether that's necessarily something that a lot of shareholders would look for in a company, but a good history of non-devastating failures is probably an important indicator of a business with good long-term investment potential with better-than average returns.

        Can't argue with autopilot quality issues, but really only bec

        • by LWATCDR ( 28044 )

          "(highways only, no side roads, maintain constant lookout for situations the autopilot is overlooking)"
          The last bit is a great excuse. It is all your fault no matter what.

          So if it is highway only then they should have a white list of roads you can use it on GPS should allow for that. My guess is that they mean limited access roads like interstates and turnpikes vs just highway like US highway 1.

          The lack of "effort" to prevent abuse IMHO shows a lack of experience in life critical software.

          "Someone once said

          • Yeah, I was thinking more of SpaceX when I wrte that failure quote.

            Can't argue in the slightest about Autopilot. It's an impressive piece of work that's grossly overmarketed. Probably 80% of the way to something that should be released to the public, with 95% of the work remaining to be done

            • by LWATCDR ( 28044 )

              Even Space X is questionable. Is SpaceX selling DC-3s or Wright Flyers?
              Are these products or test vehicles? As long as the customer knows that they are flying on an experimental LV that is fine but just where in the develop phase are we? The good thing is right now no one dies when SpaceX blows it. Even better is no payload is lost when a Falcon does not land so I would say that SpaceX is debatable.
              Back to Tesla, let's not forget the problems with the auto opening doors and the self parking as well.

    • by Ogive17 ( 691899 )
      He might be from the future and his time travel device broke during his last trip. Now he's trying to pull mankind ahead, technologically, so that he can fix his craft and return to his timeline before he dies.

      Hmm.. maybe I should create a screenplay about this.
    • He is not making money. Wasting money is easy

    • As if he's The Man Who Fell To Earth [wikipedia.org]?
    • Yes. He lives in the moon; the hollow moon.
  • by Anonymous Coward

    Ya got Tesla, folks, right here in SolarCity.
    Tesla with a capital "T"
    And that starts with "T" and that stands for trouble!

  • by netsavior ( 627338 ) on Monday August 01, 2016 @11:17AM (#52622017)
    It takes 3 or 4 phone calls, and some "do not disclose" paperwork in order to find out that you won't save any money, and you won't own anything.
    • Re: (Score:3, Insightful)

      by whoever57 ( 658626 )

      It takes 3 or 4 phone calls, and some "do not disclose" paperwork in order to find out that you won't save any money, and you won't own anything.

      Depending on the state in which you live, your roof orientation, shading, etc., a solar installation can pay off in as little as 5 years,

      But leasing or PPAs are a mug's game. As you state, with leases or PPAs, you don't own anything. Worse still, the solar panels may make it more difficult to sell or refinance your home. Also, some states have rescinded their n

    • by Jeremi ( 14640 ) on Monday August 01, 2016 @12:58PM (#52622655) Homepage

      It takes 3 or 4 phone calls, and some "do not disclose" paperwork in order to find out that you won't save any money, and you won't own anything.

      Our condo building's HOA has been saving about $300/month for the last 5 years via a SolarCity PPA.

      It's true we don't (and won't) own anything, but for us that is a benefit -- that means that if something breaks, we're not on the hook to fix it. If the system ever goes down, it's SolarCity who loses money until it gets fixed, not us (since we pay per kWh generated, not per month). Since nobody on the HOA board is an electrician or technically minded, the zero-responsibility-for-maintenance aspect is important.

      The upshot is: $300/month savings on our power bill, with no risk to us, and no money out of the HOA's pocket, ever. The only thing we had to give up was some space on our roof, which wasn't being used for anything anyway.

      • by PRMan ( 959735 )
        And again, at some point that UCC-1 fixture filing on your building may come into play, and then you will see what it cost you.
        • What is your beef with the UCC1? How else would you expect to have the asset loaned to you? Would you prefer unsecured debt-- do you want to pay the payday-loan rates for your solar installation?!

          Bottom line is that with entering into a purchase agreement like this, you should do a TVM calculation to separate the cost of purchase outright vs finance and establish if the interest rate is acceptable/beneficial.

          The games the installers play is typically in rate escalation assumptions; a smart consumer should

      • OTOH, I've been looking into purchasing a solar system for my house, and all three of the companies I've talked to are offering 25-year warranties, parts and labor. If it breaks, I call and they come fix it... *and* I own it. Power is cheaper in my area ($0.11 per kwh), so my cost situation is that it will increase my electricity costs by about 20% for 10 years, then it'll be paid off and I'll have "free" electricity for another 15, plus however long the system lasts after the warranty period ends. If I wer
        • so my cost situation is that it will increase my electricity costs by about 20% for 10 years, then it'll be paid off and I'll have "free" electricity for another 15, plus however long the system lasts after the warranty period ends.

          If the company that installed it and provides the warranty is still in business then. Warranty support is the single advantage that a lease or PPA has. If the company that owns the lease goes bankrupt, either another company will take on your contract (including the warranty),

        • To be clear, if my previous post was not. I think that the financials you describe have a low chance of actually paying back ever, given the risk that the installer may go out of business before the 10 years are up.
          • To be clear, if my previous post was not. I think that the financials you describe have a low chance of actually paying back ever, given the risk that the installer may go out of business before the 10 years are up.

            The installer in question has already been in business for 20 years, and been doing solar installations for 10.

            • All I can say is: good luck!

              Personally, I would not invest in something that, in the best case scenario, will break even after 12 years and has some risk that it will never break even.

              I hope you have factored in panel degradation, although this may be offset by increases in electricity prices.

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