Trying to read between lines, but it's not all that obvious to me what is going on. Considering Musk's history with big, risky, personal debts I would not discount the possibility that he is doing something like that here.
Tesla has been making seriously interesting progress in terms of products. It's far outside the norms of " disruptive tech" that we've gotten used to with the giant successes of the last decade or two (Google, Facebook, Uber...). To be Facebook or Uber, you need to put out your version of the software, be popular, lucky on your timing and (ideally) dig a network effect moat. There's a lot of risk, but not a lot of capital is involved.
Musk seems to love capital intensive ideas. There are definitely some advantages to it. Tesla doesn't worry about competition from proverbial college dorms. The competition they need to worry about is from the likes of Google (or maybe Uber in the future) or the major manufacturers. Neither seem like very strong competition. Tesla have ideas that require billions to try mostly to themselves.
Anyway, I wouldn't discount everything as corporate smoke screens and CYA. There is at least a decent chance this is what it sounds like. Tesla want a Solar arm. This purchase makes sense ...and it also lines up well in terms of converting debt-equity-risk-position-whatnot-intertwined-financial-magic.
It is important for a business to be thinking long-term. As we all know, that is Elon's real strength. But the financials of this deal make little sense to me and many investors view this decision as reckless. Tesla is a cash burning company- they had to do another large capital raise just last month. SolarCity is a cash burning company with considerable debt. When Tesla buys SolarCity they must fund the day to day cash burn and also assume SolarCity's multi-billion dollar long-term debt burden. With the Model 3 ramp-up Tesla already has massive cash requirements. SolarCity will add fuel to the cash bonfire.
I never know what to think when people bring up "investor concerns" in cases like this. I mean, I get that investors are owners. But, Tesla is public and the stocks (are there bonds?) are liquid. This company has both stated and demonstrated a big appetite for very high risk-reward. If investors don't like it, they can take their win and get out of Tesla.
This is (in some sense ;-) the opposite to the criticism in your earlier comment. Tesla is doing what Musk said they'd do, take lots of risk and try to lead a shift away from fossil fuel. So far we've seen a surprisingly good car and a very promising looking battery, some charging stations… Now he says he's adding solar, with it more risk and more potential. Damned as a liar if he's doing some financial engineering while talking visionary risk taking. Damned as a loose cannon if he does what he said before (presumably) you bought the stock and pursuing some massively risky vision.
I mean… hmmm… there are lots of companies you can invest in. One way they differ is in risk-reward potential. I think it works better if/when CEOs can decide on strategy and investors can decide to buy/sell shares. Catering to investors that want to hold but also to moderate the company's strategy encourages herding, averaging out of strategies.
I'm not an investor in Telsa so I guess I don't have a dog in the fight. But… I have to say I'm excited to see a CEO (seemingly) not driven by bad incentives take big risk. I think investors in Tesla should be the most risk tolerant ones.
Judging by the stock price today, I think that may be exactly what happened, but only just a bit. Stock is down 8%, some investors have decided to get out of tesla.
It also makes sense from a business prospective, where one tests and develops the new ideas in a separate environment and upon success - integrates the said proven healthy ideas into the trusted larger body.
Tesla has been making seriously interesting progress in terms of products. It's far outside the norms of " disruptive tech" that we've gotten used to with the giant successes of the last decade or two (Google, Facebook, Uber...). To be Facebook or Uber, you need to put out your version of the software, be popular, lucky on your timing and (ideally) dig a network effect moat. There's a lot of risk, but not a lot of capital is involved.
Musk seems to love capital intensive ideas. There are definitely some advantages to it. Tesla doesn't worry about competition from proverbial college dorms. The competition they need to worry about is from the likes of Google (or maybe Uber in the future) or the major manufacturers. Neither seem like very strong competition. Tesla have ideas that require billions to try mostly to themselves.
Anyway, I wouldn't discount everything as corporate smoke screens and CYA. There is at least a decent chance this is what it sounds like. Tesla want a Solar arm. This purchase makes sense ...and it also lines up well in terms of converting debt-equity-risk-position-whatnot-intertwined-financial-magic.