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Trying to work something out here, need input, as I've never had this happen before: I advised a friend to buy Tesla and SolarCity stock some time ago, and the

Trying to work something out here, need input, as I've never had this happen before: I advised a friend to buy Tesla and SolarCity stock some time ago, and they did so. The SolarCity stock was much higher at the time than it is now, perhaps $60-70. I see that the offer from Tesla involves "0.122x to 0.131x" exchange for Tesla stock. So what does this mean for people whose positions in SolarCity were currently down? They have to hope the Tesla stock eventually goes up enough to recover the loss they suffered on SolarCity?

manuelflara 10y ago
Probably, yes. They're buying SolarCity with Tesla stock and paying a 20% or so premium over current SC stock. But yeah, if your friends bought say when SC was 50% up, then now they'll have to wait/hope Tesla stock goes up.
jonknee 10y ago
Yes, and up significantly. This is valuing the SCTY shares at $26.50 to $28.50. Your friend would need to wait for TSLA shares to more than double (which would be a higher market cap than Ford, GM, Honda or Nissan).
- aerovistae 10y ago
  Personally I anticipate that won't be a long wait for the patient investor.
  - ams6110 10y ago
    Hm I'm not so sure. Ford sells about 5 vehicles per minute around the clock worldwide, they're just a bit ahead of Tesla.
    - aerovistae 10y ago
      And I'm sure we'll never need more than 640kb of storage, either.
    - toomuchtodo 10y ago
      Total market for vehicles (Ford) compared to total market for energy storage & vehicles (Tesla).
caminante 10y ago
Better yet, they could sell now and use the loss to reduce taxes [0]. [0] https://www.irs.gov/uac/irs-reminds-taxpayers-they-can-use-stock-losses-to-reduce-taxes https://www.irs.gov/uac/irs-reminds-taxpayers-they-can-use-s...
a13n 10y ago
Actually there's a lawsuit against Zulily basically saying that shareholders who purchased at a higher price than the shares were acquired for are not satisfied with selling at that lower price. https://www.internetretailer.com/2015/09/23/shareholders-seek-class-action-lawsuit-against-zulily https://www.internetretailer.com/2015/09/23/shareholders-see...
- caminante 10y ago
  As of yesterday, SCTY had a mean target price of $30.18/share across 17 Wall Street analysts. To your point, shareholders might balk at TSLA's offer.
  - kgwgk 10y ago
    Sell-side analysts are not going to pay shareholders $30 for their shares though. Tesla stock is not cash, but is better than nothing. If anyone is losing in this deal I think it will be non-Musk Tesla shareholders.
  - toomuchtodo 10y ago
    As a TSLA stockholder, I hope they do; I'd rather TSLA wait to buy up SCTY assets when they're in bankruptcy rather than pay a premium to SCTY stockholders (sorry Elon!)
    - haser_au 10y ago
      There's a risk that another company will offer to buy it before this happens. The board of Tesla probably feels this is the right time to get in on a promising business.
  - a13n 10y ago
    I certainly do, TSLA is getting a fantastic deal.
  - jonknee 10y ago
    That will be a tough battle considering that Musk himself owns 22% of SolarCity shares.
haser_au 10y ago
The same thing happen recently Shell made a takeover offer for BG Group. In Feb 2015, BG Group shares were at their lowest point in 8 years (https://au.finance.yahoo.com/echarts?s=BG.L#symbol=BG.L;range=my https://au.finance.yahoo.com/echarts?s=BG.L#symbol=BG.L;rang...). Then Shell makes an offer and the price bumps up. But not enough to make back the losses on the shares in the past 8 years. Shareholders will vote on the offer, and have two choices. 1) Vote No would mean they back SolarCity to increase the share price back to at least where they paid for it. If the No vote is successful, the price instantly loses the gains its made in the past 24 hours, and potentially drops a little further. 2) Vote Yes if shareholders think that the gains they'll get from having Tesla shares (dividend, price gains, cash flow, capital to expand, etc.) will make the SolarCity business a better business/more competitive, etc. There may not be the same doubling/tripling/quadrupling of share price than if they stay a separate company, but it's a much lower risk. Same thing happened for the BG Group/Shell deal. In the end, 99.69% of BG Group and 83% of Shell shareholders approved the takeover. I think we'll see something similar for the SolarCity/Tesla deal as well.

manuelflara 10y ago

Probably, yes. They're buying SolarCity with Tesla stock and paying a 20% or so premium over current SC stock. But yeah, if your friends bought say when SC was 50% up, then now they'll have to wait/hope Tesla stock goes up.

jonknee 10y ago

Yes, and up significantly. This is valuing the SCTY shares at $26.50 to $28.50. Your friend would need to wait for TSLA shares to more than double (which would be a higher market cap than Ford, GM, Honda or Nissan).

aerovistae 10y ago
Personally I anticipate that won't be a long wait for the patient investor.
- ams6110 10y ago
  Hm I'm not so sure. Ford sells about 5 vehicles per minute around the clock worldwide, they're just a bit ahead of Tesla.
  - aerovistae 10y ago
    And I'm sure we'll never need more than 640kb of storage, either.
  - toomuchtodo 10y ago
    Total market for vehicles (Ford) compared to total market for energy storage & vehicles (Tesla).

caminante 10y ago

Better yet, they could sell now and use the loss to reduce taxes [0]. [0] https://www.irs.gov/uac/irs-reminds-taxpayers-they-can-use-stock-losses-to-reduce-taxes https://www.irs.gov/uac/irs-reminds-taxpayers-they-can-use-s...

a13n 10y ago

Actually there's a lawsuit against Zulily basically saying that shareholders who purchased at a higher price than the shares were acquired for are not satisfied with selling at that lower price. https://www.internetretailer.com/2015/09/23/shareholders-seek-class-action-lawsuit-against-zulily https://www.internetretailer.com/2015/09/23/shareholders-see...

caminante 10y ago
As of yesterday, SCTY had a mean target price of $30.18/share across 17 Wall Street analysts. To your point, shareholders might balk at TSLA's offer.
- kgwgk 10y ago
  Sell-side analysts are not going to pay shareholders $30 for their shares though. Tesla stock is not cash, but is better than nothing. If anyone is losing in this deal I think it will be non-Musk Tesla shareholders.
- toomuchtodo 10y ago
  As a TSLA stockholder, I hope they do; I'd rather TSLA wait to buy up SCTY assets when they're in bankruptcy rather than pay a premium to SCTY stockholders (sorry Elon!)
  - haser_au 10y ago
    There's a risk that another company will offer to buy it before this happens. The board of Tesla probably feels this is the right time to get in on a promising business.
- a13n 10y ago
  I certainly do, TSLA is getting a fantastic deal.
- jonknee 10y ago
  That will be a tough battle considering that Musk himself owns 22% of SolarCity shares.

haser_au 10y ago

The same thing happen recently Shell made a takeover offer for BG Group. In Feb 2015, BG Group shares were at their lowest point in 8 years (https://au.finance.yahoo.com/echarts?s=BG.L#symbol=BG.L;range=my https://au.finance.yahoo.com/echarts?s=BG.L#symbol=BG.L;rang...). Then Shell makes an offer and the price bumps up. But not enough to make back the losses on the shares in the past 8 years. Shareholders will vote on the offer, and have two choices. 1) Vote No would mean they back SolarCity to increase the share price back to at least where they paid for it. If the No vote is successful, the price instantly loses the gains its made in the past 24 hours, and potentially drops a little further. 2) Vote Yes if shareholders think that the gains they'll get from having Tesla shares (dividend, price gains, cash flow, capital to expand, etc.) will make the SolarCity business a better business/more competitive, etc. There may not be the same doubling/tripling/quadrupling of share price than if they stay a separate company, but it's a much lower risk. Same thing happened for the BG Group/Shell deal. In the end, 99.69% of BG Group and 83% of Shell shareholders approved the takeover. I think we'll see something similar for the SolarCity/Tesla deal as well.