6 ms·

Shareholders approve Tesla Solarcity acquisition

253 points by astdb 10y ago

chollida1 10y ago
SolarCity shareholders approved the deal early today. The government also approved the deal, by not blocking the deal, so this is going to happen. Here is Bloomberg's stub article on the deal. https://www.bloomberg.com/news/articles/2016-11-17/tesla-shareholders-approve-solarcity-merger-by-85-vote https://www.bloomberg.com/news/articles/2016-11-17/tesla-sha... They tend to write tweet length articles for breaking news like this so google can index them and then flesh out the article as details become available. The after hours trading is heavy as this comes the day before monthly option expiry, so there is alot of factors at work here. - The merger arb group is trying to arb out the last bit of profit as the deal is now confirmed. - The option traders are now looking at their new exposure due to the Tesla jump - The shorts are getting hammered, again, and now have to decide if they really want to hold a short position in a stock with little external catalysts to move it downward before the end of the year.
- semi-extrinsic 10y ago
  > little external catalysts to move it downward before the end of the year. I agree with the "before the end of the year" qualifier. In the longer term, one interesting external catalyst recently came up: Norway's largest political party Ap, who are likely to win the election next year, have said they will reduce the tax breaks on EVs costing more than ~$50k, essentially letting the tax breaks only apply to the part of the price below $50k. This would increase the price of a Model S by >$20k in Norway. (Norway has been one of Tesla's biggest markets outside the US; in 2015 10% of all Teslas sold went to Norway.)
woofyman 10y ago
Edit: congress is investigating solar companies, including Solar City on the tax subsidies they receive.
- deleted 10y ago
  [deleted]
- justina1 10y ago
  Not a credible source. I'm guessing what the article refers to is the entire solar industry being asked about how they calculate the tax credit benefits. Very different from that click-bait title. http://www.wsj.com/articles/lawmakers-probe-tax-incentives-received-by-solar-energy-firms-1473967056 http://www.wsj.com/articles/lawmakers-probe-tax-incentives-r...
- Goronmon 10y ago
  Wow, that site is pretty terrible. The only sources it seems to reference are the site's own articles.
  - huac 10y ago
    Plenty of places do this now to keep click traffic (and thus ad viewing-ness) in house.
    - __derek__ 10y ago
      Yes, legitimate news outlets do this with actual reporting to back it up.
- ryanobjc 10y ago
  That's not a real news article!
danm07 10y ago
Not a big surprise. Shareholders would approve the acquisition of Theranos if it were Elon at the helm.
pavlakoos 10y ago
It would be a pity if they wouldn't.
noname123 10y ago
Hi, I was wondering if any peeps who have read any of TSLA or SCTY research reports by any Street analysts (not that those people can be trusted) or have done due diligence as a investor care to share about, (1) Projection of what exactly is TSLA's market share for the next five years with the introduction of Chevy Bolt on the lower-end; and potential new competitors like GOOGL and self-driving/electric cars of traditional auto makers on the higher-end. (2) Profit margin of TSLA cars without the green credits from gov't and tax breaks from any US gov't alternative energy research incentives; any risk from regulatory landscape due to the most recent US regime change. (3) The trajectory/projection of household solar panel adoption pegged to the trajectory of traditional energy cost trends (e.g., natural gas and oil commodity price due to recently supply glut); the break-even number of new households growth for SCTY division or a number that Crude/Gas need to stay above. (4) Cash flow projection for TSLA/SCTY as far as I understand it, combined entity relies heavily on fundraising via gov't grant, issuing new bonds and occasional issuing of new equity shares. What percentage of TSLA net revenue goes to meeting bond payments, and what percentage of net income comes from financial engineering vs. sales of cars? These questions I think could shed critical (both positive and negative) light to otherwise generally very positive but shallow coverage of TSLA on HN? Thanks in advance for any inputs by more informed peeps!
- _ph_ 10y ago
  (1) Chevy currently plans to build 30k cars per year, a fraction of the Tesla build numbers, not even taking the Model 3 into respect. I wished they would plan for greater numbers as the electrical car market is large enough for both (and more!) (2) The Tesla cars are profitable with a 20+% margin - they are growing with 100% year over year and that eats up any profits. There is actually very little government money involved. (4) cash flow comes from 80+k cars sold this year with a $15 billion backlog on Model 3 orders.
  - dmoy 10y ago
    I think the question on (2) may be more focused on - will consumers buy as many tesla cars if they all cost $7,500 more? Will tesla drop the price of their cars instead (thus eating into their profit margin)?
a13n 10y ago
I found a cool risk arbitrage play here that others may find interesting. When the deal was announced, it mentioned that SCTY shares were to be converted into TSLA shares at a rate of 0.11 TSLA/SCTY. Yet SCTY shares were priced at close to 0.097 TSLA/SCTY. This means there was roughly a 12% profit to be made by buying SCTY shares and shorting the equivalent value of TSLA shares, assuming the deal goes through. I ended up only buying SCTY shares, effectively buying TSLA shares at $182 (when it was at $203). Now TSLA is at $189 so I only made about 4% but had I shorted TSLA at the same time I would have made the full 12%. All over the course of a just a few months, not bad. It seemed pretty obvious to me that the deal would go through - though hindsight is 20-20. It's also interesting to consider that now that SCTY has little downside risk and 20% of SCTY shares are held short, if there will be a short squeeze. Seems like SCTY shares are locked at exactly 0.11 * TSLA so I guess I don't see this happening. Fun, profitable learning experience. :)
- hayksaakian 10y ago
  i'm not a financial expert, but does that profit margin represent the small chance that the merger wouldn't go through? can you calculate the exact 'odds' that this arbitrage represents
  - a13n 10y ago
    Yeah I mean this stuff is all priced by the market. So it isn't any chance or odds based on facts, rather based on what the market priced the chance of the deal falling through. I felt pretty confident the deal would go through, Elon mentioned that he spoke with many institutional shareholders and they were on board with the deal. Just makes sense that he picks up his own company rather than a competitor. Edit: That's why it's called a "risk arbitrage" play. Arbitrage is when you simultaneously buy and sell the same security at different prices. Risk arbitrage means there's some risk that the securities won't be the same (generally because the merger falls through).
- deleted 10y ago
  [deleted]
- deleted 10y ago
einrealist 10y ago
This is great news. I wish Tesla and Solarcity all the best. I wish you can render Trump's policies meaningless and help our world to survive. BTW. After my school in Germany, I had my civilian service in a society called "Solar City <redacted>". It made my mind about alternative energy and it will never change!
ctdonath 10y ago
Eager to see how this works out. When I had an EV, figured that running it on home solar would cost about half the price the car. With the introduction of "invisible" collection, it's gotta take off.

253 points by astdb 10y ago

SolarCity shareholders approved the deal early today. The government also approved the deal, by not blocking the deal, so this is going to happen. Here is Bloomberg's stub article on the deal. https://www.bloomberg.com/news/articles/2016-11-17/tesla-shareholders-approve-solarcity-merger-by-85-vote https://www.bloomberg.com/news/articles/2016-11-17/tesla-sha... They tend to write tweet length articles for breaking news like this so google can index them and then flesh out the article as details become available. The after hours trading is heavy as this comes the day before monthly option expiry, so there is alot of factors at work here. - The merger arb group is trying to arb out the last bit of profit as the deal is now confirmed. - The option traders are now looking at their new exposure due to the Tesla jump - The shorts are getting hammered, again, and now have to decide if they really want to hold a short position in a stock with little external catalysts to move it downward before the end of the year.

semi-extrinsic 10y ago
> little external catalysts to move it downward before the end of the year. I agree with the "before the end of the year" qualifier. In the longer term, one interesting external catalyst recently came up: Norway's largest political party Ap, who are likely to win the election next year, have said they will reduce the tax breaks on EVs costing more than ~$50k, essentially letting the tax breaks only apply to the part of the price below $50k. This would increase the price of a Model S by >$20k in Norway. (Norway has been one of Tesla's biggest markets outside the US; in 2015 10% of all Teslas sold went to Norway.)

woofyman 10y ago

Edit: congress is investigating solar companies, including Solar City on the tax subsidies they receive.

deleted 10y ago
[deleted]
justina1 10y ago
Not a credible source. I'm guessing what the article refers to is the entire solar industry being asked about how they calculate the tax credit benefits. Very different from that click-bait title. http://www.wsj.com/articles/lawmakers-probe-tax-incentives-received-by-solar-energy-firms-1473967056 http://www.wsj.com/articles/lawmakers-probe-tax-incentives-r...
Goronmon 10y ago
Wow, that site is pretty terrible. The only sources it seems to reference are the site's own articles.
- huac 10y ago
  Plenty of places do this now to keep click traffic (and thus ad viewing-ness) in house.
  - __derek__ 10y ago
    Yes, legitimate news outlets do this with actual reporting to back it up.
ryanobjc 10y ago
That's not a real news article!

danm07 10y ago

Not a big surprise. Shareholders would approve the acquisition of Theranos if it were Elon at the helm.

pavlakoos 10y ago

It would be a pity if they wouldn't.

noname123 10y ago

Hi, I was wondering if any peeps who have read any of TSLA or SCTY research reports by any Street analysts (not that those people can be trusted) or have done due diligence as a investor care to share about, (1) Projection of what exactly is TSLA's market share for the next five years with the introduction of Chevy Bolt on the lower-end; and potential new competitors like GOOGL and self-driving/electric cars of traditional auto makers on the higher-end. (2) Profit margin of TSLA cars without the green credits from gov't and tax breaks from any US gov't alternative energy research incentives; any risk from regulatory landscape due to the most recent US regime change. (3) The trajectory/projection of household solar panel adoption pegged to the trajectory of traditional energy cost trends (e.g., natural gas and oil commodity price due to recently supply glut); the break-even number of new households growth for SCTY division or a number that Crude/Gas need to stay above. (4) Cash flow projection for TSLA/SCTY as far as I understand it, combined entity relies heavily on fundraising via gov't grant, issuing new bonds and occasional issuing of new equity shares. What percentage of TSLA net revenue goes to meeting bond payments, and what percentage of net income comes from financial engineering vs. sales of cars? These questions I think could shed critical (both positive and negative) light to otherwise generally very positive but shallow coverage of TSLA on HN? Thanks in advance for any inputs by more informed peeps!

_ph_ 10y ago
(1) Chevy currently plans to build 30k cars per year, a fraction of the Tesla build numbers, not even taking the Model 3 into respect. I wished they would plan for greater numbers as the electrical car market is large enough for both (and more!) (2) The Tesla cars are profitable with a 20+% margin - they are growing with 100% year over year and that eats up any profits. There is actually very little government money involved. (4) cash flow comes from 80+k cars sold this year with a $15 billion backlog on Model 3 orders.
- dmoy 10y ago
  I think the question on (2) may be more focused on - will consumers buy as many tesla cars if they all cost $7,500 more? Will tesla drop the price of their cars instead (thus eating into their profit margin)?

a13n 10y ago

I found a cool risk arbitrage play here that others may find interesting. When the deal was announced, it mentioned that SCTY shares were to be converted into TSLA shares at a rate of 0.11 TSLA/SCTY. Yet SCTY shares were priced at close to 0.097 TSLA/SCTY. This means there was roughly a 12% profit to be made by buying SCTY shares and shorting the equivalent value of TSLA shares, assuming the deal goes through. I ended up only buying SCTY shares, effectively buying TSLA shares at $182 (when it was at $203). Now TSLA is at $189 so I only made about 4% but had I shorted TSLA at the same time I would have made the full 12%. All over the course of a just a few months, not bad. It seemed pretty obvious to me that the deal would go through - though hindsight is 20-20. It's also interesting to consider that now that SCTY has little downside risk and 20% of SCTY shares are held short, if there will be a short squeeze. Seems like SCTY shares are locked at exactly 0.11 * TSLA so I guess I don't see this happening. Fun, profitable learning experience. :)

hayksaakian 10y ago
i'm not a financial expert, but does that profit margin represent the small chance that the merger wouldn't go through? can you calculate the exact 'odds' that this arbitrage represents
- a13n 10y ago
  Yeah I mean this stuff is all priced by the market. So it isn't any chance or odds based on facts, rather based on what the market priced the chance of the deal falling through. I felt pretty confident the deal would go through, Elon mentioned that he spoke with many institutional shareholders and they were on board with the deal. Just makes sense that he picks up his own company rather than a competitor. Edit: That's why it's called a "risk arbitrage" play. Arbitrage is when you simultaneously buy and sell the same security at different prices. Risk arbitrage means there's some risk that the securities won't be the same (generally because the merger falls through).
deleted 10y ago
[deleted]
deleted 10y ago

einrealist 10y ago

This is great news. I wish Tesla and Solarcity all the best. I wish you can render Trump's policies meaningless and help our world to survive. BTW. After my school in Germany, I had my civilian service in a society called "Solar City <redacted>". It made my mind about alternative energy and it will never change!

ctdonath 10y ago

Eager to see how this works out. When I had an EV, figured that running it on home solar would cost about half the price the car. With the introduction of "invisible" collection, it's gotta take off.