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This bit seems pretty damning: > As SolarCity struggled to raise money from institutional investors, it began offering individuals a chance to buy what it call

This bit seems pretty damning: > As SolarCity struggled to raise money from institutional investors, it began offering individuals a chance to buy what it called Solar Bonds. (“Now you can get paid while driving the solar revolution,” the marketing material said.) But there were few takers—so other parts of the Musk empire took up the slack. According to the shareholder lawsuit, SpaceX acquired $255 million of the bonds. Other than Musk's involvement in both, what's the situation where a company like SpaceX sees a need to plow $255 million into debt obligations issued by a solar panel installer?

jacquesm 7y ago
Absolutely none. I'm surprised the controllers at SpaceX would even allow it.
- toomuchtodo 7y ago
  Governance at private companies with single majority shareholders (Musk owns >51% of SpaceX, and has even more voting control) is tricky. Controllers work for the C level/CFO, not shareholders (and the CFO is the one who is going to get sued, not the controllers). Solar bonds are not as safe as US treasuries (almost nothing is for those who aren't up to speed), but the argument could be made (hopefully with data!) that they were low enough risk that people weren't going to suddenly stop paying their electric bills for the solar on their roofs (and the benefit to SpaceX was premium earned vs that of other safer cash equivalents), so you might as well lend your satellite launch customer deposits to Solar City to get more solar panels installed on roofs. And if you, as the controller, did not see it the same way, they might consider finding a controller who would. Disclaimer: TSLA investor, owned SCTY solar bonds, have a friend who is a controller for a private family owned company who likes to talk work quite a bit. I admire the financial engineering used to succeed up to this point, and wince at the fiduciary issues occasionally.
AstralStorm 7y ago
Only in a deal to furnish sats and rockets with solar panels forever. Vertical integration more or less.
- smacktoward 7y ago
  These were just corporate bonds, though, and corporate bonds don't work that way. A corporate bond is a simple agreement: you give me $X now, I give you back $X + interest when the bond matures. They're a way for a company to borrow money, nothing more. If SpaceX managed to get extraordinary concessions for its bond purchase, like some kind of exclusivity agreement, that would raise even more questions -- like, why does one of Elon's other companies get special perks for buying Solar City bonds that the non-Elon-connected buyer doesn't?
pastor_elm 7y ago
They offered a decent return (IIRC, at least 4%).
btilly 7y ago
SpaceX's stated goal is "occupy Mars". Being able to land and deploy solar panels at scale is essential to this goal. And Musk has learned the hard way not to trust third party suppliers that he doesn't control. SpaceX's aspirational goal is to launch something Mars-wards in the 2022 window to identify where the base will be and have some resources. Then send several vehicles and a few people in 2025 to set up a mission. Primary on that mission is to deploy solar panels, and start making methane+oxygen from CO2, water and energy. This is both for a return trip and for people to breathe. Then in 2027 send the first trip that can make a return flight. (Those dates are set by the fact that the Earth and Mars come into a good conjunction for launching from one to the other every 26 months.) Musk says "aspirational". I think "crazy". But bump those by 2-5 years and it becomes barely plausible. And the end goal sounds less crazy now than it did 5 years ago. When it sounded less crazy than it was 11 years ago when we all were laughing at him. And if he succeeds, the Mars colony could come to be worth more to SpaceX than its satellite launch business. By a lot.
- joering2 7y ago
  Very interesting, but can you elaborate how we could benefit from colonizing Mars? Even more so - how could SpaceX be much more worth by being able to go to Mars, and how others wouldn't be able to achieve similar step sometime after them (depriving SpaceX from exclusivity of operation) Mars is much smaller than Earth with much more hostile environment. I heard some ideas of growing trees or putting air on Mars, but just to adjust a flow of a river on Earth could cost millions of dollars; if you add complexity to get it done on Mars I don't think a price tag could be even put on it. Visiting Mars - sure who wouldn't want it, but other than biologist and geologist, I doubt masses would want to migrate and live there, making SpaceX worth billions in process (that assuming somehow SpaceX would be given an exclusivity to park their rockets on Mars - a body to give such approval doesn't even exist and I doubt any single country can claim Mars' ownership)
  - omnimus 7y ago
    You should ask Musk about that. I think he believes that we as humanity need backup plan if anything is to happen to Earth. Also he is probably megalomaniac and thats why he sets to grand goals. By the way i am pretty sure people who come to Mars in numbers will colonize it and it now it seems that United States will be the country that colonizes and claims Mars.
pbreit 7y ago
Very clear visibility into ability to payoff on double-digit yields?
HALtheWise 7y ago
SpaceX typically starts taking payments for launches years before they actually take off, which means they can end up sitting on cash that needs investing. It isn't entirely clear that solar bonds are the best vehicle for that, but it's not entirely ridiculous either.

jacquesm 7y ago

Absolutely none. I'm surprised the controllers at SpaceX would even allow it.

toomuchtodo 7y ago
Governance at private companies with single majority shareholders (Musk owns >51% of SpaceX, and has even more voting control) is tricky. Controllers work for the C level/CFO, not shareholders (and the CFO is the one who is going to get sued, not the controllers). Solar bonds are not as safe as US treasuries (almost nothing is for those who aren't up to speed), but the argument could be made (hopefully with data!) that they were low enough risk that people weren't going to suddenly stop paying their electric bills for the solar on their roofs (and the benefit to SpaceX was premium earned vs that of other safer cash equivalents), so you might as well lend your satellite launch customer deposits to Solar City to get more solar panels installed on roofs. And if you, as the controller, did not see it the same way, they might consider finding a controller who would. Disclaimer: TSLA investor, owned SCTY solar bonds, have a friend who is a controller for a private family owned company who likes to talk work quite a bit. I admire the financial engineering used to succeed up to this point, and wince at the fiduciary issues occasionally.

AstralStorm 7y ago

Only in a deal to furnish sats and rockets with solar panels forever. Vertical integration more or less.

smacktoward 7y ago
These were just corporate bonds, though, and corporate bonds don't work that way. A corporate bond is a simple agreement: you give me $X now, I give you back $X + interest when the bond matures. They're a way for a company to borrow money, nothing more. If SpaceX managed to get extraordinary concessions for its bond purchase, like some kind of exclusivity agreement, that would raise even more questions -- like, why does one of Elon's other companies get special perks for buying Solar City bonds that the non-Elon-connected buyer doesn't?

pastor_elm 7y ago

They offered a decent return (IIRC, at least 4%).

btilly 7y ago

SpaceX's stated goal is "occupy Mars". Being able to land and deploy solar panels at scale is essential to this goal. And Musk has learned the hard way not to trust third party suppliers that he doesn't control. SpaceX's aspirational goal is to launch something Mars-wards in the 2022 window to identify where the base will be and have some resources. Then send several vehicles and a few people in 2025 to set up a mission. Primary on that mission is to deploy solar panels, and start making methane+oxygen from CO2, water and energy. This is both for a return trip and for people to breathe. Then in 2027 send the first trip that can make a return flight. (Those dates are set by the fact that the Earth and Mars come into a good conjunction for launching from one to the other every 26 months.) Musk says "aspirational". I think "crazy". But bump those by 2-5 years and it becomes barely plausible. And the end goal sounds less crazy now than it did 5 years ago. When it sounded less crazy than it was 11 years ago when we all were laughing at him. And if he succeeds, the Mars colony could come to be worth more to SpaceX than its satellite launch business. By a lot.

joering2 7y ago
Very interesting, but can you elaborate how we could benefit from colonizing Mars? Even more so - how could SpaceX be much more worth by being able to go to Mars, and how others wouldn't be able to achieve similar step sometime after them (depriving SpaceX from exclusivity of operation) Mars is much smaller than Earth with much more hostile environment. I heard some ideas of growing trees or putting air on Mars, but just to adjust a flow of a river on Earth could cost millions of dollars; if you add complexity to get it done on Mars I don't think a price tag could be even put on it. Visiting Mars - sure who wouldn't want it, but other than biologist and geologist, I doubt masses would want to migrate and live there, making SpaceX worth billions in process (that assuming somehow SpaceX would be given an exclusivity to park their rockets on Mars - a body to give such approval doesn't even exist and I doubt any single country can claim Mars' ownership)
- omnimus 7y ago
  You should ask Musk about that. I think he believes that we as humanity need backup plan if anything is to happen to Earth. Also he is probably megalomaniac and thats why he sets to grand goals. By the way i am pretty sure people who come to Mars in numbers will colonize it and it now it seems that United States will be the country that colonizes and claims Mars.

pbreit 7y ago

Very clear visibility into ability to payoff on double-digit yields?

HALtheWise 7y ago

SpaceX typically starts taking payments for launches years before they actually take off, which means they can end up sitting on cash that needs investing. It isn't entirely clear that solar bonds are the best vehicle for that, but it's not entirely ridiculous either.