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Keep your companies straight. The bonds that SpaceX bought both helped the company stay afloat, and were at above market rates. And SpaceX made money off of t
by btilly 7y ago
Keep your companies straight.
The bonds that SpaceX bought both helped the company stay afloat, and were at above market rates. And SpaceX made money off of that. SpaceX's involvement made sense, both tentatively (in the hope that SpaceX would get technology that they want down the road) and immediately (financial returns). The deal worked out well for SpaceX. Though it didn't pan out for their eventual hopes down the road.
Tesla is the company that really sank money in. Their synergy made more sense, Tesla has a lot of expertise in batteries and solar panels + batteries is a great combination. This is true at a small scale such as the home installations of solar panels + batteries that Tesla sold. Or at a large scale such as the South Australian battery project. And even in a distributed project such as the solar panels that Tesla added to a ton of supercharging stations.
That said, the Tesla involvement in Solar City has been a disaster for Tesla. (Though not for Elon Musk.) But Musk has always run financial house of cards. And he has enough going his way that he could still come out on top. The story with Musk is that he either will change the world or go out with a bang. This is still true. But he's coming ever closer to really changing the world, and the bang if he goes out will be truly spectacular.
- reitzensteinm 7y agoIf they were struggling to find buyers for the bonds, it was below market rate by definition.
- vkou 7y agoSolarCity paid SpaceX 4.4% on those bonds, when they couldn't find any non-insider takers for a 6.5% yield. 4.4% on a junk bond is not 'above market rates'. It's a sweetheart deal. > And SpaceX made money off of that. 1. In finance, ignore counterparty and default risk at your own peril. 2. Only because Elon then took the money of Tesla shareholders to buy SolarCity. If the purchase didn't go through, those bonds would have been about as valuable as toilet paper. > in the hope that SpaceX would get technology that they want down the road These were bonds, not tech licenses. It was propping up a business that may at some point in the future, license tech that hasn't been invented yet at better terms than any competitors in the solar space, who are not bogged down with a financial rock, and an entirely irrelevant residential-panel-financing business about their neck. > Tesla is the company that really sank money in. Yes, they ended up eating the worst of his self-serving trades. Despite a happy outcome of SpaceX, it was still not responsible of him to have invested SpaceX money into his own failed side venture. > Their synergy made more sense, Tesla has a lot of expertise in batteries and solar panels + batteries is a great combination. Ford has a lot of expertise with ICE engines, yet for some reason, it's not been trying to become a gasoline company... But sure, as much as I think there's no synergy between a failing firm that is specializing in financial engineering, and an auto manufacturer (And hindsight confirms this - SolarCity is, years later, nothing but a drain on Tesla's balance sheets), I do agree that, bad as it is, it's still a better case that SpaceX / SolarCity.