Can Elon Musk Justify Purchasing SolarCity?



If Elon Musk is trying to validate purchasing SolarCity, now is the time. Tesla’s (TSLA) SolarCity acquisition in 2016 has received stern criticism for a long time. Musk’s deposition of shareholders’ lawsuit against the acquisition came to light last week.

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Elon Musk’s debated SolarCity purchase

SolarCity was founded by Elon Musk’s cousins. At the time, Musk served as the chairman. Shareholders say that there’s a conflict of interest since the C-suite executives are related. Musk completed the transaction and paid SolarCity $2.6 billion when the solar panel maker was financially weak. He was well aware of the situation. The deal was expected to provide synergy benefits to the company. However, Tesla’s solar arm never really took off.

He said, “If I did not take everyone off of solar and focus them on the Model 3 program to the detriment of solar, then Tesla would have gone bankrupt,” according to a Bloomberg report last week.

Tesla launched the third version of its Solar Roof or V3 last week after previous versions weren’t successful. Earlier, on the third-quarter earnings call, Musk said that he sees Tesla’s energy segment as the same or even bigger in size than its electric vehicle business.

The coincidence between Musk’s increased focus on Tesla’s solar segment and his deposition coming out makes it look like he wants to revive the company’s solar arm.

Elon Musk goes offline

Elon Musk strongly promoted the newly launched Solar Roof tiles on Twitter. He offered discounts to people impacted by fires in California. Musk even posted a video on the micro-blogging site showing the strength of the new solar roof tiles. However, he went offline and said, “Not sure about any good of Twitter.” To learn more about Musk’s Twitter saga, read Twitter Lessons for Tesla’s Musk and President Trump.

Tesla’s impressive third quarter

Tesla’s electric vehicle business played out extraordinarily well in the third quarter. However, the Energy segment didn’t do that well in the third quarter. The segment deployed about 43 megawatts of solar in the quarter ended on September 30—a 54% decline compared to the same quarter in 2018. In the second quarter, Tesla deployed 29 megawatts of solar.

After three years of acquisitions, Tesla’s energy segment, which includes solar and batteries, forms around 6% in the company’s total revenues. Musk’s vision for Tesla’s solar segment might be too bold. In the past, we learned not to bet against Elon Musk! He brought down the cost of Tesla’s Model 3. Also, the company record delivery of large-sized lithium-ion batteries to Australia.

Tesla stock has risen more than 23% since it reported its quarterly earnings last month. So far this year, the stock has lost around 6%. Notably, Tesla has underperformed legacy automakers. Ford (F) and General Motors (GM) shares have risen approximately 17% and 13%, respectively, YTD.

Read Will Tesla’s Surprise Profitability Redeem Elon Musk? to learn more. Tesla fans like to compare the company to tech giants like Apple (AAPL) and Amazon  (AMZN) instead of legacy automakers. Read Tesla’s Real Competition: Automakers or Mega-Tech? to learn more.


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