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Author: yodaorange Big red star, 1000 posts Feste Award Nominee! Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 465102  
Subject: Dotcom déjà vu Date: 12/12/2012 1:01 AM
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To heck with that diversification stuff. Who needs it? Find the right stock that is strapped to a rocket ship and go to the moon! Luckily I have found one for METARites. We can’t buy it quite yet, but get ready to back up the truck on this one.

The San Francisco Chronicle has the story: [1]


SolarCity Corp. on Tuesday abruptly postponed its initial public stock offering hours before trading was expected to begin, the Reuters news service reported.

The San Mateo company, chaired by Tesla Motors CEO Elon Musk, had been expected to price its shares at $13 to $15, raising up to $150 million. But institutional investors balked, according to Reuters. A SolarCity representative did not respond to calls for comment.

But SolarCity doesn't make solar panels. Instead, the company installs and leases solar systems to homeowners and businesses, a business growing at breakneck speed. The plunge in panel prices has helped SolarCity, not hurt it.

Although the 6-year-old company has yet to turn a profit, sales during the first nine months of 2012 jumped 166 percent compared with the same period last year, reaching $103.4 million. Losses in the first nine months of 2012 grew 37 percent, to $77.9 million.


And you thought the dotcom era ended in 2000! It is ALIVE and WELL when you can take companies public that lose 78 cents for every dollar of sales. That is IMPRESSIVE.

I guess it is just old fashioned that companies have to show a profit before an Investment Bank will take them public. I would leverage this bet up to the max. With cheap margin money flowing like water, you want to get every possible penny of profits. What could go wrong?

As soon as I can figure out the ticker for this rocket ship, we are going to load the widows and orphans portfolios to the gills!


Come join the fun. Get the Ferrari on order.

Yodaorange

BTW: On the chance you have not seen previous Yodaorange posts, he would NOT buy anything like this in a gazillion years. Yoda thinks on the surface, it is ABSURD to bring a company like this to market UNTIL they have proven it can be a profitable business.




[1] Incredible stock opportunity of a lifetime!
http://www.sfgate.com/business/article/SolarCity-puts-off-pl...
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Author: WilliB Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 411123 of 465102
Subject: Re: Dotcom déjà vu Date: 12/12/2012 12:05 PM
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So what happens if you are renting their panels and they go bankrupt? Do the creditors come rip the solar panels off your roof?

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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 411130 of 465102
Subject: Re: Dotcom déjà vu Date: 12/12/2012 2:40 PM
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But SolarCity doesn't make solar panels. Instead, the company installs and leases solar systems to homeowners and businesses ...

... sales during the first nine months of 2012 ... [reached] $103.4 million. Losses in the first nine months of 2012 grew 37 percent, to $77.9 million.


How do you NOT make money in that business??

You know the cost of the panels and associated equipment. You are doing enough installations that you had darn well better know what it costs to install them. You know your financing costs for the panels. Tote those up, amortize over the life of the lease, add a markup for your overhead and profit, and you've got the lease payment to charge.

It's not a rocket science business.

--Peter

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Author: WatchingTheHerd Big red star, 1000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 411153 of 465102
Subject: Re: Dotcom déjà vu Date: 12/12/2012 8:27 PM
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If past is any prologue, the day SolarCity goes entirely bust, they'll have an all hands meeting in the executive boardroom with all of the remaining employees as they hand in their badges and laptops to the one remaining HR guy. One employee will ask "soooooo, are we still getting that foosball table for the breakroom?". Another will ask, "uhhhh, so when will our options be vesting?"

(Don't ask how I can envision this scenario...)


WTH

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Author: Goofyhoofy Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 411158 of 465102
Subject: Re: Dotcom déjà vu Date: 12/12/2012 9:33 PM
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How do you NOT make money in that business??

They probably will make money, although nothing is guaranteed, obviously.

The reason they show such big losses against sales is because they are using a very different financing model. Rather than "selling" a system to a homeowner, who goes to the bank and gets a loan for it (or less likely, pays cash), SolarCity is self-financing installations in return for a flow of payments back from the homeowner over time. This requires them to expense 100% of sales, while revenue recognition takes time, possibly as much as 20 years, depending on the deals they strike with homeowners.

This is not new. GMAC was, at first, a self-finance arm for GM so people could buy cars. Some home builders went into the self-finance business rather than pass that lucrative part of the business off to banks. SolarCity will use the proceeds from the IPO to continue the build-out, but it looks as though they will net only about 60% of what their advisors thought, which may change things in the business model.

Their figures, developed over the course of several years, show homeowners that they can realize about a 10% annual savings on energy and eventually own the system, which is decent, but not overly compelling, since the life expectancy of these sorts of systems is 25-40 years, depending. (I don't know about their system specifically, that's just a generic average.)

And yes, if the homeowner stops paying, they will come and remove the system. Of course that costs them again, but I've heard of it happening. There are other risks; it's possible that utilities will stop being required to purchase power from homeowners (and might do so), or the rates for doing so might change, or lots of other things. But yoda is off base laughing quite so hard at their "losses" versus "sales." It's about revenue recognition and timing, not some airy "solar power" pipe dream.

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Author: tim443 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 411167 of 465102
Subject: Re: Dotcom déjà vu Date: 12/12/2012 11:27 PM
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This company uses a somewhat similar business plan in that they install their equipment on commercial, private and even (according to rumour) US and Canadian Military aircraft. They then provide services as requested by the company for all sorts of stuff such as "blue box", which supplements to old flaming hole in the ground or bottom of the ocean "black box" as the information is back at home base.

Ironically they just this morning received their activation Supplemental Type Certificate ("STC") for its Automated Flight Information Reporting System ("AFIRS(TM)") 228 on the Boeing 777 model aircraft from Transport Canada. This was the final STC for the Boeing series which includes 737, 747, 757, 767 and now 777.

http://flyht.com/

http://flyht.com/flyht-receives-boeing-777-activation-stc-fo...

For non-aircraft types you need an STC to install just about any new piece of equipment (especially if it involves electronics) for each "type".

They also have an STC for some of the Airbus aircraft and several business jets. The Airbus 320 and the new Bombardier C series will have the equipment installed OEM on the production line.

Profits!!!.... chuckle they missed by only a penny in one of their recent quarters. }};-D

I own a position mostly for monitoring but have a feeling they will become a division of L-3 Communications (LLL)in the not too distant future.


http://flyht.com/investors/fact-sheet/

Tim

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Author: yodaorange Big red star, 1000 posts Feste Award Nominee! Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 411168 of 465102
Subject: Re: Dotcom déjà vu Date: 12/12/2012 11:37 PM
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Goofy said: They probably will make money, although nothing is guaranteed, obviously.

Goofy, the Fed's currently provide a 30% tax CREDIT for solar systems. Some states and/or utilities also provide credits. The industry is strongly dependent on these credits. Both consumers and industry spokesmen say if the credits go away, the industry will die on the vine.

With the ongoing federal budget challenges, how confident should an investor be that the Fed credit will survive ad infinitem?

This would seem to be a vital part of the business model . . .

Thanks,

Yodaorange

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Author: Goofyhoofy Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 411184 of 465102
Subject: Re: Dotcom déjà vu Date: 12/13/2012 10:04 AM
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Goofy, the Fed's currently provide a 30% tax CREDIT for solar systems. Some states and/or utilities also provide credits. The industry is strongly dependent on these credits. Both consumers and industry spokesmen say if the credits go away, the industry will die on the vine.

With the ongoing federal budget challenges, how confident should an investor be that the Fed credit will survive ad infinitem?


Maybe not. Maybe it won't matter.

The cost of materials of solar systems has declined 30% in the past two years (hence the bankruptcy of some US manufacturers) thanks to Chinese production.

Panels used to be 90% of installed cost. That is down to 70% (68%, actually, on average.) At some point it's reasonable to think that will decline to 60%, even 50%, since production of panels is really not so significantly different than production of other silicon products mass produced on wafers with increasing efficiency year after year. There is a point at which government support for such things would become unnecessary, just as it did for silicon chips, jet aircraft design, neighborhood recycling, the internet, or lots of other things which did not stand on their own at birth.

In my view it would be terribly short sighted to drop credits for renewables and chain ourselves back to fossil extracts, although we have been terribly short sighted before (and probably will be again.) But that is just my view, which is irrelevant in such things.

As I said there are risks in this business. Regulatory: power companies may no longer be required to purchase the energy at any price. Or at reasonable price. Or at inflated price. Subsidies may disappear. Production costs may not continue to decline. Homeowners may default. Flux capacitors may be invented and take over the industry. Home nuclear plants may appear for your basement. I don't know, it's "the future."

I thought your laughter at their "losses" versus "sales" metrics was misplaced, because the business model is un-traditional (if not entirely new.) I'm sure there will be lots of risks, and they may go upside down, or prosper, I have no idea. I hope they do well, but really, I have no idea. Nor, I should point out, do writers on the internet who know almost nothing about the company, including the segment of the industry they're in.
 


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Author: Dikka Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 411289 of 465102
Subject: Re: Dotcom déjà vu Date: 12/14/2012 10:40 AM
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The stimulus actually went further and allowed companies to take a 30% cash payment in lieu of the tax credit, as tax credits can only be utilized by companies with a tax liability (i.e., profitable).

Solar City took advantage of this program. Perhaps a bit too much advantage:

http://www.washingtonpost.com/politics/solar-firms-probed-fo...

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