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Tesla’s Many Areas Needing Improvement – SolarCity Takeover

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February 6, 2017

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Tesla’s Many Areas Needing Improvement – SolarCity Takeover

Tesla-logo-webThe persuasiveness of Tesla head Elon Musk resulted in more than 90 percent of Tesla and SolarCity shareholders following his recommendation and approving the takeover of the latter. Now, Tesla will expand its electric car portfolio by offering solar roofs. The impact of the merger on Tesla’s financials will show as early as the fourth quarter of 2016, when SolarCity’s results are added to the corporation’s balance sheet. The most important factor is the around USD 3 billion in debt. But there could be other contractual obligations for SolarCity from contracting projects, such as the long-term sale of solar power and the solar plant investment. In any case, the USD 3 billion are now Tesla’s to cope with. A thorough evaluation must additionally include the 13 million new Tesla shares as a buyout price. And there are some legal arguments to make, which could be done parallel to or after the merger and which may – based on the ruling – add to the price tag. I have not yet figured out where all the synergy potential has gone off to.

Model 3 only in late 2018?

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Tesla aficionado and analyst Adam Jonas from Morgan Stanley has recently lowered his price target by a mere USD 4 to USD 242. He described the takeover of SolarCity as having “added …

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I would like to paraphrase Bob Lutz, former GM executive, by saying that Tesla will someday be the past when all of Musk’s full-throated promises have been left unfulfilled. And, there are rumors about Model 3 to be priced at USD 40,000 to USD 50,000 instead of around USD 35,000 if you want more than the basics.

This is not what operating income looks like

The latest quarterly figures from Oct. 31, 2016 showed a plus of USD 22 million. However, if you subtract the more than USD 130 million Tesla has received in tax credits, the balance will move into the red. The federal incentives for each vehicle are USD 7,500 and a few states have their own subsidies available. Including state support, financial incentives added up to as much as USD 150 million during the reporting period. Companies like Tesla even seem to have the option to decide on their own when – i.e., in which quarter or even fiscal year – they recognize the incentives received.

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Tesla and Trump

Elon Musk may have been better off not making some of his remarks about the new President Donald Trump, whom he reportedly has been quite dismissive of. Trump is said to be suspicious of government incentives and subsidies for renewable energies, such as solar and wind, but also of electric transportation and he may cut some of them or demand more free-market engagement. You can probably expect stronger opposition from the new government. The stock market has a lot to do with psychology.

Automotive industry’s CCS initiative

Finally, you may think, the automotive industry is about to set up a charging infrastructure in Europe with reportedly universal standards. Fast-charging in five to 15 minutes, 80 percent capacity and seven times faster than normal charging points. The Combined Charging System is based on standard plugs, but Tesla could take a backseat with its own infrastructure being turned into an insular solution. Will Tesla even have to make its charging stations accessible to other electric carmakers because of EU regulations?

Elon Musk as “most innovative company leader”

Elon Musk has already received several awards for being a positive influence in the electric transportation industry, with the latest award for being the “Most innovative business leader.” But the company’s current situation …

Conclusion

Markets that will show strong growth in the future are the health care market and in particular …

Stay tuned. Nothing is more powerful than an idea whose time has come.

Risk warning

Investors must understand that buying and selling shares is done at their own risk. Consider spreading the risk as a sensible precaution. The fuel cell companies mentioned in this article are small and mid-cap ones, i.e., they do not represent stakes in big companies and the volatility is significantly higher. This article is not to be taken as a recommendation of what shares to buy or sell – it comes without any explicit or implicit guarantee or warranty. All information is based on publicly available sources and the assessments put forth in this article represent exclusively the author’s own opinion. This article focuses on mid-term and long-term perspectives and not short-term profit. The author may own shares in any of the companies mentioned in this article.

Author: Sven Jösting (written Dec. 2016)

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