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Betreff des ThemasHow Elon Musk Gambled Tesla to Save SolarCity
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22234, How Elon Musk Gambled Tesla to Save SolarCity
Eingetragen von Warren Buffett, 09.9.19 22:18
How Elon Musk Gambled Tesla to Save SolarCity

This is perhaps the most damning article I've ever read about Musk and Tesla, both for the content as well as the author: Bethany McLean is one of the best, most respected business journalists in the world, with a proven record from the financial crisis of sniffing out fraud (of which there is no shortage at Tesla). Excerpts:

The controversy over SolarCity, which has dovetailed with questions about Musk’s mountain of debt and profit shortfalls, offers a window into the mindset of America’s most outlandish CEO.
... In June 2014, SolarCity bought Silevo, a solar-panel manufacturer that had struck a deal with New York to build a factory in Buffalo. On a conference call, Musk boasted that the deal would enable SolarCity to install tens of gigawatts of panels every year—far beyond the company’s peak annual run rate of about one gigawatt. He spoke as if the technology were already proven. On its website, SolarCity predicted it would “achieve a breakthrough” in solar-power pricing thanks to “massive economies of scale.”

“It was shoot first and aim later,” says the former senior employee. “There was a lot of machismo going on: bigger, better, badder, faster.

... Even then, to those who looked closely, the cracks at SolarCity were becoming apparent. In 2014, key executives had started to leave. The Rives began to sell stock. SolarCity’s debt was soaring, and the yield on its bonds hit double digits, a sign that the market thought the company was in trouble. Goldman Sachs, one of Musk’s major bankers, called SolarCity the “worst positioned” company for capitalizing on future growth in the solar sector. One of the few things shoring up the company’s stock, according to a former investor, were the constant rumors that Musk was somehow going to bail it out.

In reality, the situation was even uglier than outsiders knew. 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. Musk himself bought $75 million of them, and the Rives acquired another $38 million. To raise the cash, Musk borrowed against both Tesla and SolarCity stock, increasing his personal credit lines from $85 million to $475 million. He also used his own reputation to shore up the stock: In February 2016, when SolarCity stock plunged to its lowest level in three years, Musk bought $10 million in shares. A week later, when the news became public, the stock soared by almost 25 percent.
At the same time, according to the shareholder lawsuit against Tesla, the company faced “significant liquidity concerns”—meaning it was running out of money. An accounting inquiry from the SEC noted that SolarCity was burning through cash—$659 million in the first quarter of 2016 alone. That February, at a Tesla board meeting, Musk proposed a solution: Tesla, he said, should acquire SolarCity.
The board balked. But Musk kept pushing. Two weeks later, he proposed the acquisition again. Once again, the board said no.

It was a hopelessly conflicted situation. Musk owned more than 20 percent of both SolarCity and Tesla. His brother, Kimbal, served on both boards, as did several investors, including Antonio Gracias, a close friend of Musk’s. As a judge in the shareholder lawsuit ruled, it is “reasonably conceivable” that Musk effectively controlled the Tesla board when he pushed it to acquire SolarCity.

... But over the years, many skeptics have come to see Musk’s stunts—from smoking pot during an interview to calling a diver who helped rescue kids trapped in a Thailand cave a “pedo guy”—as more unhinged than iconoclastic.

... Now the brewing problems at SolarCity threatened to give skeptics real ammunition against Musk—unless those problems could be buried. In May 2016, the Tesla board finally agreed to acquire the company for almost $5 billion, including the assumption of nearly $3 billion in SolarCity debt. On a conference call on June 22, the day after the deal was publicly announced, Musk told analysts and investors that the company had “the best technology out there for high-efficiency, low-cost solar panels.” He didn’t say anything about the liquidity crisis at SolarCity. Nor did he mention something else that shareholders allege the Tesla board came to learn as it did its due diligence on SolarCity: The cost per watt of solar modules being produced in Buffalo was actually projected to be 20 cents above the rest of the industry.

Whitney Tilson

https://www.vanityfair.com/news/2019/08/how-elon-musk-gambled-tesla-to-save-solarcity
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