According to Elon Musk's
, he first conceived of the idea for SolarCity (NASDAQ:
), a company founded by his cousins Lyndon and Peter Rive, at the
annual Burning Man festival in the Nevada desert.
Like many of Musk's various inspirations, today SolarCity is a
thriving company sporting a market-cap of around $2.65 billion.
Investors who bought in at the IPO price in December 2012 have
already realized gains well in excess of 300 percent.
SolarCity is run by Lyndon Rive and Musk remains the company's
chairman of the board. Musk's other better-known ventures include
Tesla Motors (NASDAQ:
), which has been on quite the hot streak of late, and Space X,
an ambitious rocket technology company with a goal of one day
helping colonize Mars.
In recent months, as the share price of both Tesla and Solar
City have soared, so has Musk's net worth. Today, he is worth an
estimated $4.3 billion after basically going completely
as recently as 2010. Although Musk provided the financing and
inspiration for SolarCity, the story of the company is not really
SolarCity describes itself as a national leader in clean
energy services. "We make clean energy available to homeowners,
businesses, schools, non-profits, and government organizations at
a lower cost than they pay for energy generated by burning fossil
fuels like coal, oil and natural gas." The company, based in San
Mateo, California, currently employs around 2,500 people and has
only been profitable for one year out of the last five.
Nevertheless, SolarCity saw a big jump in its revenue for
fiscal 2012 and investors seem to believe in the business model.
Although analysts are not projecting that SolarCity will become
profitable in either fiscal 2013 or 2014, revenue is expected to
grow a little less than 32 percent this year followed by a 52
percent jump next year.
The stock had run up into its most recent earnings report,
which was released on Monday, May 13, but pulled back following
the quarterly results. For its first-quarter, the company posted
a net -loss of $31.0 million or $0.41 per share, compared to a
profit of $656,000 or $0.04 in the year ago period.
Revenue was $30 million versus $24.8 million in last year's
first-quarter. This compared to Wall Street estimates calling for
a loss of $0.26 per share on revenue of $29.08 million.
The losses in the share price, however, have been short lived
as the stock has rallied sharply on Thursday in the wake of the
announcement of a financing deal with Goldman Sachs. Late in the
session, shares were up around 10 percent, giving SolarCity a
gain of almost 200 percent already in 2013. The deal with Goldman
will finance $500 million worth of solar projects, making it the
largest agreement of its kind.
According to analysts, the big run-up in the name, and the
large move on Friday in the wake of the Goldman announcement, has
been driven in part by short-sellers. In recent days, around 15
percent of SolarCity's float had been sold short and it is clear
that short-covering has assisted in the stock's rally.
The presence of bearish traders in the stock's of Musk-related
companies has become somewhat of a theme -- perhaps because of
the audaciousness of the entrepreneur's ideas. For example,
short-sellers have recently also been pummeled in Tesla
The South-African born Musk, who made his first massive
fortune as a PayPal co-founder, has repeatedly taken far-flung,
highly speculative business models and turned them into
It is clear that some investors are betting on the
entrepreneur's pedigree as much as on SolarCity's future
prospects, and, frankly, that might not be a bad trade. It has
certainly worked in Tesla, which came very close to bankruptcy in
its early years.
Raymond James analyst Pavel Molchanov commented on the Goldman
agreement, saying "This will not change any estimates, but the
headline -- Goldman supporting Solar City -- is a bullish one."
He added, "for a stock that is heavily shorted, it is
understandable why a headline along these lines would have this
Going forward, SolarCity remains a very interesting stock
given its ambitious, green-business model and its association
with Musk. At the very least, this is not a name to bet against
as many now-burned investors can attest.
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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