Tuesday, December 11, 2012

UPDATED--Coming Up: Elon Musk’s SolarCity Seeks IPO Multiple of 19 Times Peers Tomorrow (SCTY)

Update: "SolarCity postpones initial public offering, according to report" (SCTY)
Original post:
I'm not going to be much help here. As I said about another of Mr. Musk's companies:
...Although it is smack dab in our Energy/Policy/Alt wheelhouse we have very few posts on Tesla.
On a personal level I didn't have much interest in government subsidized $100K playthings.
On the other hand, as an investment the stock always seemed to be in stronger hands* than the battery companies or other fashion-forward issues, poo-pooing it didn't seem like good advice for our readers.
So I didn't post much on TSLA....
*some of the names I was referring to: Mr. Musk, Daimler, Steve Jurvetson, a cast of thousands
From BusinessWeek:
SolarCity (SCTY) Corp., the solar power provider led by billionaire Elon Musk, is betting prospects for clean energy and Musk’s name will help it garner a valuation 19 times the price of peers in an initial public offering. 

The IPO, scheduled for today, would value the San Mateo, California-based company at about $1 billion, or about 8 times sales in the 12 months through September. That compares with an average price-to-sales multiple of about 0.4 for publicly traded companies such as Real Goods Solar Inc. and First Solar Inc. SolarCity is pushing ahead with its offering after completing the most equipment installations in California, the U.S.’s biggest solar-power market.

While Musk may be aiming to replicate the performance of his Tesla Motors Co. (TSLA), which has doubled since its 2010 IPO, SolarCity is contending with a market that has pummeled public solar stocks and a pending U.S. government inquiry into its accounting practices that may raise costs. Still, while the valuation SolarCity seeks may be “excessive,” the company has established itself in a business that’s poised to grow, said Debra Fiakas, managing member of New York-based Crystal Equity Research LLC.

“SolarCity competes in the integration and installation market with a lot of mom-and-pops, and that makes them incredibly powerful, because they don’t face any large competitors,” Fiakas said in a phone interview. “They’re a new-age utility of sorts. They represent the distributed utility that we’ve started to talk about.”...MORE
19x seems a bit rich but, the stock is in reasonably strong hands, Mr. Musk owning 31.9% (pre-) and Draper Fisher Jurvetson another26.3%.

Here's the SCTY filing page at EDGAR
Here's the Nov. 27 version of the S-1 (222 page PDF)
And then there's the cover of the offering document, I've never seen anything quite like it:

This free writing prospectus relates only to the initial public offering of common stock of SolarCity Corporation and should be read together with the preliminary prospectus dated November 27, 2012 related to this offering (the “Preliminary Prospectus”), included in Amendment No. 1 to the Registration Statement on Form S-1 (File No. 333-184317) (the “Registration Statement”) relating to these securities. On December 7, 2012, SolarCity filed Amendment No. 3 to the Registration Statement (“Amendment No. 3”), which may be accessed through the following link:
The following information is set forth in Amendment No. 3 and updates the information contained in the Preliminary Prospectus. References to “SolarCity,” “we,” “us” and “our” are used in the manner described in the Preliminary Prospectus.
Intent to Purchase Shares in our IPO by the Chairman of our Board
Elon Musk, the chairman of our board, has indicated his intent to purchase $15.0 million of our common stock in this offering from the underwriters at the initial public offering price.
Increase in Reserved Share Program
We have requested that the underwriters reserve for sale, at the initial public offering price, up to 1,000,000 shares of our common stock being offered for sale (or approximately 10% of the shares offered in the offering) to certain business associates, friends and family of our executive officers and board of directors through a reserved share program. Previously we had requested that the underwriters reserve 7% of the shares offered in the offering under this program. Participants in the reserved share program will be subject to 180 day lock-up restrictions.
Update on U.S. Treasury Grant Applications
We and our fund investors claim U.S. Treasury grants in amounts based on the fair market value of our solar energy systems. Although we have obtained independent appraisals to support the fair market values we report for claiming U.S. Treasury grants, the U.S. Treasury Department can review these fair market values.
On December 5, 2012, the U.S. Treasury Department notified one of our investment funds that it has established new guidelines for residential solar energy systems placed in service in California and Arizona on or after October 1, 2012. The new guidelines communicated are $6.00 per watt in California and $5.00 per watt in Arizona. Prior to this change, we had been reimbursed at $6.87 per watt in California and $6.20 per watt in Arizona. As a result of this updated guidance, we will be obligated to contribute additional solar energy systems to this investment fund so that the fund investors will recover a shortfall of approximately $200,000 and if other investment funds are similarly notified we may be required to true-up those funds.
The U.S. Treasury Department’s determination relates to grant applications under the Section 1603 grant program. We do not expect to submit grant applications related to that program after the first quarter of 2013.