Thursday, September 1, 2016

A Bad Day For Elon Musk and His Insurers (TSLA; SCTY)

Well, not just his insurers.

Re: the explosion, we don't yet know who is on the hook for what is being estimated at a $200-300 million loss but these things are syndicated so no one is looking at a company-wrecker except maybe SpaceCom who was expecting to start cranking some revenue out of the satellite and maybe get acquired by the Chinese.

Back to the insurance question, in the past SpaceX has used Aon International Space Brokers as the brokerage but as to the underwriters it's guesswork.

Both The Insurance Insider and SpaceNews make the point, that because this was not "intentional ignition" as defined in the standard space insurance policies, the insurance carriers responsible are probably not the usual suspects (Hiscox as lead for a Lloyd's syndicate for example). Here's II:
The marine cargo market could be hit with a $200-$300mn loss from the SpaceX Falcon 9 rocket which exploded during a pre-launch static fire test at Cape Canaveral, Florida earlier today (1 September) The Insurance Insider understands.

Sources in the space market said that as the incident took place prior to launch, the loss would likely fall under marine cargo coverage.

It is understood the pre-launch policy for SpaceX does not generally cover static fire tests, but that it could...MORE
Here's SpaceNews' Paris Bureau Chief Making the same point on twitter:
And although there are only around a dozen major space insurers and maybe thirty total, the marine cargo business is very dispersed, with a couple interesting possibilities that stand out because of corporate moves in the last year.

Lloyd's members and space specialists Amlin and Catlin were both bought by much larger companies, Catlin by Ireland's XL and Amlin by Mitsui Sumitomo, both of whom do marine biz.

Of course I could be totally off base and it will turn out one of the big French carriers had the risk.

Anyhoo, we should know more tomorrow so let's commiserate with Elon. From Barron's Stocks to Watch:

Tesla Motors: It’s Not Just SpaceX That’s Blowing Up Today
It’s been a terrible, horrible, no good, very bad day for Elon Musk. A SpaceX rocket exploded on the launching pad. Lazard (LAZ) admitted it underpriced SolarCity (SCTY) by $400 million when analyzing its value for its merger with Tesla Motors (TSLA). And the Wall Street Journal had a front page story from Susan Pulliam, John Stoll and Charley Grant this morning highlighting the growing need for cash at Musk’s publicly traded firms:
Two pillars of Elon Musk’s empire are facing financial crunches as the entrepreneur seeks to combine the two companies through a controversial acquisition.
Tesla Motors Inc., which makes electric cars, disclosed in a securities filing Wednesday that it has to pay $422 million to its bondholders in the third quarter, and that it will raise additional money by the end of the year. The purpose of the additional capital, among other things, is to support its proposed merger with home-solar company SolarCity Corp. Mr. Musk is the chairman of both companies.
The filing also revealed that in recent weeks, 15 institutional investors passed on either acquiring SolarCity or injecting equity into it. The company is having difficulty tapping the public markets amid the proposed merger and is facing a liquidity squeeze, the filing indicated. SolarCity’s cash declined to $146 million on June 30, from $421 million a year earlier, the company has reported.
Put it all together, and it’s a bad day for Tesla Motors and SolarCity shares. Tesla has dropped 4.8% to $201.81 at 2:15 p.m. today, while SolarCity has tumbled 11% to $18.49. Lazard has fallen 1.2% to $36.58. At these levels, it would be Tesla’s biggest drop since June, and SolarCity’s largest decline since May.

UPDATE: And then there’s this, from Axiom Capital’s Gordon Johnson, who sees “solar market headwinds intensifying”:...MORE
"Elon Musk Faces Cash Squeeze at Tesla, SolarCity" (TSLA; SCTY)
Devonshire Research Group's Short Tesla Thesis, Part II (TSLA)

Tesla closed at $200.77, down $11.24 (-5.30%) and 26 cents above the low for the day.