Electric car maker Tesla Inc's (TSLA.O) move last week to cut 9 percent of its workforce will sharply downsize the residential solar business it bought two years ago in a controversial $2.6 billion deal, according to three internal company documents and seven current and former Tesla solar employees.
The latest cuts to the division that was once SolarCity - a sales and installation company founded by two cousins of Tesla CEO Elon Musk - include closing about a dozen installation facilities, according to internal company documents, and ending a retail partnership with Home Depot Inc (HD.N) that the current and former employees said generated about half of its sales.
About 60 installation facilities remain open, according to an internal company list reviewed by Reuters. An internal company email named 14 facilities slated for closure, but the other list included only 13 of those locations.
Tesla declined to comment on which sites it planned to shut down, how many employees would lose their jobs or what percentage of the solar workforce they represent.
The company said that cuts to its overall energy team - including batteries to store power - were in line with the broader 9 percent staff cut.
"We continue to expect that Tesla's solar and battery business will be the same size as automotive over the long term," the company said in a statement to Reuters.
The operational closures, which have not been previously reported, raise new questions about the viability of cash-strapped Tesla's solar business and Musk's rationale for a merger he once called a "no brainer" - but some investors have panned as a bailout of an affiliated firm at the expense of Tesla shareholders. Before the merger, Musk had served as chairman of SolarCity's board of directors.
The installation offices that the internal email said were targeted for closure were located in California, Maryland, New Jersey, Texas, New York, New Hampshire, Connecticut, Arizona and Delaware.
The company also fired dozens of solar customer service staffers at call centres in Nevada and Utah, according to the former Tesla employees, some of whom were terminated in last week's cuts. Those employees spoke on condition of anonymity because making public comments could violate the terms of their severance packages.......MUCH MORE
So, How Was Tesla's Purchase Of SolarCity Not a Fraud? (TSLA; SCTY)
We've been posting on this nasty bit of alchemy for years, some links below.That was Izabella Kaminska with the heads-up. Her confrère, David Keohane (now FT-Paris) was also on SCTY with quite a few Further Reading posts linking to it—as well as SunEdison, another bit o'financial engineering gone wrong. Fond memories of SUNE; who can forget the time its death throes led to one of my favorite headlines:
Today FT Alphaville's editor commends to our attention a Reuters article from Friday:
Tesla largely responsible for slide in U.S. home solar sales...
and another, to which Mr. Keohane kindly linked:
The stock had traded above $32 in July 2015. The bankruptcy wiped out $16 billion in debt with the equity having declined by an additional $10 billion.
Anyhoo, back to some of our prior Solar City posts:
The Short Argument Against Tesla
Mr. Chanos was taken to the cleaners by Mr. Musk on SolarCity: had Tesla not bought it, SCTY was on its way to bankruptcy court. We have quite a few posts on the bad blood between the two, use the 'Search Blog' box search term SCTY if interested....
"Tesla cites performance reviews as it fires SolarCity employees, though workers say reviews never took place" (TSLA)
The question that comes to mind is: Was the acquisition of SCTY a
Whitney Tilson on Shorting Tesla (and other stuff) TSLA
April 1, 2013
Why We Don't Short Tesla: The stock is up 16% On The Day (TSLA)
...For the longest time we had a Don't Short Tesla policy because it showed signs of being a cult stock and cult stocks can kill shorts. Plus it can be very hard to locate stock and very expensive to borrow when you do,
However, after the SolarCity deal and Elon's purchase of SCTY debt (on top of his SpaceX buying SCTY debt) I'm more open to betting against the company, at least tactically if not to zero.
Remember, your mileage may vary, close cover before striking etc.
"Einhorn Compares GM to Apple and Explains Why He’s Short Tesla" (TSLA; GM)
..It is just so dangerous to put valuation (as compared to fraud) shorts on in a bull market.
We have had a general rule, "Don't short Tesla" virtually since the IPO, that we've violated on three occasions, fortunately profitable but it is tough to tell if it was worth the risk.
Why SolarCity Has Become a Shell of Its Former Self Since Tesla Buyout (TSLA)
This is a $3,000,000,000 scandal and no one seems to care....
SolarCity/Tesla: Analysts React (SCTY; TSLA)
Not only is Tesla taking on almost $3 billion in SolarCity debt, it is also buying into the problem of even more negative cash flows, both Operating and FreeCashFlow.Tesla-Solar City: Cousins Shouldn't Get Married (to each other) TSLA; SCTY--UPDATED
Which of course, along with the corp. governance nastiness, explains why Tesla has lost almost 11% of its market cap, amounting to $3.14 billion on the 133 million shares out and more than the entire market cap for SCTY (98,296,422 shares at $22.30, up 5.2%).
The market is saying SCTY is worth less than zero to Tesla.
We'll have a lot more to say about this in the coming days....
So, Who Will Write A Fairness Opinion On The Tesla/SolarCity Deal? (TSLA; SCTY)
More On SolarCity/Tesla and Fairness Opinions (SCTY; TSLA)
"Elon Musk Faces Cash Squeeze at Tesla, SolarCity" (TSLA; SCTY)
"Short-Seller Chanos Calls Tesla-SolarCity Merger 'Crazy': CNBC Conference" (TSLA; SCTY)
Today In Depreciation: Does Tesla Really Understand What It’s Buying in SolarCity? (TSLA; SCTY)
Tesla, SolarCity Tumble Ahead Of New Merger Financials (TSLA; SCTY)
Attentive reader may have noticed we didn't cover Mr. Musk's press conference on the roof tile solar panels last Friday. We've been at the market long enough to recognize a master magician's "hey, look at this" misdirection. The tiles aren't going to matter to anyone for at least a year, probably two, and by then I would expect the market to have changed to the point that they will be recognized as a niche at best."Wait, Tesla Motors Might Need to Raise $12 Billion?!?!" (TSLA; SCTY)
The oohing and ahing from the assembled journos was kinda funny though; in a naïve, never had to bet real money sort of way....
How Do We Know James Chanos Got Under Elon Musk's Skin? (TSLA SCTY)We've been thinking $6 billion to cover the build-out of the factories in Fremont, CA and Nevada and the New York SolarCity plant along with funding the higher cash burn after the SCTY merger.
And we were at the high end....
Chanos has been living rent-free in Elon's head for over a year.went into a meeting and forgot until today.
The departure this week of the second of Mr. Musk's two cousins, the Rive boys who had been running SolarCity reminded me I had promised another example of the toll the stress of keeping all the plates spinning may be taking on Elon.
In Monday's "Being Told Tesla Exists Because of Tax Breaks and Subsidies Drives Elon Musk Crazy (TSLA)" I said:
Regarding Mr. Musk, it is starting to appear he's a bit thin-skinned, we'll have another example later today or tomorrow....
Here's the set-up for this example. Back in the fall of 2015 Chanos was pretty vocal about SolarCity being the quintessential short-it-to-zero-stock. The company was burning enormous amounts of cash, had no path to profitability, and couldn't get anyone but SpaceX to buy their debt.
On October 21 SCTY shared their financials and we posted "Pray For Elon Musk: SolarCity Drops 21% (SCTY)".
The public relations people earned their keep with "SolarCity pivots to slower growth mode" and I recounted how earlier, in August, Lyndon Rive, SolarCity's CEO was told Chanos was shorting his stock and "SolarCity's CEO When Told Jim Chanos Is Shorting His Stock: "First I've ever heard of the guy" (SCTY)".
Oh dear, oh dear, oh dear.
SolarCity's CEO is an ahistorical idot.
I mean we're all idots from time to time but most of us at least try to conceal our idot-hood from the freakin' media!
Well, Mr. Chanos apparently took note of Rive's comment and the next day, while being interviewed on CNBC started out with "One of our big short positions in the renewable space is SolarCity".Here's the video if you care to see it, it's pretty funny: "SolarCity: Jim Chanos On Elon Who? (SCTY)".
The interviewer says "Elon Musk's company" and Chanos replied "Who?"
Fast-forward to the week before last and, via Sujeet Indap, the FT's Lex US editor:And many more.
The Journal does a story on Tesla's need for cash,
One of the fanbois tells Elon not to sweat it,
Mr. Musk uses a variant of the 2015 trash talk: ...["never heard of them"]...
...The upshot? Elon got to use the line, the Rive boys got to say "thanks cuz" for turning their going-to-be-worthless SCTY stock into TSLA, I get to do this post and Chanos got screwed by the self-dealing bail-out but hey, 3 out of 4 ain't bad.
Plus, the TSLA the cousins received may or may not be worth the current price after the model 3 roll-out.
We shall see.