He made a pretty good case on the first conference call that buying SolarCity out right is the best way to prevent future conflicts of interest. Partnerships between the two companies as independent entities would mean continuous scrutiny over which party would be receiving a favorable conflict of interest.
Is the Powerwall just was an optional accessory to upsell to Tesla automobile customers? If so, then the SolarCity deal is bad for both parties. I am inclined to believe not.
If the purpose of Tesla is to transition humans from fossil fuels to solar then it would appear that this makes sense from multiple points of view. Presumably Tesla can do a better job at doing this faster and quicker than SolarCity could on its own. This is a really, really big task and making some comparisons about how SolarCity may capture a greater amount of future profits by itself is underestimating the future competitive environment and likelihood of a positive outcome.
The thing for investors to look at critically going forward is how Tesla advances in manufacturing capability relative to the competition. The attempt at raw materials in, finished goods out, at a very high rate of speed, speaks strongly for how Tesla is trying to achieve their underlying mission.
Perhaps in 5 years many companies will be able to accomplish this. If so, further shareholder dilution is a big problem. Tesla could be wildly overvalued. Other car companies are producing good electric cars and they will be self-driving soon. Doing an ok job of those two things alone can't justify Tesla's value or survival. Uber's transportation network effects combined with the huge drop in auto sales from vehicle sharing will gut any plausible profits.
Value investors beware. Also a good exercise in why just doing traditional balance sheet & income statements combined with a linear evaluation of the business results in tech companies always looking way overvalued (Facebook being wildly overvalued since Mark Zuckerberg turned down the $1b offer from Yahoo.)
Is the Powerwall just was an optional accessory to upsell to Tesla automobile customers? If so, then the SolarCity deal is bad for both parties. I am inclined to believe not.
If the purpose of Tesla is to transition humans from fossil fuels to solar then it would appear that this makes sense from multiple points of view. Presumably Tesla can do a better job at doing this faster and quicker than SolarCity could on its own. This is a really, really big task and making some comparisons about how SolarCity may capture a greater amount of future profits by itself is underestimating the future competitive environment and likelihood of a positive outcome.
The thing for investors to look at critically going forward is how Tesla advances in manufacturing capability relative to the competition. The attempt at raw materials in, finished goods out, at a very high rate of speed, speaks strongly for how Tesla is trying to achieve their underlying mission.
Perhaps in 5 years many companies will be able to accomplish this. If so, further shareholder dilution is a big problem. Tesla could be wildly overvalued. Other car companies are producing good electric cars and they will be self-driving soon. Doing an ok job of those two things alone can't justify Tesla's value or survival. Uber's transportation network effects combined with the huge drop in auto sales from vehicle sharing will gut any plausible profits.
Value investors beware. Also a good exercise in why just doing traditional balance sheet & income statements combined with a linear evaluation of the business results in tech companies always looking way overvalued (Facebook being wildly overvalued since Mark Zuckerberg turned down the $1b offer from Yahoo.)