SolarCity Chops IPO Value, Increases Shares

Billionaire Elon Musk’s SolarCity Corp., sought a valuation 19 times the price of peers in its intended December 11, 2012 initial public offering. The IPO was to offer 10.1 million shares, equivalent to a 14 percent stake, for $13 to $15 each, in order to raise $151 million.

However, the company postponed the offering today, increasing the size of its initial public offering and said it expected a lower pricing. The company said it now expects to sell 11.5 million shares at $8 each. The offering is likely to be priced on Wednesday night and start trading on Thursday on the Nasdaq, according to Reuters. Musk, the biggest shareholder, doesn’t plan to sell shares, and filed to buy $15 million of the company’s stock in the IPO. The company filing did indicate that existing stockholders would sell about 65,000 shares.
SolarCity is one of a handful of companies that lease solar panels to customers, install them on their property, and charge below-market rates for electricity generated. The company has completed the most equipment installations in California, the U.S.’s largest solar market. It competes against mainly mom-and-pop shops, and has no large competitors, according to Debra Fiakas, managing member of New York-based Crystal Equity Research LLC.

Despite its power position, the company faces a market that has soured on public solar stocks. Demand for alternative energy has risen, but solar-company stocks have been hurt by oversupply of equipment and raw materials.

Moreover, clean-tech IPOs have not been greeted with enthusiasm. Solar-panel component-maker Enphase Energy Inc. (ENPH) has slumped more than 50% since its IPO in March 2012. Biofuel maker Amyris Inc. (AMRS) is down more than 80% since going public in 2010.
Still, solar energy is widely viewed as poised for growth.  U.S. spending on energy-efficiency services will increase more than four-fold between 2008 and 2020, reaching as much as $80 billion.

Some analysts view SolarCity more positively than competing firms, even though it has never been profitable, and booked a $95 million net loss in the year through September.

“If you look just at revenue, they may seem a little expensive,” said Kevin Landis, president of Firsthand Capital Management Inc. in San Jose, which holds shares of the company’s stock. “I care more about their bookings and trends in bookings than their revenue recognition, and that shows them to be a good value.”

Sheeraz Haji, chief executive of consulting firm Cleantech Group in San Francisco noted that SolarCity appeared to be on an amazing growth spurt. “It feels like the flip side of solar being difficult, as panels become cheap,” he said.
A pending U.S. government inquiry into the company’s accounting practices may present problems down the line. In July, SolarCity and competitors received subpoenas from the U.S. Treasury Department for documents related to federal cash grants the company received for building solar systems. It will take several months to resolve the issue.

Goldman Sachs Group Inc., Credit Suisse Group AG and Bank of America Corp. led SolarCity’s IPO. The stock will be listed on the Nasdaq Stock Market under the symbol SCTY.

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