SolarCity IPO: Sunny Outlook with Clouds on Horizon

SolarCity IPO: Sunny Outlook with Clouds on Horizon

By Alison van Diggelen, host of Fresh Dialogues

This week SolarCity made public details of its plans for a $200M IPO, an all too rare sunny event for the clean energy sector in this doom laden post Solyndra era. Yet the filing revealed information which might have some investors take a cloudier view of the company’s future.

Although the company has installed solar arrays on over 33,000 U.S. buildings, and revenues have been growing healthily, SolarCity is still in the red and relies on the 30% Federal Investment Tax Credit to keep expanding. As Katie Fehrenbacher reports, the company is being investigated for overvaluing its solar systems for the tax credit. To date, SolarCity’s business model has benefited enormously from the surplus of cheap Chinese solar panels, and prices (until recently) have been trending down. But that is due to change with the large increase in duties imposed on certain Chinese solar panel makers; and the bankruptcy of other Chinese panel suppliers. Investigations by the Treasury Department are ongoing, as is the evolving landscape of solar panel industry.

In a Fresh Dialogues interview earlier this year, CEO Lyndon Rive was bullish about the company’s prospects and even suggested SolarCity was seeking “world domination” in the energy supply sector. He addressed the increase in tariffs on Chinese solar panels:

“It’s more of an annoyance than a concern,” Rive said. “It’s a worldwide market…if China’s costs go up, we’ll just buy from somebody else.”

Rive talked about tempering the growth of SolarCity, to avoid the pitfalls of expanding too rapidly.

“We have a four month waiting list….four months is totally acceptable. Our customers totally understand it,” said Rive. “Could we grow even faster?  Yes. But then the wheels may start getting shaky. So we are growing at a healthy rate to ensure quality, safety and also customer satisfaction.”

The IPO disclosures reveal that Elon Musk has over 30% of the shares in the company, followed by John Fisher of Draper Fisher Jurvetson with 26%. The Rive brothers, cofounders of SolarCity with their cousin Elon Musk have a combined 14% only. Here’s Lyndon Rive’s perspective on how Musk contributes to SolarCity as chairman.