Skip to main content

Tesla (TSLA), SolarCity (SCTY) Stumble on $2.6 Billion Buyout

By U.S. News & World Report

Solar power dynamo Solar City (ticker: SCTY) said Monday that it agreed to be purchased by electric car pioneer Tesla Motors (TSLA), but the price of the transaction is disappointing Wall Street and sending shares of both companies lower.

Tesla is buying Solar City for $2.6 billion in an all-stock deal. Shares of SolarCity fell nearly 5 percent on the news, as the price tag was about $300 million less than Tesla offered in June.

[See: 5 Stocks Wall Street Is Watching This Week: PFE TSLA SQ FIT BRK.B.]

TSLA stock initially fell slightly on the news, briefly losing as much as 2 percent.

The buyout is an important part of Tesla CEO Elon Musk’s grand vision to create the world’s preeminent diversified sustainable energy company. Viewed for years as a high-tech auto company, Tesla pivoted into energy storage with its Powerwall batteries, which were released in 2015. The packs work with SolarCity’s panels to store excess power generated during the daytime for consumption later, allowing customers to wean themselves off the grid.

Musk figures there will be major synergies from the merger — the news release announcing the deal estimates “cost efficiencies” of at least $150 million in the first year after the deal closes. The SCTY-TSLA tie-up is expected to close in the fourth quarter, and is still contingent upon shareholder approval by both companies.

SolarCity has until Sept. 14 to field other offers from potential suitors, but no other serious bidders are expected to come out of the woodworks.

Musk himself is the largest single shareholder in both SolarCity and Tesla; he’s recused himself from the approval process and will not vote his shares of either TSLA or SCTY for the clear conflict of interest.

[See: 10 Ways to Invest in Driverless Cars.]

That may be one reason the offer price was lowered, as Wall Street sold off TSLA stock to the tune of 10 percent when the plan was first announced back in June.

SCTY shareholders will receive 0.11 shares of TSLA for each share of SolarCity they own, putting the buyout price at $25.37 per share, below the range of $26.50 to $28.50 per share Tesla originally offered.

Another possible reason for the price reduction: This morning, SolarCity lowered its 2016 guidance for megawatts installed, an important measure of the company’s growth. SCTY is now guiding for between 900 and 1,000 MW installed on the year, lower than the 1,000 to 1,100 it previously guided for.

The decision to finance the deal entirely with TSLA stock could be a savvy one for Tesla, as its shares currently trade for 80 times forward earnings. Using overvalued stock for acquisitions is arguably better than using cash, since it doesn’t hurt liquidity and also minimizes the dilution that will take place from putting more TSLA stock on the market.

[Read: Why Stock Buybacks Are Often a Lousy Idea.]

Whether the deal will prove to be in the best long-term interests of Tesla shareholders is very much an open question, as neither Tesla nor SolarCity is profitable, and both are loaded up with debt. If anyone can make this work it’s Elon Musk — but in the meantime, Wall Street’s still right to be skeptical.

More from U.S. News

10 Ways to Invest in Pharmaceuticals With ETFs

8 Stocks to Buy For a Starter Portfolio

8 of the Most Incredible Investments of the 21st Century

Tesla (TSLA), SolarCity (SCTY) Stumble on $2.6 Billion Buyout originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
Read Next Story

Related News

Frustration grows in Venezuela as earthquake death toll reaches 1,430

Israel and Lebanon sign framework agreement with US in ‘first step’ toward peace, Rubio says

Trump-endorsed populist poised to become Colombia’s next president as rival challenges vote