In June, the electric car manufacturer Tesla announced it intended to buy solar energy company SolarCity for $2.6 billion. Since then, SolarCity has experienced delays in locking in new financing commitments, the company said last month in an SEC filing.
But on September 12, things started to look a little bit better.
The company announced it raised $305 million in a cash equity transaction advised by billionaire investor George Soros’ hedge fund.
Here’s everything you need to know about SolarCity.
What is SolarCity, and what does it do?
Employing about 13,000 people and operating in 20 jurisdictions, SolarCity is one of the largest solar energy companies in the US. The company designs and installs solar panels on the roofs of homes and buildings, currently servicing about 250,000 customers.
SolarCity didn’t invent the solar panel, but it is credited with making wider adoption of solar panels possible. A few years ago, solar panels were extremely expensive (about $30,000 to $50,000 upfront), which deterred many people from switching to them.
So Solar City developed a lease model that lets people install solar panels with no money down and save money instantly (but pay for the panels in chunks over time). This is great for customers, but has also cost SolarCity a lot.
As of this year, it’s swimming in more than $3 billion-worth of debt, and still has plenty of competition from companies like Sunrun and Vivint Solar.
Why did SolarCity raise $305 million?
SolarCity was awarded $305 million to finance new projects. Some of the company’s latest projects include a huge solar field in Kaua’i, Hawaii that will charge up batteries during the day, as well as a new battery factory in Buffalo, New York.
The company also plans to unveil two new products by the end of the year, including a solar roof.
Shares of the company were up 6.6% at $17.89 in afternoon trading on September 12, the day the funding was announced.
What is Tesla’s stake?
Elon Musk, the CEO of Tesla, is already a chairman of SolarCity and helped found it in 2006.
This year, Tesla has been making moves to acquire much of the company. In March, Musk’s rocket venture SpaceX bought $90 million of SolarCity stock. In late June, Tesla submitted an offer to buy SolarCity for $2.6 billion, and in August, the company accepted.
While the Federal Trade Commission (FTC) has already approved the merger, shareholders must still vote on the deal. The shop period ends Wednesday, September 14.
In a recent securities filing, Tesla said it would need to raise additional money by year’s end to finance it. Some critics have called the merger a “bailout” of SolarCity (In the past year, its stock fallen by 57%).
Tesla is also building the Gigafactory, a $5 billion battery factory in Nevada, by 2017. There, Tesla will manufacture batteries for the Model 3, as well as batteries for its storage devices, called Powerwalls.
- Maurizio Pesce
Musk has said repeatedly that SolarCity is the missing part of Tesla’s business.
Tesla already manufactures Powerwall and chargers for its cars – but if a customer wants to use solar energy to power their home and Tesla, they currently must lease solar panels from a third-party company that installs them.
Musk argues that merging with SolarCity would transform Tesla into a one-stop-shop for drivers who want to go green.