Nice Work If You Can Get It


Imagine owning a company that has never recorded a profit but still rakes in millions. Nice work if you can get it, eh? Well, all it takes is the right “green” plan and friends in the right places.

Welcome to SolarCity, the latest booming green company that has never recorded a profit. The startup’s stock price has soared by 600% since its IPO last December—it closed on Monday at $57 a share—and spiked after the company announced a couple of weeks ago that it expects business to grow by 70% to 90% next year. Yet the company, based in San Mateo, Calif., and specializing in deploying rooftop panels, ended the first six months this year $61 million in the red.

Ordinarily, that sort of number might disconcert investors. But SolarCity’s business model is powered by government subsidies, which also fueled the 500% stock run-up and turn to profit this year of the electric-car maker Tesla. Steering both companies is Elon Musk.

In addition to being the chairman of SolarCity and CEO of Tesla, Mr. Musk is the largest shareholder in both companies. The increase in their stock prices has raised his net worth by more than $5 billion over the past year.

SolarCity’s second-quarter filing with the Securities and Exchange Commission notes that the company’s “ability to provide solar energy systems to customers on an economically viable basis depends on our ability to finance these systems with fund investors who require particular tax and other benefits” (emphasis added).

The company’s base is a 30% federal tax credit that accrues to investors who provide upfront financing for the rooftop panels that SolarCity installs for customers at no charge. Customers “lease” the panels from SolarCity by paying for the solar power they generate, which is priced below their utility’s retail rate. (Read More)

Elon Musk – sounds like a rodent. But he’s doing very well for himself thanks to government subsidies and contracts, all courtesy of the taxpayers.

There’s much more at the link, and there’s also more to the story.

The JOURNAL article doesn’t really elaborate on Elon Musk or Tesla, the assumption being that JOURNAL readers are already well informed on them. But Mr Musk has made his fortune riding on the back of government subsidies.Bloomberg BusinessWeek published an almost fawning article about Tesla last June, but recent storieshave the stock falling. Tesla produces a well-received electric car, but it requires substantial government incentives to get people to buy the things. Given the prices of the Tesla models,1 they are available only to very well-to-do buyers. The federal government is, in effect, taking the tax dollars of low-and-middle-income taxpayers to subsidize luxury automobiles for wealthier people. How is that right?

Of course, Mr Musk knew that all along: his business model has been to make his profits on the margins provided by government subsidies, and has a net worth of between $6.7 billion and $7.7 billion, probably what you’d expect from a large Obama donor, though it appears that being an Obama donor hasn’t kept the Infernal Revenue Service from having a few questions.(Read More)

Think of Mr. Musk and his corporatist cronyism the next time you hear Obama talking about “investing” your money in green energy.