In a regulatory filing Wednesday, Tesla said that in the first six months of the year, it burned through $611 million in cash, and SolarCity went through $433 million. That probably means more stock sales, which will dilute existing holdings, said Salim Morsy, a Bloomberg New Energy Finance analyst.
The filing also revealed that Musk suggested to his cousin, SolarCity CEO Lyndon Rive, sometime in February that they combine their companies, and that the Tesla board was briefed on the idea on Feb. 29. That means Tesla directors knew about the possibility of a union when the company sold $1.4 billion in stock in a secondary offering in May, but didn’t share that information with buyers.
Because the board decided not to proceed with an evaluation of a deal in February, the company was probably in compliance with securities laws, according to James Cox, a professor at Duke University School of Law. It wasn’t until May 31 that Tesla directors told management to assess the rationale of such an acquisition.
Risk Tolerance
The February discussion between Musk and Rive was described as “high-level, conceptual,” with the two talking about possible product offerings. It doesn’t specify whether that conversation was before or after Musk’s Feb. 12 purchase of almost 570,000 shares of SolarCity for an average price of about $17.56, which brought his holdings to about 21.8 million shares.
Musk has a famously high tolerance for risk. He poured the $180 million he made from the 2002 sale of PayPal, which he co-founded, to EBay Inc. into Tesla and SpaceX. By 2008, both were running on fumes, with Tesla hemorrhaging money and SpaceX’s first three rocket launches having failed to reach orbit. But in December of that year, after SpaceX’s fourth flight was flawless, NASA announced it had been awarded a contract worth as much as $1.6 billion to ferry cargo to the International Space Station. Tesla closed a critical funding round late on Christmas Eve, hours before it would have gone bankrupt.
“There is no level of risk that is too high for Elon Musk,” said Mike Ramsey, an analyst at Gartner Inc. “That’s absolutely clear. His skin is completely in the game.”
In June, Musk called marrying Tesla and SolarCity a “no brainer.” Back in 2013, he put a telling post on Twitter about his dedication to sticking it out at Tesla: “Just as my money was the first in, it will be the last out.”
This article was provided by Bloomberg News.