Last June, when Tesla unexpectedly announced it would acquire the cash burning behemoth that was SolarCity, which at the time was run by Lyndon Rive, a cousin of Elon Musk, many quickly alleged the transaction was nothing short of a less than "arm's length" bailout by Musk of both SolarCity and Rive. The reasons were legion: from the corporate cross ownership, with Musk Chairman and largest shareholder of both companies...
... to the extensive board overlap and potential "related party" conflicts of familial interest...
... culminating with a transaction which saw between 7 if memory serves board members recusing themselves.
In the end Musk won, the deal was concluded, and Lyndon Rive's reputation of commanding a melting - and massively cash burning ice cube - was saved.
He also made a killing by cashing out his stock.
Fast forward not even a year later, when Reuters reports that SolarCity's founder, and Elon Musk cousin, Lyndon Rive, is leaving the combined company in June, he said on Monday.
Why the hasty departure from a merged company which cashed out Rive's shares at a whopping premium to what they were worth in the standalone company? In an interview, the former SolarCity chief executive gave the token excuse: "he wanted to start a new company next year and spend more time with his family." Rive, 40, said SolarCity was "healthier than it's ever been," and the time had come for him to move on.
Rive had been serving as head of sales and services for Tesla's energy division since last year. Upon his departure, Rive's responsibilities will be distributed among Tesla leadership, Tesla said.
Rive co-founded SolarCity with his older brother Peter in 2006 with financial backing from their cousin Musk. Peter Rive, who was SolarCity's chief technology officer, will remain to focus on the company's solar roofs.
Over the next decade, SolarCity expanded rapidly with no-money-down financing schemes and a vast sales and installation operation. The company in 2013 aimed to have 1 million customers by 2018, but drastically scaled back plans at the end of 2015, growing far below expectations, as costs for funding that growth mounted and demand began to slow. SolarCity hit 300,000 customers late last year. It was also burning through so much cash some more outspoken analysts - who did not fear losing Tesla as a future underwriting client - alleged SolarCity would be insolvent without the Tesla "bailout." Even Goldman noted at the time that SCTY's loan covenants were on the verge of getting breached absent some dramatic rescue:
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Since its acquisition by Tesla, SolarCity had continued to generate substantial losses for Tesla, which however is now part of the company's grand unified vision of providing a vertically integrated "green" transportation and energy conglomerate.
As a reminder, Tesla acquired SolarCity for $2.6 billion last August - cashing out all existing SCTY executives, and paving the way for Tesla CEO Elon Musk's ambitious plans for a carbon-free energy and transportation company.
As Reuters correctly notes, "the sale came as investors worried about the solar panel installer's debt-fueled growth." However, under the much bigger Tesla balance sheet, SolarCity's financial problems were quickly diluted, if not forgotten.
Since the acquisition, SolarCity has further slowed installations and focused on the most profitable projects that generate cash upfront.
Throughout his decade at the helm of the company, Rive had a populist vision of making rooftop solar energy affordable to all in an effort to curb demand for fossil fuels and combat climate change. Much, if not all, of its original business model - much like that of Tesla - was based on receiving taxpayer subsidies and grants.
Last week, Tesla launched its innovative solar roof tiles - a product that generates electricity without traditional rooftop panels. As we showed before, the only reason the company's business model is competitive and even remotely viable, is due to "tax grants."
According to Reuters, Rive said he began to consider leaving a few months ago. "My skill set and what I love doing is starting and running companies," Rive said. "I can hand off the baton to somebody else and give myself the opportunity to do something else that could also have another impact."
Something tells us whatever company Rive starts will once again end up being generously subsidized by taxpayers.
As to whether Tesla's acquisition of SolarCity by Musk in the summer of 2016 was a bailout for both the solar panel installer and his cousin, we leave it up to readers to decide. We'll just repeat our question from nearly a year ago when we discussed the Tesla-Solarcity merger, and concluded that "we wonder if 22nd Century investors will be warned of "Musk Schemes"?"