SolarCity (SCTY) Equity Financing Should Provide Confidence to Tesla (TSLA) Shareholders - Baird

September 12, 2016 1:03 PM EDT
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Price: $20.64 --0%

Rating Summary:
    4 Buy, 17 Hold, 1 Sell

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Baird analyst Ben Kallo weighed in on SolarCity (NASDAQ: SCTY) after the company announced it raised $305M in cash equity financing. Effectively, the company monetized a portion of the future cash flows from a 230 MW portfolio. The transaction also includes an 18-year loan that was syndicated to 5 institutional investors.

Kallo said, "Importantly, this is the second time SolarCity has monetized cash flows in recent months and we estimate the company has achieved a lower rate."

The analyst said the transaction should provide confidence to Tesla (NASDAQ: TSLA) shareholders that SCTY can be self-funding over the long term.

"While the TSLA transaction still is outstanding, this should help ease TSLA shareholders' concerns regarding SCTY's cash needs when/if the transaction closes," Kallo said. "Under the proposed merger SCTY shareholders would receive 0.11 TSLA shares per SCTY share (equivalent to ~$22 based on TSLA’s current price.)"

The analyst maintained a Neutral rating and price target of $25 on SCTY.

For an analyst ratings summary and ratings history on SolarCity click here. For more ratings news on SolarCity click here.

Shares of SolarCity closed at $16.77 yesterday.

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Robert W Baird, Tesla, Definitive Agreement, Ben Kallo

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