SolarCity has defied skeptics so far and is now entering the crucible of the IPO roadshow process. Our first impressions and a look at the industry and their competition should help us get started. The deal is likely to appeal to investors liking a "big story" with good management and strong momentum. The big question in my mind is why equity investors would do so without a divident or at least a policy of having one. Management asserts that this is a "DCF story" but it's hard to take that to the bank unless you are a bond holder.
Underwriters: Goldman, Credit Suisse, BofA
Co-Managers: Needham, Roth
Symbol: SCTY, Shares: 10,000,000, Price Range: $13 - $15, Deal Size: $140,000,000
Shares Outstanding: 71,708,364, Enterprise Value: $1B, Revenue: $150M, Multiple: 7x
Notes from the Roadshow
They start out with the core appeal of solar - to ultimately pay less for cleaner and more natural power. It's an "aspirational" message. Suggests that "solar is ready to become a mainstream power source."
The company is aiming at the distributed "rooftop" market and exploit a spread between utility pricing and solar. The model is based on consumers signing a 20 year contract. The financial structure is a key to how the company is able to make money.
In the commercial segment the model is more about "locking in" costs for electricity over the long term and knowing that costs will be inline with budget no matter where energy prices go. (Which has been up for some years now.)
Company results have been good in terms of revenue growth with $832M of contracts so far. The waiting list is a few months long although installation is said to require only a few days. Number of customers has been growing at a fast rate. over 21,000 signed YTD versus just over 5,000 in the same period a year ago.