SCTY Stock: Here’s How Elon Musk Lost $192 Million Overnight

Elon Musk Lost $192 MillionSCTY Stock Plunges 32.1% After Earnings

SolarCity Corp (NASDAQ:SCTY) released its earnings after the closing bell on Tuesday and the reaction wasn’t pretty. Markets pummeled SCTY stock in afterhours trading, knocking it down by more than 32.1%. The rout cost Elon Musk $192 million.

Despite beating Wall Street estimates, investors continued to dump SCTY stock. In its fourth quarter, the company delivered $115.5 million in sales and a loss of $2.37 per share. Revenue was up 61% year-over-year, yet that wasn’t enough to save Elon Musk’s investment. (Source: “SolarCity Form 10-K Filing,” Securities & Exchange Commission, February 9, 2016.)

Investors were instantly drawn to the guidance for the first quarter of 2016. It showed the losses expanding even further and was generally more pessimistic. Hence the panic.

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Here’s the part that scared them (emphasis added by me):

“For Q1 2016, we also expect GAAP Operating Expenses of $230 million–$240 million (including between $30 million and $32 million in non-cash amortization of intangibles and stock compensation expense) and Non-GAAP Loss Per Share (before Income (Loss) Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests)* between ($2.55)–($2.65)…”

The prospect of further losses started the run. SolarCity’s CEO, Lyndon Rive, tried to do damage control, blaming the weak outlook on a regulatory shift in Nevada and construction delays. He also insisted the company will be cash-positive by year’s end.

In fact, Rive committed to 40% growth. Regardless, the lower guidance cost Elon Musk a lot of money. According to last year’s SEC filings, Elon Musk owned 20,681,439 shares of SolarCity. (Source: “SolarCity Form DEF 14A Filing,” Securities & Exchange Commission, June 2, 2015.)

Through the year, he bought about 630,519 more shares in the company. (Source: “Here’s how Elon Musk balances Tesla, SolarCity stocks,” MarketWatch, November 18, 2015.)

So at the start of Tuesday, Musk’s stake in SolarCity was worth about $596.95 million. In less that 24 hours, that was cut down to $405.27 million. Ouch, that’s got to hurt.

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