Elon Musk Bullish on SCTY Stock
Elon Musk, the chairman of SolarCity Corp (NASDAQ:SCTY) and its largest shareholder with more than a 21% stake, is averaging down his position in SCTY stock, which has lost 64% of its value so far this year alone.
The renowned billionaire entrepreneur acquired 569,680 shares of the stock in a transaction on Friday, according to the U.S. Securities and Exchange Commission (SEC) web site. (Source: “SEC Form 4 Filing,” SEC, February 12, 2016.)
The shares were bought at an average price of $17.56 per share, with a total value of $10.0 million.
Averaging down is the process of buying additional shares in a company at lower prices than the price at which the investor originally purchased the stock. This lowers the average price the investor paid for all their shares.
SolarCity stock was pounded on Tuesday, falling 29% in the wake of the solar installer’s fourth-quarter earnings report.
The San Mateo, California-based company, which is expected to make up a large part of the world’s future energy supply, provided a gloomy outlook for the current quarter. It projected a first-quarter loss of $2.55–$2.65 per share, which is wider than Wall Street’s estimated loss of $2.36 per share.
SolarCity, regarded as a Wall Street darling just two years ago, is now facing deep uncertainties, despite unflagging consumer interest and surging growth in renewable energy. The company’s debt levels are soaring as cash levels shrink.
Earlier last year, hedge fund manager and short seller Jim Chanos revealed he was betting against SolarCity stock, calling the company a subprime lender and “really nothing more than a consumer finance company.” (Source: “Elon Musk takes a hit as SolarCity shares plunge,” CNN Money, October 30, 2015.)
SolarCity is run by two of Musk’s first cousins, Lyndon and Peter Rive. (“Elon Musk’s vision is not for the faint of heart,” Reuters, February 11, 2016.)
The embattled company said last week that it appointed Tanguy Serra, its chief operating officer, as the company’s new chief financial officer.
In reaction to the weak quarterly report, Barclays cut its rating from “Overweight” to “Equal Weight,” Bank of America lowered its price target from $75.00 to $40.00, while Roth Capital downgraded the stock from “Buy” to “Neutral.”
Raymond James, on the other hand, raised the stock from “Outperform” to “Strong Buy,” even though the research firm slashed its price target from $70.00 to $60.00.