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Why Shares of SolarCity Corp Popped 24% Today

By Travis Hoium - Feb 17, 2016 at 4:15PM

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Even Elon Musk thinks SolarCity shares are cheap.

What: Shares of SolarCity Corp (SCTY.DL) popped as much as 24% in trading Wednesday after Chairman Elon Musk revealed he purchased shares of the company's stock.

So what: In a filing with the SEC, Musk revealed that he bought 569,680 shares of SolarCity stock for just over $10 million in Friday. This was shortly after SolarCity's stock plunged following its fourth-quarter earnings report and weaker-than-expected guidance.

As shares of SolarCity and Tesla Motors have both dropped, Musk has been buying more and more shares. In the case of SolarCity, he bought shares in 2015 at $40.49, between $25.20 and $26.45, and another $10 million worth at $33 per share.  

Now what: You have to give it to Elon Musk: He has a lot of confidence in himself. But his share purchases also haven't led to a higher stock price or better fundamental performance for SolarCity. Last week, the stock traded at a three-year low and got within shouting distance of its IPO price.

If you think SolarCity is a great buy here, great. But buying just because Elon Musk did isn't a good investing strategy. In fact, it's been a losing proposition for a couple of years now.

Travis Hoium has no position in any stocks mentioned. The Motley Fool owns shares of and recommends SolarCity and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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