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Why SolarCity Corp.'s Shares Popped 22.5% Today

By Travis Hoium - Mar 3, 2016 at 3:12PM

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Could Elon Musk be looking to buy out this rooftop solar company?

Image source: SolarCity. 

What: Shares of SolarCity Corp. (SCTY.DL) popped as much as 22.5% today on whispers that Elon Musk might take the company private.

So what: Rumors hit the market this afternoon that Musk may take SolarCity private, potentially causing short-sellers to quickly cover their positions. Musk recently bought shares of SolarCity that increased his stake in the company to 22.6%, but hasn't offered a buyout. As of now, this is nothing more than hearsay driving the stock.  

Now what: In many ways, a buyout of SolarCity makes no sense at all. The company is still burning cash and is hoping to be cash flow breakeven only by the end of 2016. Musk himself is also at least $475 million in personal debt after purchases of shares of Tesla Motors and SolarCity post-IPO.  

Musk may indeed think that SolarCity's stock is undervalued, but organizing a buyout of the company for $3 billion or more would be a huge feat, even for him. The residential solar market is seeing more turmoil than we've ever seen, and even SolarCity's borrowing costs to fund projects are rising. That's not the kind of business Musk would want to take private, so I wouldn't read too much into these stories today.

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