Please ensure Javascript is enabled for purposes of website accessibility

Why SolarCity Corp.'s Shares Popped 22.5% Today

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

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

SolarCity Corporation Stock Quote
SolarCity Corporation
SCTY.DL

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
319%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.