Search


Subscribe to AFM


Subscribe to AllFinancialMatters
by Email

All Financial Matters

Promote Your Page Too

The American's Creed

Site Sponsors

Books I Recommend


AFM in the Media


Money Magazine May 2008

Real Simple March 2008

Blogroll (Daily Reads)

« | Main | »

WSJ Opinion: How Government is Making Solar Billionaires

By JLP | October 22, 2013

From today’s WSJ (How Government is Making Solar Billionaires):

Welcome to SolarCity, SCTY -0.59% the latest booming green company that has never recorded a profit. The startup’s stock price has soared by 600% since its IPO last December—it closed on Monday at $57 a share—and spiked after the company announced a couple of weeks ago that it expects business to grow by 70% to 90% next year. Yet the company, based in San Mateo, Calif., and specializing in deploying rooftop panels, ended the first six months this year $61 million in the red.

Ordinarily, that sort of number might disconcert investors. But SolarCity’s business model is powered by government subsidies, which also fueled the 500% stock run-up and turn to profit this year of the electric-car maker Tesla. Steering both companies is Elon Musk.

In addition to being the chairman of SolarCity and CEO of Tesla, Mr. Musk is the largest shareholder in both companies. The increase in their stock prices has raised his net worth by more than $5 billion over the past year.

Isn’t that lovely?

Yes, I am aware that the government also helps other industries. The point is the government really should get out of all business creation and promotion. The government should not be deciding who is or is not successful. If your idea cannot succeed in the market place on its own, then you need a different idea. Mr. Musk has the U.S. taxpayers to thank for his wealth.

Discuss among yourselves while I go paint the master bedroom…

PS – If you can’t read the link, email me (JLP – at – AllFinancialMatters.com) and I’ll get you a copy.

Topics: Economics, Politics | 9 Comments »


9 Responses to “WSJ Opinion: How Government is Making Solar Billionaires”

  1. Retiredat40 Says:
    October 22nd, 2013 at 2:01 pm

    Peanuts compared to the defense industry. At least one day we will be getting most of our electricity from rooftop solar panels. Defense industry spending pretty much all goes down the tubes although it is a good jobs program. Why is it no one ever wants the defense industry to compete on its own?

  2. Retiredat40 Says:
    October 22nd, 2013 at 2:40 pm

    Also, most of Musk’s wealth increase is coming from IPO mania. That’s in part because of subsidies, but it is the market deciding what his net worth ought to be. The market has decided that solar panels are the wave of the future. His company is losing money even with subsidies. So clearly, the market is voting for the concept and not just counting on subsidies. Mostly, they are betting on Musk.

    Musk got his wealth from PayPal. He has the market to thank for his increased net worth with some help from the govt. But obviously, people think the concept is valid or they wouldn’t be buying.

  3. BG Says:
    October 22nd, 2013 at 7:45 pm

    “…Customers, however, must sign a contract agreeing to cede “any and all tax credits, incentives, renewable energy credits, green tags, carbon offset credits, utility rebates or any other non-power attributes of the system” to SolarCity….”

    Wow, just wow.

    What’s next — Fertility clinics requiring patrons to sign over all their future child-tax credits? lol.

  4. Retiredat40 Says:
    October 22nd, 2013 at 9:59 pm

    That’s nothing. In Germany prices on solar are coming down so much that roughly 5% of electricity is now being generated using solar. This has the utilities sweating and they are lobbying to charge people for the electricity they produce themselves claiming that they are “freeriders.” This will be the future of solar in the USA where corporate power reigns supreme.

    When solar gets to the point that people can simply unplug, you’ll pay a subsidy to the utilities for their lost profit as well as pay the solar panel producer for the electricity you generate using their panels which will probably be leased at that point. They will get you coming and going as always.

  5. JLP Says:
    October 23rd, 2013 at 8:54 am

    Retired,

    I think we should cut any government spending to the bone that props up industry. The defense industry should be scrutinized and watched like a hawk. The mixing of government and business paves the way for all sorts of funny business.

    I don’t think government should be involved in solar energy. If the business cannot survive on its own, then it’s a bad business. The ONLY reason SolarCity is doing well is because of government subsidies…

  6. Retiredat40 Says:
    October 23rd, 2013 at 1:22 pm

    Solar City isn’t doing well. It’s stock is. That is not so much because of the subsidies as the significant future prospects of solar.

    The government should definitely subsidize things that benefit the population such as drug research and even energy. The energy subsidies are excessive at this point as the oil and coal industries can stand on their own. Solar not so much. So I agree with subsidies for solar. Those subsidies are much less than for coal which Republicans aren’t upset about at all.

    Musk is getting rich because of the market though. It’s kind of amusing to see Republicans getting upset because someone is being rewarded by the market because that’s the way they tell us it ought to be.

    The main reason they are upset is because they don’t believe electricity should come from anything but coal because that represents progress past 1955 and solar is seen as a Democratic agenda.

  7. Evan Says:
    October 26th, 2013 at 7:50 pm

    I owned some SCTY and sold after 150% gain inside a few months I ran! It is amazing to me that TSLA and SCTY seems to be trading without any regard to fundamentals. It is like 1999 again

  8. Valkyrie Frost Says:
    November 4th, 2013 at 2:44 pm

    The advent of IRA, 401K’s and numerous other retirement saving plans that send money into investment funds that in turn must invest those funds in the stock market are fueling stocks like TSLA and SCTY. Like, 1999, it’s an artificially inflated market well outside the true value fundamentals. Invest with caution.

  9. Valkyrie Frost Says:
    November 4th, 2013 at 2:51 pm

    BTW, I love solar. However, I also believe the govt should not subsidize the industry, except – perhaps – on the research side.

Comments