Solarcity files for IPO to build global smart green utility

“Our goal is to become the largest provider of clean distributed energy in the world.” Elon Musk, super hero of the Smart Green Economy, is doing it again. As Chairman and biggest shareholder, Elon prepares for his third IPO after PayPal (2002) and Tesla Motors (2010) and positions Solarcity as the smart green utility of the future. Solarcity just filed for its long-awaited Initial Public Offering on NASDAQ by registering the Form S-1 with the SEC. While IPO date, volume and share price are to be defined, reading this investment prospectus is highly recommended. Update: On 27 November 2012, the price range ($13 to $15) and the volume (10.065.012 shares) was announced (S-1 Amendment 27.11.12).

Solarcity’s disruptive business model is technology neutral, highly scalable and very convenient for customers. The 6-year old startup sells renewable energy to consumers and companies at prices below utility rates with zero upfront cost. Further services include energy efficiency, energy storage and electric mobility that can also be integrated and sold to the same customer base.

Smart Green Utility Solarcity

Solarcity’s business model benefits from increasing electricity prices, decreasing cost of PV modules and low cost of capital fostered by tax credits and other types of subsidies. As of June 2012, Solarcity deployed 201 cumulative MW on 33.792 buildings. It also raised $200M venture capital and $1.57B infrastructure funds to finance the PV installations. While Solarcity is far away from profitability, the management team focuses on high-speed growth and getting ready for international expansion. This is very important as the business model can be easily copied. DZ-4 in Germany and Solease in the Netherlands are only 2 examples of European startups inspired by the idea to sell solar as a service.

As the global cleantech market badly needs more successful exits (liquidity events), the Solarcity IPO will not only provide nice returns to pre-IPO investors, but also new hope for the next generation of cleantech entrepreneurs that are searching for scalable business models. According to the S-1, in February 2012, Solarcity raised $81M in its Series G financing round selling 3.386.986 shares at a share price of $23,92. If my calculations are correct, the Series G valuation was already $1.35B.

Let’s take a look at Solarcity’s major shareholders and the value of their respective equity stakes at the Series G pricing: Elon Musk (31.9%, $431.2M), Draper Fisher Jurvetson (26.3%, $355.5M), Generation Investment Management (7.5%, $101.6M), DBL Investors (7.4%, $100M), CEO Lyndon Rive (7.0%, $97.5M), CTO and COO Peter Rive (7.0%, $97.5M), Valor Equity Partners (2.1%, $28M) and Silverlake Kraftwerk (2.0%, $27.5M).

But even poster child cleantech startups like Solarcity are not immune to the risk of dropping energy prices as a result of the shale gas revolution of which I personally think that it is very bad for renewable energy in the US and the rest of the world in the long-term.

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