Liberal billionaire Elon Musk is using his taxpayer-backed space company to prop up his ailing taxpayer-backed solar panel company. Musk’s SpaceX pumped $90 million into the financially troubled SolarCity, according to recently released Securities and Exchange Commission (SEC) filings.
SpaceX now has an estimated $255 million invested in the struggling rooftop solar company, as the space company has already purchased $165 million in SolarCity bonds. SpaceX makes its money by selling rockets and space transportation services to the National Aeronautics and Space Administration (NASA) and is looking to start supplying the American military. SolarCity is a sizable investment for SpaceX, which was valued at $12 billion in 2015.
Musk himself invested $10 million of his personal fortune into SolarCity in February, according to SEC filings.
SolarCity was required to disclose the bond purchases to the SEC because the companies have the same leadership. Elon Musk is the CEO and a major shareholder of SpaceX, but also serves as chairman of SolarCity along with being the company’s largest shareholder. Musk’s cousins, Lyndon Rive and Peter Rive, serve as the CEO and chief technology officer of SolarCity. Both are shareholders in SpaceX.
SolarCity has been in rocky financial straits recently as state governments cut back on lucrative subsidies people can get for selling solar power back to the electrical grid.The company’s stock has rapidly fallen and currently hovers around $23.54 per share, down from its 2014 high of $86.
JP Morgan downgraded projections about SolarCity’s stock in February due to unfavorable regulatory changes. Barclays also downgraded SolarCity’s stock in February, lowering the price target from $49 to $20 per share.
SolarCity’s financial problems began after Nevada utility regulators cutback how much energy companies were forced to pay solar panel owners for their energy along with increasing the monthly fee for having rooftop panels. The change caused Musk’s SolarCity stock to devalue by roughly $165 million in a single day.
Many states, including Nevada, have so-called net-metering policies which allow people or businesses with rooftop solar panels to sell power they produce back to the grid at retail electricity rates. SolarCity and other companies benefited from these policies which encouraged solar power and expanded their market.
In late February, the bank JPMorgan downgraded projections about SolarCity’s stock and lowered the company’s target price from $44 to $29. The financial services company Barclays also downgraded SolarCity’s stock in February, lowering the price target from $49 to $20.
SolarCity’s financial problems largely began when the government of Nevada introduced sharp cutbacks to its net metering program. This policy shift occurred when Musk lost a regulatory battle to fellow liberal billionaire Warren Buffett. The change caused Musk’s SolarCity stock to devalue by roughly $165 million in a single day.
Electrical utilities argue net-metering shifts the costs of maintaining the electrical grid onto households that don’t have solar panels. Since the demand of and price for electrical power fluctuates widely on any given day, net-metering was effectively a wealth transfer from utilities to rooftop solar companies.
Roughly 20 other states are considering changing their net metering laws, which would dramatically alter the economics of rooftop solar, according to Massachusetts Institute of Technology Technology Review. Without net metering payments, rooftop solar “makes no financial sense for a consumer,” Lyndon Rive, CEO of SolarCity, admitted to The New York Times in February.
Nevada regulators sided with Buffett and allowed his company to increase monthly service charges for solar customers by about 40 percent while paying rooftop solar customers 75 percent less for energy they sell back to the grid, according to a sample bill posted on the utility’s website. The policy devastated SolarCity, causing the company to follow through on its threat to end 550 jobs in Nevada.
SolarCity did not respond to requests for comment by The Daily Caller News Foundation in time for publication.
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