Small Cap Strategist is published by Crystal Equity Research an independent research resource on small capitalization stocks. Follow along as we discuss the most recent trends in the small-cap sector, investigate interesting companies and pan a few not-so-promising stocks.
energy retailer SolarCity
has filed for an initial public offering of 10 million shares of its common stock
and a few shares owned by existing shareholders.The offering is valued at between $130.0
million and $150.0 million based on an anticipated share price between $13 and
$15 per share. SolarCity expects its shares to trade on Nasdaq under the symbol SCTY.
raised by SolarCity will be used support acquisitions of complementary
operations.Proceeds could also be used
to support SolarCity’s capital spending program as it seeks to extend its
distributed network of solar systems on residential and commercial buildings. SolarCity’s
installed base expanded to 33,792 buildings by the end of June 2012.
majority of SolarCity’s revenue comes from the sale of solar-generated electricity.
SolarCity has yet to produce an operating profit.Indeed in the six months ending June 2012,
the company’s operating loss deepened compared to previous periods.That said, scale is on SolarCity’s side.Revenue from solar energy system sales increased
to $51.7 million in the first six months of 2012, compared to $11.2 million in
the same period of the previous year.Profit margin on this segment increased to 14.9% compared to negative
46.2% in the prior year.
my view, this a deal worth considering, but only after the shares get some
seasoning.A $13.00 per share price puts
a $932 million market value on SolarCity and implies a multiple of 8.4 times
revenue.This seems a bit pricey given
that the company has not been consistently profitable.
The deal was expected a month ago, but was delayed when Hurricane Sandy literally fouled up the works on Wall Street. I
will be watching SolarCity carefully. The
company has so far done a good job of building the sort of distributed power
generation system our country needs as it moves away from fossil fuels for
electricity generation. Priced right, it could be an excellent long-term hold.
Neither the author
of the Small
Cap Strategist web log, Crystal Equity
Research nor its affiliates have a beneficial interest in the companies