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SolarCity’s difficult path to public market

In what is becoming one of the closest watched solar IPOs for some time, solar lease provider SolarCity has increased the number of shares in its offering and reduced its share price.

Major SolarCity investors have issued statements that they intent to purchase large numbers of SolarCity shares in the IPO.

Flickr/orngejuglr

In a sign of the difficulties facing cleantech companies in financial markets, SolarCity first delayed and now has reduced the share price for its initial public offering (IPO). Initially SolarCity had hoped to sell 10 million shares in the company for US$13 to $15 per share. However in its submission to the Securities and Exchange Commission filed today, the solar lease provider will now offer 11.5 million shares for $8 per share.

Forbes has reported that this would raise $92 million less than it would have, if SolarCity could have achieved a price at the high end of its previous range. Reuters notes that the price of $585 million is almost half of its previous proposed valuation.

Many in the cleantech and solar community are watching SolarCity’s IPO closely, as it is the first such company to have listed in recent times lately. When the firm did not price its shares yesterday, some observers interpreted it as auguring badly not only for SolarCity but for the sector.

However, this comparison with other solar public listings may not be entirely fair. While many solar stocks, like Solyndra or First Solar, have performed disaterously or poorly, respectively, in recent years at the hands of financial markets, by operating in the downstream solar leasing market segment many of the challenges facing manufacturers do not apply to SolarCity, observes GigaOm – a technology website. In fact low and falling prices for solar actually favors SolarCity.

Some of the negativity surrounding SolarCity’s IPO may be related to it continuing losses, despite its increasing revenues and growth. That 90% of its customers opt for a lease, rather than pay for an installation up front, may also be weighing on its IPO prospects, as providing installations under lease is capital intensive and will require continuing, and perhaps diluting, investment into the company in the future.