Solar stocks have been taken a beating across the board this summer, first from a faulty association with oil prices and in the last week as a casualty of global market woes. Some have been hit worse than others.
SolarCity was one of the few stocks that showed some resilience to the first trend, with stock prices bouncing back in late July, only to fall again in August. However, SolarCity stock lost value sharply over the last week, with a fall both mirroring overall market declines and spurred the words of a hedge fund manager famous for short selling.
James Chanos, president of Kynikos Associates, announced that he was shorting SolarCity on American cable channel CNBC on Friday around noon, which precipitated a 11% fall in the stock’s value in by the end of the day. He additionally described the company as a subprime financing company, warned of negative EBITDA and debt, and said that the company’s business model had been passed over.
Chanos also stated that solar is a transformational industry, citing falling costs. SolarCity CEO Lyndon Rive clarified on CNBC later that day that the FICA score of its customers put it out of the realm of sub-prime mortgages. Rive also noted that its default rate was extremely low, and offered a different explanation of SolarCity’s value proposition to customers than Chanos had provided.
This was followed by SolarCity Chair Elon Musk buying an additional $5 million in shares on Monday. As Musk is the company’s largest investor this represented a tiny increase in his holdings, but sent a signal to investors.
This may have helped the stock to bounce back from a low of $35.23 on Monday morning to settling around $45 on Tuesday afternoon. However, this remains the lowest the stock has been since late 2013.