SolarCity signs 300,000 customer, but profitability questions remain

The milestone, representing a major step forward for a company in the midst of its complicated acquisition by Tesla, highlights the challenges of public companies that depend on long-term planning.

October 27, 2016 Frank Andorka

Shifting sales strategies by national residential installers like SolarCity will cause customer acquisition costs to rise in the short term - but as the market adjusts, GTM Research predicts they will fall below their previous 2013 lows.

Wikimedia Commons

It all started with a Tweet.

At around 3 p.m. Eastern Daylight Time (EDT) yesterday, SolarCity announced on its Twitter feed that it had signed its 300,000th customer, a noteworthy accomplishment that no other company in the industry can match.

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The announcement generated little response on Twitter, and what little it did was generally positive as it should have been, befitting the milestone. But one tweet from a self-described environmental engineer, @eriz35, highlighted a key struggle that SolarCity — and eventually Tesla if the merger between the goes through — has with its status as a public company:

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And therein lies the rub. It’s no secret that SolarCity, despite nearly becoming a household name, has struggled with its profitability. As our own Christian Roselund has written:

Losses are nothing new to SolarCity. The company’s business model involves building long-term value in the form of solar assets, and it has led the industry in financing innovation and pursued growth at the expense of short-term profit. However, this path of growth is having hiccups, and SolarCity’s losses for the first half of 2016 are not only higher than normal, but have well exceeded its revenues.

The company burned through $216 million in cash in Q2, and its Q3 report is expected to be held on or before Nov. 3 (according to NASDAQ), though there is some wiggle room.

As Roselund noted, the SolarCity business model depends on taking a long-view approach, where the investment value grows over time. But as a public company, the pressure is constantly on SolarCity to hit projections every three months.

The tension between those two competing visions for the company has left SolarCity often scrambling to raise capital to build its business for the long haul. It has led to at least three fundraising rounds since July. It did receive a recent influx of cash nine days ago, thanks to a $300 million funding deal with Credit Suisse, but questions remain.

Many analysts have openly wondered if the proposed Tesla-SolarCity deal might bring down both companies because of SolarCity’s debt and has led to lawsuits attempting to stop the deal. But in a blog post on Oct. 12, Tesla announced shareholders will meet on Nov. 17 to vote on the deal.

Whether SolarCity can reconcile its forward-looking business model and the public-company pressure remains to be seen, but it’s clear the tension will remain in the foreseeable future.

In other SolarCity news, the company announced it is near to completing installations on nearly seven megawatts on Air Force family housing in four states. The bases involved are Travis Air Force Base (AFB) in California; Tyndall AFB in Florida; Sheppard AFB in Texas; and Luke AFB in Arizona.

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