Aug 25, 2016 01:36 PM EDT
Business Start-Up News: Elon Musk Buys SolarCity Debt After Teasing New Product
SpaceX boss Elon Musk has purchased more than half of SolarCity debt. This comes after the Tesla Motors founder and CEO took to Twitter to tease about a new product for the electric car line.
Tesla has a new, improved battery for its Model S all-electric sedan. This would allow it to accelerate from 0-60 miles per hour in about 2 seconds.
Fortune reported that Elon Musk is buying $65 million of bonds from SolarCity during the latest debt offering by the solar panel company. Tesla plans to acquire SolarCity for $2.6 billion.
Musk's purchase comes after the company revealed that it would cut down on operating costs to lessen expenses. This is in line with its reduced solar installation outlook.
In addition, the SolarCity filing showed CEO Lyndon Rive and Chief Technology Officer Peter Rive, Musk's cousins, buying another $17.5 million each of the $124 million offer.
It was noted that this was the first time that Tesla Motors CEO Elon Musk has directly bought SolarCity bonds. His other company, SpaceX, has purchased bonds in the past. He is the largest shareholder in Tesla and SolarCity.
Corporate governance scholar Charles Elson shared his thoughts on the purchase. Speaking to CNBC, he commented that it was highly unusual for senior officers or directors to buy debt.
It was not a good signal to send to investors. Moreover, it would also raise some questions on the company's stability and sustainability.
"When you see an officer buying stock, it is a good sign - it means the business might have a good future," Elson said. "If you see them buying debt, you wonder, what is the long-term value."
In a statement to the publication, SolarCity CEO Lyndon Rive admitted that they "invested in SolarCity's Solar Bonds because it's a very efficient way for the company to raise capital without paying expensive banking fees. The bonds are issued directly, online, and there are no fees for investors either."
"Ultimately Elon, Pete, and I expect to be minority investors," he added.
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