The Breakdown

Explaining Southern California's economy

Solar City IPO raises $92 million but doesn't deliver Chairman Elon Musk a great year

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Elon Musk almost had a truly great year. The CEO of Tesla Motors and SpaceX saw Tesla's Model S sedan named Motor Trend's Car of the Year and the Dragon capsule successfully rendezvous with the International Space Station and splash down in the Pacific twice.

And I named the visionary entrepreneur the DeBord Report 2012 L.A. Businessperson of the Year!

Musk is also Chairman of Solar City, the San Mateo-based solar panel installation and leasing startup. Solar City staged an initial public offering Thursday. That should have been icing on Musk's 2012 cake (the company is run by two of his cousins, while he's one of the main investors). But it didn't entirely turn out that way.

The IPO wasn’t a disaster for Musk. Solar City raised $92 million in its Wall Street debut and now has a market cap of nearly $600 million. But the offering was priced lower than initially planned: $8 a share, rather than the $13 to $15 that had been announced in the lead up to the IPO. The higher price would have valued the company at a cool billion.

The investment banks that underwrote the offering — with Goldman Sachs taking the lead — weren't able to overcome skittishness about the clean-tech sector. It's witnessed some prominently meltdown over the past year or so. The worrisome whiff of Solyndra, the solar startup that went bankrupt, taking investor and federal Department of Energy money with it, hangs miasma-like in the green energy realm. Battery maker A123 also recently declared bankruptcy; its $371 million IPO - 2009's largest - set off plenty of irrational optimism about cleantech companies and their bright future. These days, that optimism looks foolish.

Still, Solar City “popped,” closing at almost $12 a share in trading Thursday. But the company is valued at hundreds of millions less than if it had successfully begun trading at the higher level. Musk himself bought $15 million of the shares Solar City sold in the IPO. Other prominent investors also jumped in. You can read that either as a vote of confidence in a company that has yet to turn a profit (although sales are rising fast) or as an effort to use the IPO process to put more money into the company, under the guise of making it available for public ownership.

Musk probably isn’t worried. Tesla is trading well above its 2010 IPO price. And there’s always SpaceX, which could launch its own IPO next year. But it would have been a nice close to his year if Musk could have gotten Solar City to a $1 billion valuation.

Follow Matthew DeBord and the DeBord Report on Twitter. And ask Matt questions at Quora.

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