• Solar power craze on Wall St. propels startup
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     | January 06,2014
     

    The first inklings of the idea came to Elon Musk and a cousin in an RV heading to the Burning Man festival in 2004.

    Solar energy, they agreed, could be big.

    But not even Musk, the billionaire behind the Tesla electric car, could have foreseen the solar-power craze that is sweeping Wall Street. He and his cousins Peter and Lyndon Rive are riding a wave of exuberance over the industry and their young business, SolarCity.

    The company — the nation’s largest provider of rooftop solar systems, with more than 80,000 customers — has not made a dime. And, frankly, no one quite seems to know when, or if, it will.

    But SolarCity has captured investors’ imaginations and become a potent symbol of a stock market ascent that makes the vertigo-inducing heights of Twitter seem tame. SolarCity’s share price, which closed at $59.27 Friday, has soared more than sevenfold since it went public, and the company, which did not exist eight years ago, is valued at roughly $4.9 billion.

    Depending on whom you talk to, the rise of SolarCity and similar companies is either a sure sign that solar power is finally having its day, or that yet another mania has gripped the markets.

    SolarCity faces formidable challenges. It is trying to outrun rivals in a race to transform the power industry. Utilities are furiously working to undo the incentives that have fueled the solar industry’s growth. A generous federal tax credit is set to shrink in a few years. It has attracted the attention of regulators, who have questioned the way it values the rooftop systems.

    And, because of its stock price, it must continue to feed Wall Street’s appetite.

    “The market expects them to grow really rapidly for a while — there’s no other way that that price makes sense,” said Shayle Kann of GTM Research.

    SolarCity will not predict when it will make a profit. In fact, executives argue that the losses are a good thing. “Losing more money means we’re investing more capital and creating more value,” said Robert Kelly, SolarCity’s chief financial officer.

    But as the company tries to expand and show robust growth signs of customer dissatisfaction have emerged.

    Musk says the company’s stock price is too low.

    “People do not understand the magnitude of the business,” he said. “It’s really very, very significant.”

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