Posted: 24 Jan 2014 06:15 AM PST
And Why I Just Got Back Into This Stock
By Jeff Siegel
DISCLOSURE: Long SCTY.
I’m not sure how many people realize it just yet, but something very big happened last year in the world of solar.
A small start-up called Mosaic came onto the scene offering New York and California residents the opportunity to invest in solar projects. These investments offered a 4.5% annual return, net of servicing fees, with terms of about nine years.
This is basically a crowdfunding opportunity for those looking to invest in small solar projects.
It’s a pretty simple model, actually.
You see, Mosaic connects investors to solar projects that need financing. The projects generate revenue by selling the power to the customer, and that revenue is used to pay back investors — with interest.
The company has been very successful since its launch, and it often sells out its offerings within days.
Overall, the model is very attractive, as it marries the demand for solar with the funding necessary to meet that demand — although with Mosaic, the operation is still quite small.
Still, after discovering the Mosaic model, I knew it wouldn’t be long before a similar model was adopted by a much larger operation — one with deeper pockets and the type of management that’s known for turning pipe dreams into profitable realities…
As co-founder and CEO of the electric car darling of Wall Street, Musk completely changed the entire landscape of electric car opportunities, showing the world that a new revolution in vehicle design was not only here but was very, very profitable.
As a result, anything Musk attaches his name to tends to garner a lot of attention. In fact, I would argue it’s one of the reasons SolarCity (NASDAQ: SCTY) got so much love following its IPO back in December of 2012.
That company is actually run by Musk’s cousin, and Musk himself serves as Chairman.
Now, I actually invested in this company shortly after it went public, and I did quite well. In fact, it was one of my most profitable picks in 2013.
However, not wanting to risk the impressive gains I had realized in such a short amount of time, I sold my shares and pocketed my winnings.
I acted too soon!
A Major Coup
Last week, SolarCity announced it’s going to launch a new, web-based investment platform through which it will allow individual investors and organizations of all sizes to participate directly in solar investments that have previously only been available to financial institutions.
The project is similar to what Mosaic does; however, unlike Mosaic, the investments won’t be tied to specific projects.
Now as I mentioned, Mosaic has been incredibly successful since it first debuted, raising nearly $6 million on less than 20 projects made available to the public. The yields on these investments range from 4.4% to more than 6%. That’s pretty good, although I suspect SolarCity may be able to up the ante.
Here’s the bottom line…
SolarCity is going to be the first major solar financing company to offer both solar financing deals to individuals and the opportunity for individual investors to get a piece of this action. With solar installations continuing to boom across the nation, this is a unique opportunity for investors and an incredibly profitable one for SolarCity.
As it is, the company has no problem raising money. In fact, a few years ago, after the company lost its federal loan guarantee, Bank of America swooped in almost instantly with $350 million so the company could complete a 300-megawatt deal it inked with the U.S. military. Since then, it has raised ridiculous amounts of capital with some pretty decent terms.
Now, add what I believe will be an avalanche of capital from individuals who want to invest in clean energy or simply want to make a less-risky investment in solar. At the end of the day, SolarCity is going to be able to raise hundreds of millions of dollars with excellent terms, all while expanding its customer reach beyond those who want to slap solar panels on their roofs.
I’m telling you right now, what SolarCity has just done is a major coup. It will go down as one of the most disruptive events to ever shake the solar market. And I’m definitely going to be a part of it.
Although I collected my winnings from SolarCity last year, I bought more after the announcement last week. There’s just no way I’m sitting on the sidelines while it goes through the process of becoming what I believe will be one day prove to be one of the most profitable companies in the United States.
To a new way of life and a new generation of wealth…