SolarCity Common Assets Purchase Shows A New Funding Strategy


SolarCity Corp (NASDAQ:SCTY) surprised the markets in January when it announced the acquisition of Common Assets LLC, an online investment platform aimed at retail investors. The solar company turned to crowdfunding, saying that it will sell securities directly to people who are interested in investing in its solar systems. With the purchase of Common Assets, the company went beyond its core investment group of institutional investors.

SolarCity expands its sources of funding

Common Assets will provide people an option to invest in SolarCity Corp (NASDAQ:SCTY)’s projects on a long-term basis, reports the San Francisco Chronicle. SolarCity’s vice president for financial products, Tim Newell, said that the company will allow its customers to participate in its debt investment. Small investors can lend the company money that SolarCity will use for its projects and pay interest to investors.

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The acquisition highlights that solar companies are turning to alternative funding models. Institutional investment in clean technology is falling out of favor. Venture capitalists are investing in clean tech not because of a company’s business model, but because it’s clean. Solar panel maker Solyndra, Inc. raised about $535 million in debt from the U.S. Department of Energy. But the company went bankrupt. It created further skepticism among institutional investors, leading to a decline in solar energy investment.

The Common Assets platform would appeal to investors who want to invest in the solar industry. Details about the minimum investment size and the qualification criteria for investors will be disclosed with the release of offering documents. Investors can start using the platform in June. SolarCity Corp (NASDAQ:SCTY)’s approach to crowdfunding would allow investors to invest in many solar projects at once. Participating in multiple projects would reduce the risk.

Some experts concerned about SolarCity’s move to crowdfunding

However, some industry experts have raised questions about SolarCity Corp (NASDAQ:SCTY)’s purchase of Common Assets. Marie Watanabe of clean energy market intelligence firm CleanTech Group said that the acquisition suggests SolarCity is having trouble raising funds for its projects. Raising funds from a large number of investors is a tedious and painful process. This strategy shows that institutional investors have lost interest in solar projects.

SolarCity Corp (NASDAQ:SCTY) shares fell 0.40% to $75.35 at 12:51 PM EDT.