Adam Lashinsky: And you've taken some reputational damage for having failed to go public.
Lyndon Rive: Exactly. So now you can keep that confidential. Your competitors don't learn about it. And then when you decide to actually pull the trigger, you are really close to pulling the trigger so then it's -- the road show could be a month way versus you do the initial filing and then the road show is six months away.
Adam Lashinsky: And your point would be that investors aren't any worse off. They still have plenty of time and the ability to learn whatever they need to learn.
Lyndon Rive: Yeah. No, it makes no difference to the investors.
Adam Lashinsky: And then there was a second point you were going to make.
Lyndon Rive: Okay. And then the other point is just the salary disclosures. You don't need to disclose everybody's salary. So the old way forced everyone's salary to be disclosed. That's never a good thing when nobody understands everybody's salary. So that's why we didn't disclose it.
Adam Lashinsky: So what was the timing behind your IPO, given that you went public at a time when there were very few other IPOs?
Lyndon Rive: Yeah. So we went public close to the end of the [2012], December 13th, my wife's birthday. So it was difficult. Investors had little appetite to look at solar companies as they'd been burnt so badly in solar manufacturing. The reason why we decided to push through and punch through that old stigma is that we are a different business. We are an energy company that sells cheaper, cleaner energy. So we decided to take the hit, go out, educate the investors of the uniqueness in the business model, and then over time they would grow with us and get to understand the business a lot better.
Adam Lashinsky: By take the hit, you mean to go public at a lower valuation than you had initially hoped to? That you could have done in a frothier market?
Lyndon Rive: Yes. So on the cover our pricing was roughly -- was $13 to $15.
Adam Lashinsky: *$13 to $15 per share.
Lyndon Rive: Dollars per share. We ended up going out at $8 per share, closed at $12.50 or around there that same day. And it's -- today it's around $19, $18. So it had an incredible ride. But we had to take the initial hit to get out, show the market that this is a different business, the growth potential is almost infinite based on the market size, and consumers want cheaper, cleaner energy. So we'll let investors grow with us and show them how this product really improves the average home's lifestyle.
Adam Lashinsky: *And by the way, on a bottom line perspective, SolarCity is not profitable. You're making big investments in the business all the time, which I assume is the reason that you're not profitable. What do you communicate with investors about what your game plan is for profitability?
Lyndon Rive: So, cash flow positive by the end of the year.
Adam Lashinsky: *By the end of 2013
Lyndon Rive: End of 2013.
Adam Lashinsky: Now, cash flow positive means that you're not profitable in an accounting sense --
Lyndon Rive: Yes, so in --
Adam Lashinsky: *-- but you're generating cash.
Lyndon Rive: Yeah, exactly. So in our business because we do a 20-year agreement with the customer, we can only recognize the revenue over 20 years. But our operating cost, we have to recognize the full cost on day one
Adam Lashinsky: *That makes total sense.
Lyndon Rive: So when you -- any company, take one-twentieth of the revenue, keep the cost the same, see if they make a profit. It would be very hard. They would have to have insane gross margins to do that. But that's not -- that's just a nuance of [generally accepted accounting principles]. In terms of cash, how much cash went out of the business, how much cash came in the business will be cash flow: Our goal is to be cash flow positive by the end of the year.
Adam Lashinsky: And I assume you've found that Wall Street investors are willing to have a conversation around cash flow and to ignore net income for that reason.




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