Is SolarCity Corp (SCTY) Dragging Vivint Solar Holdings Inc (VSLR) Down?

Today, Dwain A Kinghorn, Vivint Solar Holdings Inc (NYSE:VSLR)’s Chief Strategy and Innovations Officer, purchased 4,350 shares of the company at $16 per share. This was his first purchase of the company’s stock. While purchase of the company’s stock by an insider might provide some respite to investors in the company, the question really is why Vivint Solar Holdings Inc (NYSE:VSLR)’s stock is falling continuously ever since its debut.

Vivint Solar Holdings Inc (NYSE:VSLR) started trading on NYSE on Wednesday, October 1, after being priced at the lower end of the spectrum of $16-$18 per share.  The company sold 20.6 million shares in its IPO and raised $329 million, but ever since the day it started trading, the shares have continuously fallen.

One possible reason of it could be that the US equity markets overall started correcting the very same day when Vivint Solar Holdings Inc (NYSE:VSLR) started trading, but whereas the S&P 500 is trading at the same level right now where it opened on October 1, Vivint Solar Holdings Inc (NYSE:VSLR)’s stock is down by more than 25% since its IPO. On Monday, the shares were down nearly 10%. Based on the financial results it submitted during its IPO, Vivint Solar Holdings Inc (NYSE:VSLR) has an EPS of $0.35 and trades at 35.28 times price versus earnings.


The best possible reason for the decline in share price can be found in the decline in volumes of the shares that were traded. On Wednesday, 24.8 million shares of the company changed hands, figures for the same for Thursday and Friday stand at 6.27 million and 3.1 million shares, respectively. It seems investors are just not interested in the company’s stock, but why can it be, when the company proclaims itself to be the fastest growing solar installation company in the US and second largest by market share? Well, the answer to that might lie in age old wisdom of betting on a winning horse.

Vivint Solar Holdings Inc (NYSE:VSLR) business model is very similar to that of SolarCity Corp (NASDAQ:SCTY). Both companies are into residential solar installation, both don’t charge their customers any upfront costs, both provide their equipments to customers on long-term lease and proclaim to cut down energy costs significantly when compared to utility providers. The difference between Vivint Solar Holdings Inc (NYSE:VSLR) and SolarCity Corp (NASDAQ:SCTY) lies in leadership. Whereas SolarCity Corp (NASDAQ:SCTY) has ‘tried and tested’ Elon Musk at its helm, who has shown to the markets his wonderful ability to innovate and execute, Vivint Solar Holdings Inc (NYSE:VSLR) cannot boast of a leader that comes even remotely near to Musk in terms of track-record. Investors who want to play solar, will rather bet on a company that has Musk as its leader than on a company with a similar business model, but no such leader. Vivint Solar Holdings Inc (NYSE:VSLR) can boast of having Blackstone as a backer. However, a well regarded private equity firm can only provide credibility, not leadership.

One factor that also needs to be counted in this analysis is the performance of solar energy stocks overall. In the past one month, most of the solar companies have seen their shares tumbling, which includes SolarCity Corp (NASDAQ:SCTY), whose shares are down more than 18% in last one month. When the whole industry sector is underperforming Vivint Solar Holdings Inc (NYSE:VSLR) can be no exception. Why solar stocks are falling overall might be a topic for another analysis, but as far as Vivint Solar Holdings Inc (NYSE:VSLR) is concerned the issues that are facing solar installation industry like regulatory hurdles and discontinuation of tax incentives are affecting and will continue to affect the company in the future too.

 Disclosure: None

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