Vivint Solar announced last week that it’s putting forward a $200 million IPO to the Securities Exchange Commission to finance future growth.
Currently number two, behind SolarCity, in US solar PV installations, Vivint Solar’s IPO is being financially backed by some heavy hitters. Key underwriters include: Goldman Sachs, Merrill Lynch, Pierece, Fenner & Smith, and Credit Suisse, notes Reuters.
Vivint Solar’s growth has been steady. According to its SEC filing, it has provided 21,900 homeowners in 7 states with 129.7 MW of solar power capacity. Investors have committed over $443 million in investments to install over $1 billion in fair market value (FMV). It also has further tax equity commitments of 53 MW of installations, at a FMV of near $269 million.
Even with the company’s advances in installations, it has taken some heavy financial losses. By June 30, 2014, Vivint had lost $76.2 million. It has acknowledged further losses as it continues to expand its operations, and is unsure the revenue will increase fast enough to slow further financial pain. However, with many businesses in game-changing industries, it can take years before a company is profitable. It took Tesla ten years before finally making a profit in 2013.
As Vivint continues its growth while trying to stop the financial bleeding, Greentech Media had a great analysis on its operations and business model.
For starters, Vivint is in fewer markets than top dog SolarCity and some others. It’s in seven states (it just recently expanded to Arizona). In comparison, SolarCity, Sungevity, and Solar Universe are active in close to a dozen states. It is a distant second to SolarCity in California.
However, Vivint Solar has beat out for the past several quarters SolarCity as the top installer in Massachusetts and New York, showing its strongest market for further growth might on the East Coast.
Secondly, Vivint Solar uses its parent’s model for attracting sales. The following explains why it may not be expanding as fast as they would like:
Vivint Solar is well known for its sales model, which was adopted from its parent company Vivint Inc. and consists almost entirely of door-to-door soliciting (in addition to referrals). This strategy may explain the company’s slow expansion to new states, as it requires hiring a large sales team…. Vivint’s acquisiton of Solmetric was meant to further increase the efficiency of its door-to-door sales by allowing sales reps to take roof measurements, create a preliminary design, and potentially close the sale on the first visit. The installer even foregoes state incentives in some cases to speed up the installation process.
Thirdly, Vivint is the only solar financier that currently has no loan option, choosing to go solely with leasing and purchase power agreements. It’s also one of two companies which both installs and finances solar systems. With solar financing a stumbling block for consumers, Vivint could always look for more creative financing schemes to attract customers down the road.
Cleantech IPOs have been quite successful in recent years. SolarCity, when it released its IPO in December 2012, raised $92 million on its first day. Its ending opening day share price was $11.79/share. As of August 29th, SolarCity’s share price was $68.68.
Tesla Motors’ IPO in 2010 raised $226 million, gaining 40% in stock value, ending at $17/share. Today, Tesla shares go for $269.70.
Whether Vivint can reach the scales of SolarCity or Tesla on its first day is highly unlikely. However, a successful IPO opening will give Vivint a much needed cash boost as it funds further growth and looks to increase its market share.