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Delaware Court of Chancery
Case No. 12711-VCS
In Re Tesla Motors, Inc. Stockholder Litigation

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 EFiled: Oct 24 2019 10:03PM EDT
Transaction ID 64351051
Case No. 12711-VCS

EXHIBIT 152
 64084032
Aug 26 2019
03:56PM

IN THE CHANCERY COURT OF THE STATE OF DELAWARE

Consolidated C.A. No. 12711-VCS

In re TESLA MOTORS, INC.
STOCKHOLDER LITIGATION CLASS ACTION

Expert Report of Ronald G. Quintero

August 26, 2019
I. ASSIGNMENT

1. I was retained by counsel for Co-Lead Plaintiffs Arkansas Teacher

Retirement System, Roofers Local 149 Pension Fund, Oklahoma Firefighters

Pension and Retirement System, KBC Asset Management NV, ERSTE-

SPARINVEST Kapitalanlagegesellschaft m.b.H., and Stichting Blue Sky Active

Large Cap Equity Fund USA to analyze information and provide opinions relating

to the acquisition (the “Merger”) of SolarCity Corporation (“SolarCity” or the

“Company”) by Tesla, Inc. (f/k/a Tesla Motors, Inc.) (“Tesla”), which closed on

November 21, 2016 (the “Merger Date”). Specifically, I was asked to assess the

fair value of SolarCity as a standalone entity as of the Merger Date and SolarCity’s

ability to meet its financial obligations and commitments absent the Merger.

2. This report summarizes my opinions about which I am prepared to

testify in this matter, as well as the bases therefor. This report is based on

information available to me at the time of the report. I reserve the right to amend

my report to reflect new information that may emerge following its issuance.

II. PROFESSIONAL QUALIFICATIONS

3. I have more than forty years’ experience as a financial professional,

with specific expertise in mergers & acquisitions (“M&A”), valuations of

businesses, and bankruptcy & insolvency.

1
 4. I began my career at Peat, Marwick Mitchell & Co.,1 initially on the

audit staff, then joined the Mergers & Acquisitions Department, and eventually

started and ran a financial advisory consulting practice through the firm’s New

York office that was focused on M&A, business valuations, and other financially

oriented projects. Subsequently, I joined Zolfo Cooper & Co.2—a leader in

financial restructuring—and then I worked as an investment banker in the

Financial Restructuring Group of Bear, Stearns & Co. Inc.3 In 1988, I founded

Chartered Capital Advisers, Inc. and an affiliated specialty CPA firm, R. G.

Quintero & Co., where I have since been continuously employed. My principal

fields of professional expertise, which I have applied throughout substantially all

of my professional career, include: M&A; valuations, with a particular expertise in

distressed companies; due diligence; bankruptcy and insolvency; financial

forecasting; forensic accounting; and financial damages analysis. A description of

my practice is provided in Exhibit 93.

5. I have applied the previously enumerated fields of expertise on more

than one thousand projects during the course of my professional career. I have

testified as an expert witness on approximately 100 occasions in courts and

1
Formerly the largest of the Big Eight accounting firms, now known as KPMG.
2
Recently merged with AlixPartners—a leading management consulting firm.
3
Formerly one of the largest investment banks in the world, acquired in 2008 by
JPMorgan Chase & Co.
2
arbitrations throughout the U.S. over the past 40 years, and have served as a court-

appointed neutral and as a neutral in non-judicial matters. Exhibit 94 lists cases in

which I have testified during the past four years. They have included major M&A

cases in which I testified as an expert witness for the United States Department of

Justice, such as the proposed Anthem-Cigna merger and the AT&T-Time Warner

merger, as well as cases involving small, privately held companies.

6. I am an award-winning scholar, author, and lecturer. I wrote Mergers

and Acquisitions—a book that was converted into electronic format and used for

continuing profession education. It was one of the best sellers of the American

Institute of Certified Public Accountants for more than a decade. I have also

published numerous articles and professional manuals on M&A, valuations, and

related topics, and have given lectures and seminars up to five days in length on

these subjects in more than sixty cities throughout the U.S., and more than twenty

countries located on five continents outside the U.S. My training C.V. is provided

in Exhibit 95, and my publishing activities are listed in Exhibit 96.

7. I have an undergraduate degree with concentrations in Economics and

Spanish Literature from Lafayette College, and a Master of Science in

Accountancy and an Advanced Professional Certificate in Investment Management

from the New York University Stern School of Business.4 I have earned ten

4
An Advanced Professional Certificate is an intermediate degree between an MBA
3
professional licenses: Certified Public Accountant (CPA); Chartered Financial

Analyst (CFA); Certified Fraud Examiner (CFE); AICPA-Certified in Financial

Forensics (CFF); AICPA-Accredited in Business Valuation (ABV); Certified

Management Accountant (CMA); Certified Turnaround Professional (CTP);

Certified Insolvency and Restructuring Advisor (CIRA); Certification in Distressed

Business Valuation (CDBV); and Certified Financial Planner (CFP). My

curriculum vitae is summarized in Exhibit 97.

8. I have no connection to or relationship with any of the parties in this

case or their employees, officers, or directors. I am being paid an hourly rate of

$545 for all services that I perform in connection with this matter, including the

preparation of this report, and any other services that I may perform in this matter,

including expert testimony.

III. SUMMARY OF PROFESSIONAL OPINIONS

9. It is my opinion, to a reasonable degree of professional certainty, that:

a. At the time of the Merger, SolarCity was not viable as a going

concern. SolarCity was insolvent and would have been unable to

satisfy its financial obligations, including recourse debt obligations,

as a standalone entity, absent the Merger. In fact, SolarCity’s own

auditor, Ernst & Young (“E&Y”), reached this same conclusion in

and a Ph.D.
4
 connection with its audit of SolarCity for the calendar year that

ended shortly after the Merger became effective.

b. Because SolarCity was not a going concern as of the Merger Date,

SolarCity’s value is most appropriately determined based on a net

liquidation value. Based on a net liquidation value, SolarCity’s

equity was worthless as of the Merger Date (Exhibit 53).

c. For illustrative purposes only, I also considered and applied three

valuation approaches that are commonly used by valuation

professionals when valuing companies as a going concern: the cost

approach, the income approach, and the market approach.

d. Under the cost approach, I determined: (1) SolarCity’s adjusted

appraised net asset value, which is most closely aligned with

generally accepted accounting principles (“GAAP”), subject to

certain adjustments; and (2) the fair value of SolarCity’s saleable

assets, which is more consistent with determining value in

connection with a transaction. As of the Merger Date, SolarCity’s

adjusted appraised net asset value was $10.23 per share (Exhibit 75),

and SolarCity’s fair saleable value was $1.59 per share (Exhibit 75).

e. Under the income approach, I prepared a discounted cash flow

(“DCF”) analysis for SolarCity as of the Merger Date.

5
i. Tesla’s financial advisor, Evercore Partners (“Evercore”),

used a set of projections known as the “Revised Sensitivity

Case” in connection with the DCF analysis set forth in its

presentation to the Tesla Board of Directors (the “Tesla

Board”) as part of its fairness opinion. The Revised

Sensitivity Case projections cannot be used to value SolarCity

because they did not reflect a steady state for SolarCity.

ii. In the ordinary course of business, SolarCity generated cash

by securitizing and selling to third-party investors the solar

investment tax credits (the “Solar ITCs”) associated with the

solar energy systems that it leased (rather than sold) to its

customers. Because SolarCity retained an ownership interest

in the solar systems it leased to its customers, SolarCity

continued to own the underlying Solar SITC associated with

those solar systems. Under to the Energy Policy Act of 2005,

the Solar ITCs—at the time of the Merger—allowed for those

investing in solar energy systems to recover 30% of the total

cost of residential or commercial solar systems through dollar-

for-dollar federal tax credits. For both residential and

commercial systems, the Solar ITCs decline to 26% of the

6
 total system costs in 2020 and drop again to 22% in 2021. In

2022, the tax credit for commercial systems and third-party-

owned residential systems settles at a 10% rate, while credits

for residential systems available to homeowners are eliminated

entirely. These planned reductions to the SITC are

collectively referred to herein as the “SITC Phase Out.”

iii. The Revised Sensitivity Case includes tax equity from the

Solar ITCs as a significant source of cash generation

throughout the projection period, which runs through 2020.

Because the Solar ITCs would continue to decline after 2020,

the cash flow projections for 2020 contained in the Revised

Sensitivity Case do not reflect a steady state for SolarCity

because they do not account for the fact that the SITC Phase

Out will continue after 2020.

iv. In order to perform a DCF analysis of SolarCity, the Revised

Sensitivity Case needs to be adjusted to reflect fully the SITC

Phase Out. I received a set of financial projections, prepared

by Juergen Moessner, that normalized the terminal year in the

Revised Sensitivity Case to account for the significant

reduction of cash generation potentially available following

7
 the completion of the SITC Phase Out (the “SITC Phase Out

Case”). To the extent that it is proper to value SolarCity using

a DCF analysis (and, in my opinion, it is not, because

SolarCity was not a going concern as of the Merger Date), a

DCF analysis based on the SITC Phase Out Case is the most

reliable estimate of SolarCity’s fair value; a DCF using the

SITC Phase Out Case results in a value of SolarCity of $6.14

per share (Exhibit 90).

f. Under the market approach, I considered both a comparable

companies analysis and a comparable transactions analysis. Even if

SolarCity was a going concern such that using a comparable

companies or comparable transactions analysis would be appropriate

(and, in my opinion, such analyses are not appropriate), I cannot rely

upon either valuation approach because: (1) I do not regard

SolarCity’s historical stock prices to be relevant to its fair value as of

the Merger Date; (2) there is an insufficient data set for purposes of a

comparable companies analysis; and (3) there are no comparable

M&A transactions.

8
IV. BACKGROUND

A. Tesla Overview

10. Tesla was incorporated in Delaware on July 1, 2003 by its co-founders,

Martin Eberhard and Marc Tarpenning. 5 Elon Musk became involved in Tesla in

2004 as a participant in the company’s $7.5 million Series A financing along with

Compass Technology Partners (Exhibit 2). At the time of his investment, Musk

became Chairman of the Board of Directors.6 Since then, Tesla has regularly

tapped the capital markets, raising at least $17.8 billion in equity and debt, with

much of it occurring subsequent to the Merger (Exhibits 2 and 3). In 2008,

following conflicts with the co-founders and a series of company missteps, Elon

Musk was appointed Tesla’s Chief Executive Officer.

11. Tesla produces and sells electric vehicles. In its IPO prospectus, Tesla

described its business as follows: “We design, manufacture and sell high-

performance fully electric vehicles and advanced electric vehicle powertrain

components.”7 In its 2015 Form 10-K, Tesla began to add “energy storage

products” to the business description.8 Despite the addition of this new product

5
Amended and Restated Certificate of Incorporation of Tesla Motors, Inc.
6
Tesla Schedule 14A, filed April 26, 2018, p. 9.
7
Tesla Form S-1, filed January 29, 2010, p. 1.
8
Tesla Form 10-K, filed February 24, 2016, p. 1.
9
line, Tesla continued to acknowledge that: “We operate as one reportable segment

which is the design, development, manufacturing and sales of electric vehicles.”9

12. Tesla debuted its first all-electric Roadster in 2006 and began offering

it to the public in 2008.10 The high $98,000 base price of the Roadster and Tesla’s

limited manufacturing capability constrained the number of vehicles that were

sold. Tesla introduced the Model S in 201211 and the Model X in 2015.12 While

these models were well-received, Tesla did not sell enough of these vehicles to

stem its substantial losses (Exhibit 4) and cash flow deficits (Exhibit 5 and 6) that

required substantial funding (Exhibits 7 and 8).

13. At the time of the Merger, Tesla was preparing to launch the $35,000

Model 3. The Model 3 was a “bet the company” product and marked Tesla’s first

attempt to reach a broader market.13 Given Tesla’s long history of delays (both in

releasing new models and in actually producing cars), all of the company’s

attention and resources needed to be directed to launching the Model 3.14 Musk

instructed his management team to “apply everyone that could reasonably be

applied to the Model 3 program from solar and from every other part of the

9
Ibid. at 12.
10
Tesla Rule 424(b)(4) Prospectus, filed June 29, 2010, p. 1.
11
Tesla Form 10-K, filed March 3, 2013, p. 4.
12
Tesla Form 10-K, filed February 24, 2016, p. 4.
13
E. Musk Dep. at 93-96.
14
E. Musk Dep. at 46-47.
10
company, not just solar, to work on the Model 3 program because if we did not

solve the Model 3 program…then Tesla would die.”15

14. Tesla sells cars directly to consumers through an international network

of company-owned stores and service centers. As of August 9, 2019, Tesla has

122 stores in the U.S., and stores in 26 other countries.16

15. Tesla is headquartered in Palo Alto, California. Prior to the Merger,

Tesla produced its cars at its facilities in Fremont, California, Lathrop, California,

and Tilburg, Netherlands.17 In 2014, Tesla broke ground on Tesla Gigafactory 1,

located near Reno, Nevada, which was to be used principally for supplying battery

packs for Tesla vehicles, and stationary storage systems.18 The Gigafactory is

intended to be completed in stages though 2020, at a total cost of $4 to $5 billion,

approximately $2 billion of which is expected to come from Tesla.19 Tesla also

operates 1,533 Supercharger Stations with 13,344 Superchargers in North

America, Europe, Asia, and the Middle East that are available to owners of Tesla

vehicles as well as other electric vehicles.20

15
E. Musk Dep. at 74-75.
16
Tesla “Find Us” page, https://www.tesla.com/findus/list (last visited August 9,
2019).
17
Tesla Form 10-K, filed February 24, 2016, p. 9.
18
Tesla Form 10-K, filed February 26, 2015, p. 11.
19
Tesla Form 10-K, filed February 24, 2016, p. 9.
20
Ibid. at 12.
11
 B. SolarCity Overview

16. SolarCity is a Delaware corporation that was founded by Elon Musk’s

cousins, brothers Peter and Lyndon Rive in 2006, with the help of a substantial

capital investment by Musk.21 Musk was SolarCity’s Chairman. At the time of the

Merger, SolarCity was headquartered in San Mateo, California, and leased sales

offices, warehouses, and manufacturing facilities across the U.S., and in Mexico

and China, in addition to sales and support offices in Ontario, Canada.22 SolarCity

completed its initial public offering in December 2012. 23

17. SolarCity described its business as follows:

We sell renewable energy and energy storage solutions to our

customers, typically at prices below utility rates, and are focused on
reducing the costs of adopting solar energy. We make it easy for our
customers to adopt solar energy by designing, permitting, financing,
and installing our solar energy and storage systems, and performing
maintenance and monitoring services. We offer our customers the
ability to go solar for little to no upfront costs, or we sell solar energy
and energy storage systems to our customers with a variety of
financing alternatives.24

18. As for how it attempted to generate cash, SolarCity engaged in the sale

of asset-backed securities that seek to monetize future income streams from solar

energy customers and the Solar ITCs.25

21
SolarCity Form S-4, filed on Oct. 5, 2012, pp. 29, 135.
22
Tesla Form 10-K, filed February 24, 2016, p. 36.
23
SolarCity Form 424(B)(4), filed December 13, 2012, p. 1.
24
SolarCity Form 10-K, filed March 1, 2017, p. 2.
25
Ibid., pp. 2–3.
12
 19. To help its customers finance the substantial costs of installing solar

power systems, SolarCity developed third-party ownership (“TPO”) programs that

enabled customers to obtain a solar system without having to make an up-front

capital outlay.26 In 2008, SolarCity launched its flagship product, the

“SolarLease,” pursuant to which customers would lease a solar energy system and

make fixed monthly lease payments.27 In 2009, SolarCity introduced the

“SolarPPA,” which was a power purchase agreement that charged customers a fee

per kilowatt hour. The SolarLease and SolarPPA came with 20-year terms. Under

the SolarLease and SolarPPA, SolarCity retained the rights to the resulting Solar

ITCs because the ownership of the systems was not transferred to the customers.28

20. During the fourth quarter of 2014, SolarCity introduced its “MyPower”

program, which was a form of purchase financing under a 30-year contract, with

variable payments based on power produced, subject to annual rate increases, and a

potential balloon payment. This program was unsuccessful, and discontinued

during the first quarter of 2016.29 In May 2016, SolarCity launched its “Solar

Loans” program, which allowed customers to finance solar systems through third-

26
Ibid.
27
Ibid.
28
Ibid.
29
MyPower was discontinued in “most service territories” in the first quarter 2016
and completely discontinued in third quarter 2016. See SolarCity Form 10-Q, filed
May 10, 2016, p. 35; SolarCity Form 10-K filed March 1, 2017, p. 29.
13
party lenders; the fees SolarCity paid to the lender reduced its earnings from such

sales.30

21. SolarCity relied heavily on TPO sales. For the first half of 2016, TPO

revenues accounted for 60% of SolarCity revenues, and the discontinued MyPower

revenues contributed another 21% of revenues (Figure 1). Declining solar panel

prices (Exhibit 9) caused the residential solar market to begin to move away from

TPO, in favor of customer-owned systems (Exhibit 10). The move towards

customer-owned solar systems, referred to as “cash sales,” presented a survival

challenge to SolarCity, because cash sales accounted for just 15% of its revenues

during the first half of 2016, and had negative gross margin of 25.4% during that

period (Figure 1).

30
SolarCity Form 10-Q, filed August 9, 2016, pp. 35, 40; SolarCity Form 10-Q,
filed Nov. 9, 2016, pp. 11, 43; SolarCity Form 8-K, filed August 9, 2016, p. 2.
14
 22. As SolarCity grew and became a publicly traded company, it began to

burn through cash and experience even greater losses. During the five years ended

December 31, 2016, SolarCity’s annual losses exceeded annual revenues (Exhibits

11, 13 and 15), and its discretionary cash flow deficit31 vastly surpassed annual

losses (Exhibits 11 through 15). SolarCity was able to turn to the capital markets

to fund the substantial losses that it incurred, on an accrual accounting and cash

basis. From 2012 through 2014, SolarCity was able to raise more money than it

31
Discretionary cash flow equals cash flow from operating activities, minus capital
expenditures and costs of solar energy systems leased and to be leased.
15
lost on a cash basis (Exhibit 12). In 2015, SolarCity reached an inflection point

when discretionary cash flow deficits outpaced net funds raised; this deficiency

persisted in 2016 (Exhibit 12).

23. An analysis of SolarCity’s quarterly cash flows from September 2011

through September 2016 reveals that the quarterly discretionary cash flow deficits

are a near mirror image of the capital raised to fund the deficits (Exhibit 16). Most

of the funding that SolarCity received since going public in December 2012 was

comprised of debt (Exhibit 17). Quarterly debt raises far surpassed quarterly

revenues (Exhibit 17). Between 2013 and 2016, SolarCity incurred quarterly

discretionary cash flow deficits of $2.26 to $7.36 for each dollar of revenues, and

funded those deficits by raising $1.86 to $14.06 for each dollar of revenues

(Exhibit 18).

24. As a consequence of ongoing capital-raising activities to fund losses

and cash flow deficits, SolarCity became a heavily leveraged company

(Exhibits 19 and 21). A review of the composition of the SolarCity balance sheet

filed with Securities and Exchange Commission just a few days prior to the

Merger32 reveals the following:

a. Approximately 60% of assets were comprised of solar energy

systems leased and to be leased. This represents the present value of

32
SolarCity Form 10-Q for the quarter ended September 30, 2016, pp. 2 and 3.
16
 the cash flows projected to be received by the 47 variable-interest

entities (“VIEs”) that SolarCity established to provide third-party

financing of customers’ solar energy systems. Although the majority

of the cash flows from the VIEs will be paid to the investors and

lenders that funded the VIEs, and SolarCity’s claims to the cash

flows are subordinated to, and largely received after, the third parties

receive their contractual cash flows, all of the VIE assets and

liabilities are required to be consolidated into SolarCity’s financial

statements under GAAP. The solar energy system assets that

constitute the majority of SolarCity’s assets, and cash flows resulting

therefrom, are commonly referred to by analysts as “PowerCo,” so as

to distinguish that segment of the business referred to as “DevCo,”

which sells and installs solar energy systems.

b. The build-to-suit leased asset was matched dollar-to-dollar with the

build-to-suit lease liability, which pertains to Gigafactory 2 in

Buffalo, New York and an arrangement with the Research

Foundation for the State of New York, on which SolarCity is

obligated to spend $5 billion in combined capital, operational

expenses, cost of goods sold, and other costs over a 10-year period,

17
 subject to annual penalties of $41.2 million in the event of falling

short of contractually agreed-upon milestones.33

c. The MyPower notes receivable are long-term customer notes

receivable associated with the MyPower program that was

discontinued during the first half of 2016.

d. The liability side of the balance sheet was comprised of:

i. $3.5 billion of funded debt;

ii. $1.6 billion of deferred revenues, which constitute previously

received amounts that had not yet been earned;

iii. $752 million build-to-suit lease liability with the State of New

York;

iv. $877 million in accounts payable, accrued liabilities, and other

liabilities;

v. $1.026 billion representing the third-parties’ equity in the

VIEs; and

vi. $971 million in shareholders’ equity.

25. The growth in cumulative equity investment, as well as year-end

balances of non-controlling interests in VIEs, deferred revenues, and various forms

of funded debt for the five years ended December 31, 2016 is shown in Exhibit 22.

33
Tesla Form 10-K, filed March 1, 2017, p. 22.
18
As of December 31, 2016, SolarCity had $8.1 billion in cumulative equity

investment and other forms of funding that were outstanding as of that date

(Exhibit 22) to support a business whose aggregate 2016 revenues were $730

million (Exhibit 13). If SolarCity had no costs associated with its revenues, the

yield on its funding would be 9%.34 However, SolarCity lost more than $1 for each

dollar of revenues (Exhibit 13), and incurred discretionary cash flow deficits that

were generally $2 to $7 for each dollar of revenues (Exhibit 18). Accordingly,

SolarCity had failed to demonstrate an ability to generate an appropriate return on

capital employed, even though it had been in business for more than a decade as of

the Merger Date.

26. Details of the SolarCity balance sheet as of the Merger Date and at year

end less than six weeks later, including key attributes of outstanding debt,

segregated between recourse and non-recourse debt, are provided in Exhibit 24.

Of the $3.6 billion in debt as of year end, more than $1.6 billion was comprised of

recourse debt.35 Also, there was a significant amount of debt maturing between

2017 and 2019, the majority of which was recourse debt, including $829 million in

2017, $841 million in 2018, and $620 million in 2019 (Exhibit 25). For reasons

34
$730,342 revenues (Exhibit 13) ÷ $8,113,312 total capitalization (Exhibit 22) =
9% yield, assuming no costs.
35
Exhibit 24, footnote g.
19
explained further on in this report, SolarCity was unlikely to be able to refinance

this amount of indebtedness as a standalone entity.

27. SolarCity stock reached an all-time high during February 2014, and

progressively declined thereafter (Exhibit 26). A polynomial trendline analysis36

of the month-end stock price of SolarCity from January 2014 (just before the stock

price peaked) through May 2016 (just before the Merger proposal was announced)

reveals that SolarCity’s stock price was declining at an increasing rate (Exhibit

27). From the opening price of 2016 until June 20, 2016—the day preceding the

announcement of the proposed Merger—SolarCity stock dropped 44% (Exhibit

28). Upon the announcement of the proposed Merger after the market closed on

June 20 at an exchange ratio anticipated to be 0.122 to 0.131 shares of Tesla

common stock for each share of SolarCity, the erosion of the SolarCity stock price

stopped (Exhibit 28). On August 1, 2016, the Merger consideration was finalized

at 0.110 shares of Tesla common stock for each share of SolarCity. From that

point there was a high correlation between the Tesla stock price and the conversion

value of the SolarCity shares (Exhibit 29).

36
A polynomial trendline analysis is useful for analyzing a curved, rather than a
linear trend.
20
 C. The Merger

28. On February 29, 2016, Elon Musk called a special meeting of the Tesla

Board to discuss acquiring SolarCity. Although Tesla management needed to be

focused on automobile production issues, the Tesla Board “authorized

management to gather additional details and to further explore and analyze” an

acquisition of SolarCity.37

29. At a Tesla Board meeting on May 31, 2016, Elon Musk again broached

the topic of buying SolarCity. The Tesla Board authorized Tesla management to

“assess a potential acquisition of a solar energy company and to engage an

independent financial advisor on behalf of the Board and [Tesla] to assist in such

assessment.”38 The Tesla Board also authorized Tesla Management to “instruct

Wachtell Lipton to undertake a review of a potential acquisition by [Tesla].”39

Evercore was officially retained as Tesla’s independent financial advisor for the

assessment on June 17, 2016.40

30. On June 20, 2016, the Tesla Board authorized making a preliminary,

non-binding proposal to acquire all of the SolarCity common stock at an exchange

ratio of 0.122 to 0.131 shares of Tesla common stock for each share of SolarCity

37
Merger Proxy, p. 58.
38
TESLA00001455-58, at 45 – 57.
39
Merger Proxy, P. 58.
40
EVR-TESLA_00000001-13.
21
common stock. 41 Tesla submitted the proposal to SolarCity management on the

same day, and publicly announced the offer on its website blog the following day.42

31. On July 31, 2016, Tesla and SolarCity entered into an Agreement and

Plan of Merger (the “Merger Agreement”)43 under which a wholly owned Tesla

subsidiary would merge with and into SolarCity. Pursuant to the Merger

Agreement, each share of SolarCity common stock would be exchanged for 0.110

shares of Tesla common stock.

32. The terms of the Merger were announced on August 1, 2016.44 The

Merger was approved by Tesla and SolarCity shareholders on November 17,

2016,45 and consummated on November 21, 2016.46

V. SOLARCITY WAS NOT VIABLE AS A GOING CONCERN

33. A key consideration in any valuation engagement is determining the

applicable premise of value. Under The International Glossary of Business

Valuation Terms, the premise of value includes “an assumption regarding the most

likely set of transactional circumstances that may be applicable to the subject

valuation; for example, going concern, liquidation.”47 Going concern value is

41
TESLA00001459-68, at 62-63.
42
Tesla Form 8-K, Ex. 99.1, filed June 21, 2016.
43
Tesla Form 8-K, Ex. 2.1, filed August 1, 2016.
44
Ibid.
45
Tesla Form 8-K, filed November 18, 2016, p. 2.
46
Tesla Form 8-K, filed November 21, 2016, p. 2.
47
International Glossary of Business Valuation Terms, as jointly developed by the
22
defined as “the value of a business enterprise that is expected to continue to

operate in the future.”48 Liquidation value is “the net amount that would be

realized if the business is terminated and the assets are sold piecemeal.

Liquidation can be either ‘orderly’ or ‘forced.’”49

34. The valuation premise is a crucial consideration in determining the

valuation method(s) to be employed. The accounting profession has codified a

decision matrix to be considered for purposes of determining whether a going-

concern qualification is required for audited financial statements. Exhibit 30

presents key considerations for evaluating an entity’s ability to continue as a going

concern, including financial criteria and management’s plans to mitigate financial

distress. Applying criteria such as those outlined in Exhibit 30 indicates that

SolarCity was not a going concern at and prior to the Merger Date as an

independent entity.

35. Martin Whitman—one of the pioneers of distress investing—explained

in his book Distress Investing:

Traditional valuation approaches give much weight to the view that

the firms are strict going concerns. Accordingly, most valuations
focus only on the ability of firms to generate cash flows or earnings

American Institute of Certified Public Accountants, American Society of

Appraisers, Canadian Institute of Chartered Business Valuators, National
Association of Certified Valuation Analysts, and The Institute of Business
Appraisers.
48
Ibid.
49
Ibid.
23
 from operations in the future. . . . We define a going concern as a
business operation devoted to the same day-to-day operations it has
always conducted, within the same industries in which it has operated,
managed and controlled as it has always been controlled and financed.
Based on this definition, it is easy to see that strict going concerns
generate wealth only by generating either free cash flows or earnings
from operations.50

36. As discussed below, SolarCity was insolvent prior to, and as of, the

Merger Date, and was not financially viable as an independent entity as of the

Merger Date. Accordingly, SolarCity was not a going concern.

A. SolarCity’s Liquidity Crisis

37. As confidential discovery in this case has revealed, by late 2015,

SolarCity management recognized that the Company was facing “a major liquidity

crisis.”51 In a September 20, 2015 email, SolarCity COO Tanguy Serra informed

the executive management team that SolarCity’s “total war chest” of available cash

at the start of the year was down approximately $1.1 billion and was forecasted to

drop to approximately $200 million by the end of the year.52 Around this time,

SolarCity began having “weekly cash meetings” where the management team

would discuss, inter alia, near-term cash forecasts and potential changes thereto.53

50
Martin J. Whitman and Fernando Diz, Distress Investing: Principles and
Technique, (Hoboken: John Wiley & Sons, Inc., 2009), p. 134.
51
TESLA00003404-05.
52
Ibid.
53
TESLA00415006.
24
SolarCity took certain steps to attempt to improve its near-term cash crisis,

including delaying payments to third party vendors.54

38. During a meeting of the SolarCity Board of Directors (the “SolarCity

Board”) on February 2, 2016, SolarCity management discussed the liquidity crisis

with the SolarCity Board. Among other issues, SolarCity management provided an

analysis concerning the Company’s “2016 Liquidity by Month.”55 This analysis

“show[ed] significant liquidity concerns,” including the likelihood of SolarCity

violating the debt covenants on its revolving credit facility.56 SolarCity

management advised the SolarCity Board that SolarCity was required to maintain

monthly cash balances of at least $116.3 million (exclusive of cash held in fund

accounts) to remain in compliance with the revolver’s liquidity covenant—a

threshold the Company was forecasted to drop below in May 2016, August 2016

and September 2016.57

39. On February 9, 2016, SolarCity announced its operating results for the

fourth quarter of 2015 and issued a “Shareholder Letter” that discussed the status

of the business.58 While SolarCity management privately recognized that the

company was facing a liquidity crisis, Lyndon Rive reported to the market in the

54
TESLA00017233-43, at 33; TESLA00596514-19, at 14-15.
55
TESLA00002323-55, at 34.
56
Ibid.
57
Ibid.
58
SolarCity Form 8-K, filed February 9, 2016, Ex. 99.1.
25
Shareholder Letter that SolarCity “closed out 2015 with the strongest quarter of

installations and value creation in our history,” and “the primary focus of our

company in 2016 is our goal of generating positive cash by year-end.”59 Lyndon

Rive made no mention of the forecasted breaches of debt covenants that he

discussed with the SolarCity Board just one week earlier. The next day, SolarCity

filed its Form 10-K. Like the Shareholder Letter, the Form 10-K omitted any

mention of SolarCity’s liquidity crisis; SolarCity boasted that it had a “Healthy

Balance Sheet” and that it believed it would have sufficient cash to “meet our cash

requirements for at least the next 12 months.”60

40. SolarCity management addressed the Company’s liquidity issues with

the SolarCity Board again on April 26, 2016.61 SolarCity management provided an

“Updated 2016 Liquidity by Month,” which again forecasted numerous potential

covenant breaches, including that intra-month cash balances would fall as low as

$73 million in June 2016.62 SolarCity management expressly advised the SolarCity

Board that “May – August are at risk of tripping covenant.”63

41. While SolarCity was attempting to manage its cash balances,

SolarCity’s deployments were declining. Confidential discovery has revealed that

59
Ibid.
60
SolarCity Form 10-K filed, February 10, 2016.
61
TESLA00002259-88, at 74.
62
Ibid.
63
Ibid.
26
SolarCity management advised the SolarCity Board that SolarCity needed to

significantly lower its public guidance. The Shareholder Letter from February 9,

2016 advised the market that SolarCity expected to install 1,250 MW during

2016.64 In a presentation to the SolarCity Board on April 26, 2016, which also

discussed the first quarter operating results, SolarCity management provided a

“2016 Guidance Revision” of just 900 MW and recommended that “we remove

quarterly guidance going forward.”65

42. SolarCity did not provide the same information to stockholders and the

market. On May 9, 2016, SolarCity announced its operating results for the first

quarter of 2016 and issued its next quarterly “Shareholder Letter.”66 In the

Shareholder Letter, Lyndon Rives states that “SolarCity kicked off 2016 with solid

momentum in installations, financing, and core cash generation” and provided

updated guidance of “1.0 - 1.1 GW” for 2016.67 SolarCity management knew,

however, that they would need to provide another reduction in guidance when

announcing the second quarter results in August 2016, which would put downward

pressure on SolarCity’s stock price.68

64
SolarCity Form 8-K, filed February 9, 2016, Ex. 99.1.
65
TESLA00002259-88, at 79.
66
SolarCity Form 8-K, filed May 9, 2016, Ex. 99.1.
67
Ibid.
68
TESLA00001858-61, at 58-59 (acknowledging that SolarCity “intended to revise
down its megawatt guidance” again on August 4, 2016).
27
 43. SolarCity’s liquidity issues continued to be a focus of the SolarCity

Board and management after Tesla made its initial proposal to acquire SolarCity.

In an email that Lyndon Rive sent on July 9, 2016 in advance of a conversation he

was scheduled to have with Elon Musk (Exhibit 31), Lyndon Rive confirmed that

he had been discussing SolarCity’s liquidity problems directly with Musk. During

a conversation on the evening of July 9, 2016, Rive confirmed to Musk that

SolarCity was “running crazy close” to its liquidity covenants and he was “really

afraid of the domino effect” that could result if SolarCity did not get cash it needed

soon.69 As Rive testified, the mere “notice of a covenant breach,” in addition to the

obvious problems it would create with SolarCity’s lenders, would cause “concern

around other investors” who were acquiring SolarCity’s securitizations and disrupt

its complicated finance machinery.70 Musk assured Rive that “[he] would make

sure that they were okay through the acquisition period” with respect to

SolarCity’s cash needs.71 Rive sent an email to Musk the next day that attached the

69
TESLA00083765 (Rive’s notes for call with Musk, which state: “I told you that
we are running crazy close”); L. Rive Dep. at 107; E. Musk Dep. at 272-73.
70
L. Rive Dep. at 130-31.
71
TESLA00083765 (Rive’s notes for call with Musk, which state: “I mentioned
that we need to raise capital but you told me no and that you will have me covered.
I made it clear need the capital but if you have me covered okay.”); E. Musk at 273
(“Q. Is that an accurate statement? Did he tell you he needed capital and you said
you had him covered? A. I think I said that I would make sure they were okay
through the acquisition period.”).
28
“cash forecast we gave the board in April” and the “domino effect” that SolarCity

faced due to its liquidity issues.72

44. The cash flow forecast to which Lyndon Rive was referring is the graph

depicted in Exhibit 32. It reveals that SolarCity was projected to breach the loan

covenant requiring a minimum cash balance of $116.3 million, and was perilously

close to running out of cash. Moreover, the email quoted in the previous paragraph

indicated that the projections needed to be “updated” both for the delay of

anticipated tax equity securitizations and “weaker bookings” from SolarCity’s

sales division.73 Elon Musk confirmed during his deposition that SolarCity

required an external cash infusion to address these liquidity issues. In discussing

the analyses that he received from SolarCity management, Musk testified: “I think

the point of this presentation is that SolarCity needed to raise money.”74

45. Prior to the approval of the Merger Agreement, Evercore discussed

SolarCity’s liquidity problems directly with the Tesla Board. In presentation

materials from July 19, 2016, Evercore advised that “significant issues” arose

during due diligence, including, inter alia: 75

72
TESLA00022462-63.
73
Ibid.
74
E. Musk Dep. at 239.
75
TESLA00001858-61, at 59 (acknowledging that SolarCity “intended to revise
down its megawatt guidance” again on August 4, 2016); TESLA00001872-74, at
72 (“Management expressed concern that if the Company announced its June 30
cash balance and revised downward its megawatt guidance on its August 4
29
  SolarCity needed a “short-term bridge loan to avoid a potential

default on its revolver.”76

 “The Company’s Corporate Revolver carries a minimum cash

balance covenant of $116 mm measured on the last day of each

month, which is exclusive of the cash held in Fund Accounts, the

triggering of which will carry a default without a ‘cure’ period and

could result in cross defaults in other debt instruments in the

Company’s capital structure.”77

 “SolarCity has indicated that it may not be able to resolve these

issues prior to signing.”78

 “Additionally, a disclosure of default could impair SolarCity’s ability

to monetize future assets with Tax Equity, Back-levering and Cash

Equity in the time frame required to maintain solvency.”79

 “Based on July 13, 2016 weekly cash forecast, SolarCity’s intra-

month cash balance dips below the covenant levels of $116mm

several times.”80

earnings call it would have a negative effect on its stock price and liquidity.”).
76
TESLA00000463-863, at 718.
77
Ibid. at 740.
78
Ibid.
79
Ibid. at 738.
80
Ibid.
30
 46. In addition, SolarCity’s Special Committee (the “Special Committee”),

advised by Lazard Frères & Co. LLC (“Lazard”), was told that SolarCity was

facing a liquidity crisis. The minutes of the July 9, 2016 meeting indicated that

Jonathan Mir, Managing Director at Lazard, “walked the [Special] Committee

through an analysis of the Company’s near-term liquidity position, which Lazard

had prepared using data provided by the Company management, including, among

other things, the Company’s week-by-week cash flows, the variances of such cash

flows, sources and uses of cash and the Company’s revolving loan covenants.” 81

This analysis showed that SolarCity’s “cash position was close to breaching a

liquidity covenant under the Company’s revolving credit facility, and that the

Company would be operating with little margin for error until October 2016.” 82

The minutes expressly confirm that SolarCity management “agreed with Mr. Mir’s

assessment.”83

47. Similarly, the minutes for the Special Committee meeting on July 18,

2016 indicate that SolarCity management “informed the Committee that, while the

Company was in compliance with all of its liquidity covenants at this time, it was

closely managing its payables,” “the company’s liquidity position was tight,” and

SolarCity “would require approximately $250 million to $300 million of additional

81
TESLA00001858-61, at 58.
82
Ibid.
83
Ibid.
31
liquidity to maintain operational flexibility.”84 Further, SolarCity management

“discussed the amount of payables overdue and the consequences of a revolver

covenant breach with the Committee, including the impact such breach would have

on the Company’s aggregation facility, among other things.”85 SolarCity

Management also expressed concern that if the Company announced its June 30

cash balance and lowered its megawatt guidance on its August 4 earnings call, it

would have a negative effect on its stock price and liquidity.”86

48. With SolarCity facing severe liquidity problems, the minutes for the

Special Committee meeting on July 21, 2016 indicated that Lazard “advised the

Committee to consider the value of the Tesla Proposal not just in terms of premium

to the current trading price of the Company’s shares, if any, but also in terms of

offering a solution to avoid the risk of the downside liquidity scenario.” 87 Lazard

advised the Special Committee that “the Company’s current liquidity situation was

such that it warranted prompt action in the Company’s current circumstances.”88

49. Lazard explored potential transactions that could have provided

SolarCity with additional cash, as well as the interest of other third parties in

acquiring the Company, and concluded that SolarCity was not an attractive

84
TESLA00001872-74, at 72.
85
Ibid.
86
Ibid.; TESLA00001888-90, at 89.
87
TESLA00001882-85, at 83.
88
Ibid.
32
candidate for third-party investment. Diego Inigo of Lazard provided SolarCity

Director of Global Capital Markets Shane Deaton an analysis indicating that an

appropriate yield applicable to an existing SolarCity bond maturing in December

2020, stripped of the conversion option, was 23.09%, reflecting a 2200 basis point

spread (i.e., 22%) over the benchmark U.S. Treasury maturing in December

2020.89

50. With an option-adjusted spread (“OAS) of 2200 basis points, the

market was pricing the SolarCity debt obligation analyzed by Lazard to be

equivalent to the lowest level of junk bonds not in default. The SolarCity OAS far

exceeded the OAS as of the same date analyzed by Lazard of 1299 basis points for

US High Yield CCC or Below, as compiled by ICE BofAML.90 According to

Standard & Poor’s Long-Term Issue Credit Ratings, “An obligation rated 'CCC' is

currently vulnerable to nonpayment and is dependent upon favorable business,

financial, and economic conditions for the obligor to meet its financial

commitments on the obligation. In the event of adverse business, financial, or

economic conditions, the obligor is not likely to have the capacity to meet its

financial commitments on the obligation.”91 Debt obligations are generally not

89
TESLA00142722.
90
As reported by ICE BofAML and disclosed in
https://fred.stlouisfed.org/series/BAMLH0A3HYC.
91
https://www.standardandpoors.com/en_US/web/guest/article/-
/view/sourceId/504352.
33
issued at an S&P rating of CCC or below; those that are so rated typically have

declined to that rating as a result of adverse developments, and they are frequently

in, or close to, default. In 2016, the default rate on debt rated between CCC and C

was 32.67%.92 This would suggest that newly issued debt by SolarCity was not

likely to be forthcoming.

51. If debt cannot be raised, then equity, which ranks below debt under the

absolute priority rule of the Bankruptcy Code (Exhibit 33), is even less likely to be

raised. Normally, financially troubled companies cannot raise equity, because it is

generally deemed to be of little or no value, other than speculative value, due to the

amount of debt with a senior status in relation to equity.

52. Ultimately, Elon Musk and his cousins stepped in to provide SolarCity

the additional cash that SolarCity management had told the Special Committee that

it needed for the company to remain afloat. Musk and his cousins, Lyndon and

Peter Rive, purchased $100 million of $124 million in Solar Bonds93 that SolarCity

issued on August 17, 2016, which was an acquisition of debt and not equity.

Moreover, SpaceX (Elon Musk’s rocket company) rolled over $165 million of

Solar Bonds that matured during 2016.94 But for the cash infusion from Musk, his

92
“2016 Annual Global Default Study and Rating Transitions,” S&P Global
Ratings, April 13, 2017, p. 11.
93
Amendment No. 1 to Prospectus Supplement No. 23 filed pursuant to Rule
424(B)(5), p. 1.
94
SolarCity Amended No. 1 to Prospectus Supplement No. 23, filed August 23,
34
rocket company, and his cousins, SolarCity would have been out of cash by no

later than September 30, 2016 (Exhibit 32) (and likely before this date), and would

have breached the minimum-cash requirement under its revolver covenant.

53. Although the Merger Proxy notes that SolarCity discussed a potential

business combination with parties other than Tesla,95 merging with Tesla was its

only viable option. A number of obstacles likely would have precluded SolarCity

from reaching a successful business combination with an entity other than Tesla

within the necessary timeframe, including:

 Any party conducting due diligence on SolarCity would have

discovered (as Tesla did) that SolarCity was rapidly running out of

cash. Under these circumstances, it is highly unlikely that SolarCity

would have been able to negotiate a premium deal with anyone but

Tesla—let alone to do so before it ran out of cash.

 Direct competitors were unlikely acquirers. SolarCity was bigger than

the second and third largest residential solar panel companies (Sunrun

and Vivint Solar) combined, and was incurring much larger cash flow

deficits than they were (Exhibit 67). These competitors lacked the

financial capacity to acquire SolarCity, and any synergies between

2016.
95
Tesla Motors, Inc. and SolarCity Joint Proxy Statement/Prospectus (the “Merger
Proxy”) dated October 12, 2016, p. 58ff.
35
 those companies would have been insufficient to adequately reduce

their respective and combined cash flow deficits. Due to the

substantial cash flow deficits of each, a potential merger would also

create complications as to how secured creditors would share or

divide collateral.

 It is unlikely that a corporate acquirer outside the residential solar

panel installation industry would have sought to enter the industry in

2016. By early 2017, NRG—the fourth largest installer— had elected

to exit the industry.96 The cost of the acquisition would include not

only the cash purchase price of SolarCity, or the dilution from issuing

stock, but also the need to refinance SolarCity’s debt and subsidize its

cash flow deficits.

 Private equity (“PE”) firms were not good candidates to acquire

SolarCity. Because PE firms cannot offer stock as acquisition

consideration, PE firms most likely need to be cash buyers. The

amount of cash required to purchase SolarCity and fund its losses was

well above what most PE firms are inclined to invest in a single

portfolio company.

96
https://www.greentechmedia.com/articles/read/nrg-sheds-the-final-remnants-of-
its-home-solar-business#gs.qm5mlr.
36
 Even if the sheer size of a SolarCity investment could have been

overcome by a consortium bid, SolarCity’s capital structure and

projected performance made it an undesirable target for a PE bidder.

Buyout firms normally leverage their investments, but SolarCity could

not reasonably take on additional debt to fund a purchase, due to its

inability to service additional debt as a consequence of ongoing cash

flow deficits. In addition, buyout firms normally seek investment

candidates that have a reasonable chance of being sold or taken public

within a five year time-horizon. Projections presented to the Tesla

Board in a meeting on June 20, 2016 indicated that SolarCity was still

projected to be losing money in five years, thereby complicating a sale

or IPO within the normal timeframe for exiting an investment

(Exhibit 34).

 A structure that some PE firms employ for buying companies with an

excessive level of leverage is to place the company in bankruptcy,

reduce debt to a more manageable level, and fund a plan of

reorganization. Such an approach would likely have provided nothing

for existing SolarCity shareholders, and would have compromised the

claims of SolarCity creditors, and thus it would be less desirable to

37
 SolarCity shareholders, creditors, and employees than the proposed

Merger.

54. Many companies facing the financial difficulties of SolarCity would

file for Chapter 11 bankruptcy protection. There are several reasons why that

would be a less desirable alternative than the proposed Merger. They include, but

are not limited to:

 To remain in Chapter 11, a company must pay its post-filing

obligations on a current basis. Because SolarCity’s historical cash

flow deficits (Exhibits 11 and 15) demonstrate an inability to operate

in a profitable and cash-flow-positive manner, a Chapter 11 filing

could have rapidly been converted to a Chapter 7 liquidation.

 A Chapter 11 filing for a company of the size and financial

complexity of SolarCity is expensive. SolarCity would have had

difficulty paying the professional and other administrative expenses

required under bankruptcy.

 Potential customers would have been wary of buying solar energy

systems and/or entering into long-term contracts with a bankrupt

company. There would be serious concerns about a bankrupt

company providing quality products and services, and being around

long enough to honor its warranty and service obligations. A

38
 bankruptcy filing would have made it very difficult for SolarCity to

win new business, which would be vital for its reorganization.

Prospective customers would have had numerous alternatives to

SolarCity, and would likely have chosen non-bankrupt competitors.

 SolarCity’s business depended upon its ability to raise capital

(Exhibits 12, 17, and 23). A bankruptcy filing would have

complicated getting new capital injections, which were vital to

funding new installations.

 Since SolarCity shareholders would likely have received little if

anything, in a Chapter 11 plan of reorganization, and many of its

creditors would have had their claims compromised, a bankruptcy

petition would have been a last resort.

55. Thus, SolarCity not only faced a liquidity crisis at the time of the

Merger, but its options for solving its liquidity crisis outside of the Merger were

bleak.

B. SolarCity Insolvency Considerations

56. Prior to and at the Merger Date, SolarCity was insolvent based on

criteria that are commonly used by financial advisors in rendering solvency

opinions, and by insolvency professionals and the bankruptcy court to evaluate

debtor insolvency. Insolvency based on just one of the criteria can be a basis for a

39
company filing a voluntary Chapter 11 petition, or being forced into an involuntary

Chapter 7 bankruptcy. These criteria are (Exhibit 35):

a. Balance sheet tests:

i. Current liabilities exceed current assets; and

ii. Probable liability of debts exceeds present fair saleable fair

value of assets.

b. Cash flow tests:

i. Unable to pay debts (including contingent liabilities) as they

come due; and

ii. Unreasonably small capital structure.

57. SolarCity could be deemed insolvent as of the Merger Date based on

any of the above criteria. SolarCity’s insolvency is further confirmed by the

commonly used Altman’s Z-Score bankruptcy prediction model.

58. SolarCity’s Current Liabilities Exceeded Its Current Assets

(Exhibit 38). Assets as of alternative dates at or near the Merger Date and

liabilities and equity as of the same dates are shown in Exhibits 36 and 37,

respectively. Current assets are those that are available for use by the business

within a single year, such as cash, receivables, inventory, and prepaid expenses

(Exhibit 36). They are the company’s most liquid assets that are used to fund

operations and pay current liabilities, which are those that are due within the next

40
twelve months. Current assets differ from noncurrent assets, such as plant and

equipment or solar energy assets, that are used by the business over a multiple-year

period, and whose full value are not likely to be realized within a single year. The

net of current assets and current liabilities is net working capital. Measurement of

net working capital is of paramount importance in evaluating solvency; failure to

pay current obligations as they come due is commonly a reason that companies are

forced into an involuntary bankruptcy proceeding.

59. SolarCity’s current liabilities as of the Merger Date amounted to $1.1

billion (Exhibit 37). This balance is net of $105 million in deferred revenues that

do not constitute legal obligations to pay cash, and adjusted for a post-closing

adjustment to accrued liabilities as of the Merger Date. Current assets as of the

Merger Date, as adjusted post-closing, amounted to $684 million (Exhibit 38).

The balance sheet as of November 21, 2016, inclusive of fair value and audit

adjustments, reveals that SolarCity’s current liabilities exceed current assets by

$423 million (Exhibit 37). Hence, SolarCity was insolvent using the most

immediate indication of insolvency, as it had a net working capital deficit of more

than $400 million. This working capital deficit could reasonably be expected to

widen due to SolarCity’s ongoing losses.

60. The working capital deficit was not a sudden development. Rather, it

was the result of continuing erosion that began during the quarter ended

41
December 31, 2014, and persisted through the Merger Date (Exhibit 38). The

decline in working capital, which had become a deficit by September 30, 2015

(Exhibit 39), was accompanied by a trend of declining cash balances that also

began during the quarter ended December 31, 2014 (Exhibit 39).

61. Financial ratios typically used by financial analysts and credit analysts

also reveal deepening levels of insolvency (Exhibit 39):

a. Current ratio—current assets ÷ current liabilities. This is one of the

most widely used financial ratios, and is the most frequently used

financial ratio to measure liquidity. A current ratio below 1.0

signifies insolvency. SolarCity’s current ratio had been declining

since the fourth quarter of 2014, and slipped below 1.0 during the

fourth quarter of 2014, and continued to erode thereafter.

b. Quick ratio—(current assets – inventory) ÷ current liabilities. This

ratio gets its name because in the numerator the principal assets are

generally cash, cash equivalents, and receivables—the most liquid of

all current assets that can be most quickly be drawn upon to pay

current liabilities. Inventory is excluded from this ratio because

inventory can be slow moving, not realizable at the amount stated on

the balance sheet, and may be two steps removed from becoming

cash—it has to be sold to generate a receivable, which must be

42
 collected to become cash. SolarCity’s quick ratio displays the same

trend as the current ratio.

c. Debt-to-equity ratio—funded debt97 ÷ stockholders’ equity. The

higher the ratio, the more dependent on debt the company is in

funding the business. SolarCity was highly debt dependent. The

debt-equity ratio was roughly at 1:1 in December 2013, but then

steadily increased to more than $4 of debt for each dollar of equity

by the end of the first quarter of 2016. The principal constraint

against additional erosion of this ratio in 2016 was SolarCity’s

inability to raise additional indebtedness. SolarCity had not done an

equity offering since 2013 (Exhibits 15 and 17). Its growth was

fueled by issuance of debt (Exhibits 15 and 17). However, as an

unprofitable company incurring cash flow deficits (Exhibits 11, 13,

and 15), SolarCity lacked the cash flow necessary to fund its

business, interest, and principal payments. If at any time the credit

markets decided to stop loaning money to SolarCity, and became

unwilling to continue to roll over its debt, SolarCity would abruptly

run out of money, with a bankruptcy likely to follow.

97
Funded debt means borrowed money or interest-bearing debt (as opposed to
accounts payable or accrued liabilities).
43
 62. The Probable Liability of SolarCity’s Debts Exceeded The Present Fair

Saleable Value of Its Assets (Exhibit 41). SolarCity’s consolidated balance sheet

indicated that the net book value of shareholders’ equity was $2.9 million at the

Merger Date—a narrow sliver of ostensible positive net worth for a company with

an $8.9 billion balance sheet as of the Merger Date (Exhibit 37), whose pre-tax

loss during 2015 and 2016 averaged approximately $800 million (Exhibit 13), or

more than $2 million per day. At its historical run rate of losses, SolarCity could

reasonably be expected to have a deficit in stockholders’ equity within a couple of

days following the Merger Date.

63. An objective of a solvency analysis based on a balance sheet test is to

determine whether the subject company’s assets are sufficient to satisfy its

probable liabilities. In the case of SolarCity, a large portion of its consolidated net

assets are those that are consolidated from its 47 VIEs, all of whose net assets are

required to be consolidated in the SolarCity balance sheet in accordance with

GAAP. “SolarCity Corporation’s, or the Company’s consolidated assets [include]

. . . assets of variable interest entities or VIEs that can only be used to settle

obligations of the VIEs.”98 The net assets of the VIEs are not available to satisfy

claims of SolarCity creditors. Accordingly, they must not be considered in a

solvency analysis.

98
SolarCity Form 10-K, filed March 1, 2017, p. 40.
44
 64. I have not received balance sheet information on the VIEs as of the

Merger Date. However, such information is disclosed in SolarCity’s Forms 10-Q99

and 10-K100 for the periods ended September 30, 2016 and December 31, 2016,

respectively. The Merger Date falls at the approximate midpoint between the two

dates for which there were SEC filings. Moreover, the net assets of the VIEs did

not change significantly between the two above dates. Accordingly, I have used

the average of the net assets of the VIEs as of the quarters within which the Merger

Date is contained to make a provision for the net assets of the VIEs that cannot be

used to satisfy the claims of SolarCity creditors.

65. To evaluate solvency based on the balance sheet test, including current

and noncurrent assets and liabilities, I have deducted from the net book value of

SolarCity net assets as of the Merger Date, the provision for the net assets of the

VIEs, and I have also made adjustments for: (1) the elimination of goodwill;101 (2)

the elimination of deferred assets and most of deferred revenues, which represent

accounting provisions rather than actual saleable (or usable) assets or obligations to

make payment or render services; and (3) correcting errors that became evident in

99
SolarCity Form 10-Q, filed November 9, 2016, p. 3.
100
SolarCity Form 10-K, filed March 1, 2017, pp. 39-44.
101
Goodwill is not reflected in the fair value balance sheet as of the Merger Date
under the acquisition method of accounting (Exhibit 24), and is unjustified based
on SolarCity’s historical lack of proven earning capacity.
45
post-closing audits. The net of the three categories of aforementioned adjustments

was to increase net assets as of the Merger Date by $689 million.

66. After deducting the net assets of the VIEs from the net assets of

SolarCity, as well as the net impact of the aforementioned adjustments, SolarCity’s

net liabilities exceeded the net assets available to creditors by approximately $650

million as of the Merger Date (Exhibit 41). This shortfall was likely to increase

subsequent to the Merger Date due to SolarCity’s ongoing losses and the low

likelihood of its ability to raise equity as of Merger Date.

67. Although SolarCity had subordinated interests in the VIEs as of the

Merger Date, SolarCity was unable to use VIE assets to satisfy its obligations. The

idiosyncratic nature of the structure of the VIEs, subordinated rights to assets and

cash flows of SolarCity, and speculative nature of the timing and amount of the

potential cash flows would make it too difficult for SolarCity to promptly generate

cash from the operations or sale of the VIEs to satisfy its obligations to creditors.

46
 68. SolarCity Was Unable to Pay Debts as They Come Due (Table 1).

TABLE 1
Inability of SolarCity to Pay Debts as They Come Due
Description $000) Reference
Net working capital deficit ($494,247) Exhibit 38
Net assets, excluding variable‐interest entities (649,175) Exhibit 41
Year‐to‐date performance through 9/30/16:
Net loss (758,704) 9/30/16 Form 10‐Q
CF from operating activities + capital exp. (479,265) 9/30/16 Form 10‐Q (A)
Solar energy systems leased and to be leased (1,230,064) 9/30/16 Form 10‐Q (B)
Discretionary cash flow (1,709,329) (A) + (B)
Scheduled maturity of debt outstanding as of 12/31/16 (Exhibit 25):
2017 2017 2019 After 2019 Total
Recourse $563,017 361,564 566,781 137,469 1,628,831
Non‐recourse 265,567 479,792 52,978 1,153,237 1,951,574
$828,584 841,356 619,759 1,290,706 3,580,405

69. SolarCity had:

a. A working capital deficit of almost a half billion dollars as of the

Merger Date (Exhibit 38);

b. Liabilities that exceeded net assets (excluding the net assets of the

VIEs) by approximately $650 million as of the Merger Date

(Exhibit 41);

c. Net losses of more than three quarters of a billion for the nine

months ended September 30, 2016102 and a deficit discretionary cash

102
SolarCity Form 10-Q, filed November 9, 2016, p. 4.
47
 flow of $1.7 billion103 during the same period, which would add to

the deficit working capital and net asset value balances; and

d. $3.6 billion in funded debt as of December 31, 2016, of which $828

million was scheduled to be repaid during 2017 and consisted mostly

of recourse debt (Exhibits 24 and 25).

70. Forecasts of 2017 presented in the Merger Proxy indicate that SolarCity

would have a deficit unlevered free cash flow of $189 million under the

“Unrestricted Liquidity Case,” and a positive unlevered free cash flow of $290

million under the more optimistic “Liquidity Management Case.”104 Setting aside

the reliability of the aforementioned forecasts, which reflect cash flows that are far

more favorable than the large cash flow deficits that SolarCity historically

experienced, the unlevered free cash flows would need to fund principal and

interest payments, taxes, and other amounts that are not provided for in a forecast

of unlevered free cash flow. Accordingly, they would be insufficient to

compensate for the huge deficiencies cited in the preceding paragraph.

71. With large cash flow deficits and significant indebtedness imminently

due as of the Merger Date, SolarCity was unable to service debt or fund losses and

103
Ibid. at 5.
104
Merger Proxy, p. 105.
48
other cash requirements without raising more capital. Ongoing losses, despite its

large market share and rapid growth, made it even more difficult to raise capital.

72. SolarCity had not done an equity offering since 2013 (Exhibits 15 and

17), and its poor financial performance (Exhibits 11, 13 and 14) and financial

condition, punctuated by a heavy debt load (Exhibits 19 to 25), made an equity

financing improbable (if not impossible) as of the Merger Date for SolarCity as an

independent entity. SolarCity’s investment bankers had been unsuccessful in

finding external sources of capital during the second half of 2016.105 The fact that

Elon Musk and the Rives needed to fund $100 million of the $124 million in

collateralized Solar Bonds that SolarCity offered August 2016 demonstrates that

investors had little appetite to loan money to SolarCity at the time of the Merger.

In an expert report dated August 12, 2019 that Murray M. Beach issued in this

matter, he expressed an opinion that “as of June 21, 2016, it is highly unlikely that

SolarCity could have executed a seasoned equity offering (‘SEO’) to raise $250 to

$300 million.”106

73. Based on the foregoing, it is reasonable to conclude that as of the

Merger Date SolarCity was unable to pay its debts as they were scheduled to come

due.

105
TESLA00738740-43; TESLA00739559-61.
106
Expert Report of Murray M. Beach, dated August 12, 2019, p. 1.
49
 74. SolarCity Had Unreasonably Small Capital (Exhibit 24). Capital is

the oxygen of a business entity. Without it, and the ability to replenish capital

through profitable operations and/or raising money in the capital markets, a

company can quickly die. Access to capital is even more important to a company

like SolarCity that required a substantial amount of capital to fund losses, growth,

and investment in solar energy systems to be leased (Exhibits 12, 15 – 18, 22, and

23).

75. As previously explained, SolarCity was experiencing a severe liquidity

crisis as of the Merger Date, and its investment banker, Lazard, was unsuccessful

in raising the capital that SolarCity required.107 SolarCity’s stockholders’ equity

was a mere $2.9 million at the Merger Date (Exhibit 37), which was insufficient to

fund a company experiencing quarterly deficits in discretionary cash flow of $215

million to $823 million since the first quarter of 2014 (Exhibit 17). Excluding the

net assets of the VIEs, SolarCity had deficit net assets of $649 million at the

Merger Date (Exhibit 41). Based on SolarCity’s losses, discretionary cash flow

deficits (Exhibits 12, 15 – 18, 22, and 23), debt that was imminently due

(Exhibit 25), and financial condition as of the Merger Date (Exhibits 36 and 40),

it was clear that SolarCity had unreasonably small capital.

TESLA00001875-76; TESLA00001882-83; LAZ_TES00039331-36, at 36;

107

TESLA00001878-79; G. Bilicic Dep. At 39.

50
 76. Bankruptcy Prediction Models Suggest That SolarCity Would Have

Gone Bankrupt But For The Merger. Bankruptcy prediction models provide

analysts insights into companies that exhibit financial characteristics that resemble

those that have gone bankrupt in the past. The most widely used bankruptcy

prediction model is Altman’s Z-score. The Z-score was developed by NYU

professor Edward Altman more than 50 years ago, and is widely used by financial

and credit professionals, and incorporated into financial templates and financial

software tools. Using a statistical technique known as linear discriminant

analysis,108 and analyzing financial data over a 20-year period pertaining to

companies that went bankrupt and those that did not, Dr. Altman was able to

develop a multivariate formula109 that provides a scoring system that is widely used

to identify companies that share characteristics in common with those that have

gone bankrupt.

77. The Altman’s Z-score formula is as follows:

a. Z = 1.2X1 + 1.4X2 + 3.3X3 + 0.6X4 + 1.0X5, where,

i. X1 = working capital ÷ total assets—liquidity measure;

108
Linear discriminant analysis is a statistical technique that identifies a linear
combination of features that characterizes two or more classes of events.
109
Multivariate analysis involves analyzing alternative outcomes based on two or
more variables.
51
 ii. X2 = retained earnings ÷ total assets—measures financial

leverage supported by undistributed earnings;

iii. X3 = earnings before interest and taxes ÷ total assets—

measures productivity of total assets, independent of tax or

leverage factors;

iv. X4 = market value of equity ÷ book value of total liabilities—

measures how much a firm’s assets can decline in value before

the company becomes insolvent; and

v. X5 = sales or revenues ÷ total assets — measures sales-

generating ability of the firm’s assets.

78. The Z-score formula yields a numerical result. The interpretation of

the Z-score output is as follows:

a. Z-score > 3.00—not likely to go bankrupt within two years;

b. Z-score of 1.80 – 3.00—inconclusive; and

c. Z-score < 1.80—high probability of bankruptcy within two years.

79. Altman’s Z-score was found to be accurate 72% of the time in

predicting bankruptcies two years prior to the bankruptcy filing.110 Of course, a

110
Edward I. Altman, Ph.D., “Predicting Financial Distress of Companies:
Revisiting the Z-Score and Zeta® Models,” July 2000, p. 16, adapted from articles
originally published in the Journal of Finance (September 1968) and the Journal
of Banking & Finance (1, 1977).
52
company that appears to be headed towards bankruptcy based on its Z-score and

other factors can avoid or defer this outcome by raising capital.

80. I have calculated SolarCity’s Z-score dating back to the completion of

its first full quarter as a public company as of March 31, 2013, and updated it for

each subsequent quarter (Exhibit 42). My analysis is shown graphically on

Exhibit 43. It reveals that SolarCity continuously had a Z-score below 1.80,

including 1.50 as of the quarter ended March 31, 2014 and declining in every

subsequent quarter. This reveals that SolarCity was a bankruptcy candidate

throughout its existence as a publicly traded company. The declining Z-score

provides evidence of deteriorating financial condition, with increased bankruptcy

prospects. Without receiving significant cash infusions, including those from

Silver Lake in late 2015 and multiple bonds purchases by SpaceX, SolarCity could

not have continued to meet its financial obligations during this period.

81. SolarCity was able to avoid the inevitable bankruptcy filing prior to the

Merger by raising capital to fund losses and discretionary cash flow deficits

(Exhibits 12 and 15 - 18); when such funding ceased to be available at the levels

required via the capital markets when SolarCity was an independent entity, it was

achieved through the Merger. Total capitalization grew by $1.3 billion to more

than $2 billion per year between 2013 and 2016 (Exhibit 22).

53
 B. Viability Analysis

82. I have analyzed the viability of SolarCity as of the Merger Date taking

into consideration several factors, including:

a. Ongoing discretionary cash flow deficits ((Exhibits 12, 15 – 18);

b. The KPMG Cash-Based Analysis (Exhibits 44 and 45);

c. The KPMG Gross Margin Analysis (Exhibit 46);

d. SEC filings by SolarCity (Exhibit 47);

e. SolarCity cost per dollar of revenues evident via SEC filings

(Exhibits 48 and 49);

f. Absence of positive value per watt deployed, including deteriorating

trends (Table 2 and Exhibit 50);

g. Acquisition-Method balance sheet and the minimal relative value

allocated to DevCo (Exhibits 51 and 52); and

h. E&Y would have rendered a going-concern qualification to its audit

opinion on the financial statements of SolarCity for the year ended

December 31, 2016, but for an Equity Confirmation Letter that was

signed by the Chief Financial Officer of Tesla.111

111
EY-TES-2016-EWP-001013.
54
 83. Based on these factors, it is my opinion, as stated to a reasonable

degree of professional certainty, that SolarCity was not financially viable as an

independent entity as of the Merger Date.

84. Financial Viability Analysis—SolarCity Operated At A Cash Flow

Deficit. As of the Merger Date, SolarCity had been operating for more than a

decade. Despite the fact that it had become the largest player in the industry and

had raised more than $8 billion as of December 31, 2016 though investments and

loans (Exhibit 22), SolarCity had failed to demonstrate its financial viability as of

the Merger Date. Beginning the first full quarter after becoming a public company,

SolarCity incurred quarterly discretionary cash flow deficits112 of $2.09 to $7.36

for each dollar of revenues, which were subsidized by raising $1.86 to $14.06 for

each dollar of revenues (Exhibit 18). Aggregate discretionary cash flow deficits

gradually increased, fueled by SolarCity’s increased ability to raise money in the

capital markets, reaching a peak quarterly deficit of $823 million during the quarter

ended December 31, 2015, which was funded by $797 million in capital raised

during the fourth quarter of 2015 (Exhibit 16).

85. Financial Viability Analysis—KPMG Cash-Based Analysis

Demonstrates That SolarCity Was Not Viable As Of The Merger Date (Exhibits 44

112
Discretionary cash flow deficit = deficit cash flow from operating activities +
capital expenditures.
55
and 45). As shown in a cash-based analysis prepared for Tesla by the KPMG due

diligence team (the “KPMG Cash-Based Analysis”), SolarCity was hemorrhaging

cash. On a purely cash basis, SolarCity lost $388 million and $697 million from

operations during 2014 and 2015, respectively. The cash flow deficit increased to

$570 million and $758 million during 2014 and 2015, respectively, after deducting

capital expenditures and other cash flow from investing activities (excluding costs

of solar energy systems). These substantial cash flow deficits were largely

managed through debt financing. During the first half of 2016 SolarCity continued

to incur deficit cash flows from operations, but its cash crisis became acute

because it was unable to raise new debt, other than through monetization of solar

energy systems.

86. Another way to analyze SolarCity is by segmenting the cash flows

between cash-based operations and monetization cash flows. This is relevant to

the post-Merger business, since the market was going away from the third-party

operator model funded by monetization, leading to a refocus by SolarCity on

customer ownership of solar energy systems (“Cash Sales”). On that basis, the

analysis reveals that the annual run rate of the excess of cash expenses over cash

revenues based on first half results was $788 million. This would suggest that a

move away from monetization of solar installations, which generated net cash,

towards Cash Sales would exacerbate losses. The KPMG Cash-Based Analysis

56
suggests that SolarCity would continue to be a cash drain following the move to

Cash Sales, and would, therefore, not be economically viable.

87. Financial Viability Analysis—KPMG Gross Margin Analysis

Demonstrates That SolarCity Was Not Viable As Of The Merger Date

(Exhibit 46). KPMG also performed a gross margin analysis (the “KPMG Gross

Margin Analysis”), reflecting a breakdown of revenues among SolarLease/PPA,

MyPower, Cash Sales, and solar renewal energy credits (“SRECs”) for the first

half of 2016. The gross margin analysis reveals the following:

a. SolarLease/PPA, inclusive of lease prepayments and incentives,

which accounted for 60% of year-to-date revenues, resulted in a

36.3% gross margin. However, (1) the gross margins were declining

on both a year-over-year basis for 2015 versus 2014, and a year-to-

date basis for the first half of 2016 versus the first half of 2015; and

(2) prepayments and incentives are nonrecurring income that will not

continue as SolarCity evolves towards a Cash Sales model.

b. MyPower sales had a high gross margin, but SolarCity announced in

February 2016 that it was discontinuing that business because

MyPower sales had to be financed by SolarCity, which lacked the

financial capacity to continue to finance MyPower sale.113

113
As discussed above, SolarCity tried to prop up Cash Sales by introducing the
57
 c. Cash Sales were unprofitable, and the negative margin was

expanding. For the first half of 2016 Cash Sales had a negative

25.4% gross margin.

d. SRECs carried high gross margins, but they were only 3.5% of year-

to-date revenues through June 30, 2016, and that amount would be

expected to decline as SolarCity moved towards a Cash Sales model.

Moreover, it would be expected to decline as the 30% tax credit on

residential solar panel installations was scheduled to be reduced from

30% of installation costs to 26% in 2020, and phased out entirely in

2022 for occupant-owned residential systems, and reduced to 10%

for commercial and certain third-party owned residential systems.

88. SolarCity’s plan to evolve towards a Cash Sales revenue model was not

economically viable if Cash Sales continued to carry a low or negative gross

margin. Cash Sales were only 15.5% of year-to-date revenues through June 30,

2016. If customers that had historically been attracted to the SolarLease/PPA and

MyPower modes of financing were not inclined to choose the Cash Sales option, it

would adversely impact revenues. Since SolarCity lost more than three quarters of

a billion dollars, before allocation of losses to noncontrolling interests, for the nine

Solar Loans program in May 2016, through which third-party lenders fully
financed sales of systems to SolarCity customers. The fees that SolarCity paid to
the lenders reduced margins even further.
58
months ended September 30, 2016 (Exhibit 47). Cash Sales had been a small

minority of sales; its losses would be even greater if all of the non-Cash Sales

revenues were replaced by Cash Sales with negative margins. The KPMG Gross

Margin Analysis also indicates that SolarCity was not economically viable as of

the Merger Date.

89. Financial Viability Analysis—SEC Filings (Exhibit 47). The audited

financial statements of SolarCity for the three years ended December 31, 2015 and

the year-to-date financial statements for the nine months ended December 31, 2015

and 2016 reveal that the sale of solar energy systems and components was

unprofitable. Combined gross profits, including sales and solar energy systems

leases, were far short of what was necessary to fund sales and marketing expenses,

general and administrative expenses, research and development, interest expense,

and other costs incurred. The net loss of $759 million for the nine months ended

September 30, 2016 was roughly equivalent to the full-year loss from 2015. The

deficit in discretionary cash flow that increased from $552 million in 2013 to $1.4

billion and $2.6 billion in 2014 and 2015, respectively, was not contained.

SolarCity continued to bleed cash in 2016. For the nine months ended

September 30, 2016, SolarCity had a deficit discretionary cash flow of $1.7

billion—slightly less than the $1.8 billion deficit for the first nine month of 2015.

But for the willingness of Elon Musk, SpaceX, and the Rives to roll over and fund

59
more than $265 million in debt during the first nine months of 2016, SolarCity

would have been out of cash (Exhibit 36), and in violation of its loan covenants.

90. Financial Viability Analysis—SolarCity’s Cost Structure Establishes

That The Business Was Not Viable (Exhibit 48). Analyzing SolarCity’s business

model on a per-dollar-of-revenues basis establishes that it was not viable as of the

Merger Date. In 2014 and 2015, for each dollar of revenues, SolarCity spent $0.94

and $1.14, respectively, on sales and marketing. It is difficult to justify spending

$1.14 for sales and marketing, and an additional $0.70 in product costs, or a total

of $1.84, to generate $1.00 in revenues, as SolarCity did in 2015. That cost

relationship would suggest that an increase in revenues would result in an increase

in losses.

91. SolarCity’s cost structure as of the Merger Date did not provide

evidence of a path towards profitability. For the first nine months of 2016,

SolarCity reduced the sales and marketing costs to $0.68 for each dollar of sales,

but even at that reduced level of spending, the sum of sales and marketing plus

product costs aggregated $1.34—more than the cost of the products. Throttling

back on sales and marketing expense has a delayed impact on revenues, since there

can be a several-month lag between receiving a customer order and completing a

solar installation. This is evident from Exhibit 91, which shows the decline in

60
SolarCity megawatts deployed that began during the second quarter of 2016, and

has persisted through the date of this report.

92. SolarCity’s financial statements do not provide evidence of economies

of scale through the Merger Date. The aggregate operating costs of $1.93 per

dollar of revenues for the nine months ended September 30, 2016 were greater than

they were during 2013. Product costs of $0.66 per dollar of revenues did not

reveal significant economies of scale. Sales and marketing costs, which had been

in excess of $1.00 for each dollar of sales, could be reduced, but with the likely

effect of reducing sales. Selling solar energy systems requires a fair amount of

customer interaction. There are a lot of technical and regulatory aspects to an

installation that a prospective customer is unlikely to know. General and

administrative expenses are unavoidable aspects of running a large business.

Nevertheless, even if 2016 year-to-date cost of revenues through September 30,

2016 could be reduced by 20% per dollar, all other operating costs were somehow

reduced by 50% per dollar, and interest and debt-related costs remained stable,114

SolarCity would still be incurring costs of $1.38 for each dollar of revenues.115

114
It is not likely that lenders would charge a lower interest rate.
115
($0.66 cost of revenues x 80%) + (sales and marketing costs $0.68 x 50%) +
(research and development costs $0.08 x 50%) + (general & administrative
expenses $0.51 x 50) + (interest and related expenses $0.22) = $1.38 pro forma
cost per dollar of revenues. See Exhibit 48.
61
 93. Financial Viability Analysis—SolarCity Was Not Creating Value Per

Watt Deployed (Table 2 and Exhibit 49). SolarCity published a quarterly review

that addressed trends in the productivity of new solar energy system deployments

and the net present value (“NPV) of the PowerCo portfolio.116 The PowerCo

analyses prepared by SolarCity discounted to a present value the payments

projected to be received from customers for new installations, inclusive of renewal

contracts and tax equity investments, against which the cost of new deployments

were netted. The analysis, which is summarized in Table 2, below reveals the

following:

TABLE 2
SolarCity Net Present Value (NPV) Created per Watt Deployed
Dec‐15 Mar‐16 Jun‐16 Sep‐16
At 6% discount rate:
NPV without renewal contract ($0.83) (1.56) (1.45) (1.60)
NPV W/O renewal contract + tax equity  inv. 0.65 (0.05) 0.20 0.13
NPV with renewal contract (0.51) (1.23) (1.08) (1.24)
NPV with renewal contract + tax equity inv. 0.97 0.28 0.57 0.49
At 8% discount rate:
NPV without renewal contract (1.12) (1.80) (1.69) (1.79)
NPV W/O renewal contract + tax equity  inv. 0.36 (0.29) (0.04) (0.06)
NPV with renewal contract (0.92) (1.60) (1.47) (1.57)
NPV with renewal contract + tax equity inv. 0.56 (0.09) 0.18 0.16
Source:  Sol a rCi ty qua rterl y revi ews , a s  s umma ri zed i n Exhi bi t 50

116
TESLA00709901.
62
 a. Absent the solar tax equity investments, new installations deployed

during 2016 produced a negative NPV (i.e., the present value of the

cash receipts per watt over the life of the contracts, both with and

without the renewals, was less than the cost per watt deployed). A

deficit NPV at a 6% discount rate implies that the new deployment

fails to achieve the required rate of return of 6%. The amount of the

shortfall is even greater at an 8% discount rate, also disclosed in the

SolarCity quarterly reviews, and consistent with the weighted

average cost of capital for residential solar systems computed by

KPMG in its fair value analysis.117

b. At a 6% discount rate, new deployments were only NPV positive

with the inclusion of the tax equity investments. Absent those cash

flows, new deployments were NPV negative. Using an 8% discount

rate, new deployments were only NPV positive during the second

and third quarter with the inclusion of both the tax equity

investments and the assumption that customers renew their leases

upon expiration. Absent both of these assumptions, new

deployments were NPV negative at an 8% discount rate. The 30%

117
Tesla Motors, Inc.: Preliminary Valuation of Certain Assets, Liabilities, and
Non-controlling Interests of SolarCity Corporation, as of November 21, 2016,
prepared by KPMG, p. 16 (PWC-TESLA00000306).
63
 Solar ITCs for solar installations are scheduled to be reduced to 26%

in 2020 and 22% in 2021. Beginning 2022, the Solar ITC phases out

completely for occupant owned residential systems, while reducing

to 10% for commercial systems and certain third-party owned

residential systems. This indicates that, without the Solar ITCs that

are scheduled to be significantly reduced, the SolarCity new

deployments were not economically viable.

c. SolarCity’s cost per watt deployed during 2016 was actually higher

than it was during the fourth quarter of 2015. The installation costs

per watt during the first three quarters of 2016 were the highest that

they had been since the first half of 2015. Economies of scale and/or

technological improvements were not reducing SolarCity’s cost per

watt.

d. The NPVs per watt were lower during 2016 than they were during

the fourth quarter of 2015. Economies of scale were not evident.

94. In a business that is dependent upon substantial financing, whether it is

third-party financing, or the customer financing new deployment, it is not a

sustainable business model to have new deployments that are NPV negative

without tax credits, which were soon to be scaled down. SolarCity’s quarterly

reviews indicated that new deployments were not economically viable.

64
 95. Viability Analysis Based on Acquisition-Method Balance Sheet

(Exhibit 51). Under the acquisition method of accounting, upon acquiring

SolarCity, Tesla was required to allocate the acquisition consideration paid for

SolarCity among the fair value of the assets, liabilities, and non-controlling

interests of SolarCity. Tesla issued common stock valued at $2.143 billion at the

Merger Date to acquire SolarCity.118 The acquisition consideration and underlying

fair value allocation contained in the Form 10-K filed by Tesla with the SEC,

based on independent appraisals prepared by KPMG,119 enables me to allocate the

acquisition consideration among three categories of SolarCity’s net business assets:

a. PowerCo—“the segment of SolarCity’s business [that] holds the

portfolio of installed assets”120 and related SRECs (collectively,

“PowerCo”).

b. Devco—“the segment of SolarCity’s business that sells and installs

solar systems.”121

c. MyPower notes receivable.

118
Tesla Form 10-K, filed March 1, 2017, p. 74.
119
Tesla Motors, Inc.: Preliminary Valuation of Certain Assets, Liabilities, and
Non-controlling Interests of SolarCity Corporation, as of November 21, 2016,
prepared by KPMG (PWC-TESLA00000291ff).
120
Merger Proxy, p. 78.
121
Ibid.
65
 96. If I rely upon what I believe to be an inflated purchase price, as

discussed later in the report, as well as the SolarCity purchase price allocation

reflected in the 2016 Tesla Form 10-K, it results in the following allocation of

purchase price paid:

a. PowerCo.—$1.64 billion, including the assumption of more than $3

billion in indebtedness that can reasonably be allocated to the

PowerCo segment;

b. MyPower—$376 million, net of $133.8 million in debt that was due

in 2017; and

c. DevCo—$125 million, including nearly $1 billion of indebtedness.

97. The allocation reveals two troubling items:

a. Approximately 96% of the allocation of fair value pertains to

PowerCo and MyPower. These are passive assets, whose value does

not appreciate; rather, they are a portfolio of financial assets that

runoff over time as the cash flows are collected, assuming that the

assumptions used in calculating fair value prove to be accurate (also

challenged elsewhere in this report). Buying a company, nearly all

of whose value is comprised of passive financial assets and notes

receivable, is inconsistent with Tesla’s asserted objective of seeking

to become “the world’s only vertically integrated energy company

66
 offering end-to-end clean energy products to our customers.”122 It

appears to be a poor use of Tesla’s capital and capital-raising

capacity.

b. Only about 4% of the purchase price is comprised of DevCo—the

company that provides clean energy products. Tesla assumed a

substantial amount of risk and debt to acquire a comparatively small

clean energy products company that was hemorrhaging cash. The

sliver of value that can be attributed to DevCo is sufficiently small

that there is reason to believe that it can diminish to zero through the

application of any assumptions that are less optimistic than those

contained in the analyses underlying the Tesla Merger Price.

98. Based on the marginal value attributable to DevCo, which would be

expected to be the engine of growth for SolarCity, it is apparent that the analyses

performed by KPMG on behalf of Tesla underlying the acquisition-method fair

value balance sheet provide a basis for attributing little, if any, value to DevCo.

This raises the question as to the economic viability of the DevCo business model.

99. E&Y Going-Concern Issues. E&Y confirmed my conclusions

regarding SolarCity’s inability to operate as a going concern. SolarCity filed a

Form 10-K for the year ended December 31, 2016—approximately 40 days after

122
Tesla Form 8-K, Ex. 99.1, filed June 21, 2016.
67
the Merger Date—and obtained an audit by its independent accounting firm, E&Y.

Documentation pertaining to the E&Y 2016 audit revealed the following:

a. In a January 17, 2017 email, E&Y audit partner Innocent Shumba

stated: “There is a going concern issue right now as SolarCity is not

going to be able to meet its obligations even when they include new

funds in the forecast.”123

b. Another document generated by E&Y, apparently intended for

acknowledgement by SolarCity management, stated:

The Company has assessed going concern for the 12 months

subsequent to the issuance of its 12/31/16 financial statements.

The Company assessed and determined that as a standalone

entity it will not have sufficient cash to meet its obligations as
they come due as shown in the table below.

The Company will obtain a Support letter from its parent

Company, Tesla, shown in the next page, which states that:

“Tesla intends to use its cash and cash equivalents to fund any
such contributions, and to engage in capital raising
transactions to increase the amount of its available cash and
cash equivalents for its own purposes and the liquidity needs of
its subsidiaries, including SolarCity.”124

100. To be able to issue an unqualified audit opinion, E&Y obtained an

equity confirmation letter dated March 1, 2017 (the “Equity Confirmation Letter”)

123
EY-TES-EM-000403.
124
EY-TES-EM-026277.
68
that was signed by the Chief Financial Officer of Tesla, and acknowledged by the

Chief Executive officer of SolarCity. The letter stated that:

Tesla hereby confirms its present intent to, from time-to-time, make
capital contributions to SolarCity for at least twelve months from the
date of this letter, on fair and reasonable terms and in amounts as
needed for general corporate purposes to support SolarCity on-going
operations.

As of the date of this Letter, Tesla intends to use its cash and cash
equivalents to fund any such contributions, and to engage in capital
raising transactions to increase the amount of its available cash and
cash equivalents for its own purposes and the liquidity needs of its
subsidiaries, including SolarCity.

By accepting this Letter, SolarCity represents that it does not currently

believe that it will incur debts beyond the combined ability of
SolarCity and Tesla to repay such debts as they mature.125

101. The above documentation, as well as information I reviewed, and my

experience as a Certified Public Accountant in the State of New York since 1977,

lead me to conclude that absent the Merger and SolarCity’s ability to rely upon the

post-Merger financial support of Tesla and affiliates, SolarCity was not viable as

an independent going concern as of the Merger Date.

125
(EY-TES-EWP-001013).
69
VI. FAIR VALUE WHEN SOLARCITY WAS NOT A GOING CONCERN

A. Valuation Approaches Considered

102. In the preceding section of my report I stated that, in my opinion,

SolarCity was not a going concern as an independent entity as of the Merger Date.

When a company ceases to be a going concern, the most relevant valuation

premise is net liquidation value. I have calculated SolarCity’s net liquidation

value; this calculation demonstrates that SolarCity’s equity was worthless as of the

Merger Date (Exhibit 53).

103. For illustrative purposes only, I have also performed valuation

methodologies that could be used if a going-concern premise were assumed, even

though, in my opinion, SolarCity was not a going concern as an independent entity

as of the Merger Date. The application of valuation methods based on a going-

concern premise provides a means of calculating a price for SolarCity common

stock, applying the counterfactual premise that it was a going concern as an

independent entity as of the Merger Date. There are three valuation approaches

that are commonly used by valuation professionals when valuing companies as a

going concern: (1) the cost approach; (2) the income approach; and (3) the market

approach. In addition to discussing my net liquidation analysis, I address each

these methods below.

70
 B. Net Liquidation Value

104. Net liquidation value is commonly used in analyzing financially

troubled companies. Liquidation value is defined as:

the net amount that would be realized if the business is terminated and
the assets are sold piecemeal. Liquidation values do not necessarily
mean the amount that would be obtained in a forced sale; most likely,
they refer to the amount that could be obtained in an orderly
liquidation. The value of a business or assets in an orderly liquidation
assumes a reasonable time period for the liquidation of the assets at
market prices under normal market conditions.126

105. The distinction between orderly liquidation value and forced

liquidation value is provided below:

“Liquidation Value – Orderly”—Assumes the assets are sold

piecemeal with a reasonable amount of time allowed for market
exposure. The assumed time period is very facts and circumstances
specific and depends on the type of assets being liquidated. There may
be instances where an orderly liquidation can take 12-24 months or an
orderly liquidation could be less than 30 days.

“Liquidation Value – Forced”—Assumes the assets are sold

piecemeal with less than normal market exposure as in a distressed
sale. The assumed time period for a forced liquidation is very facts
and circumstances specific and depends on the type of assets being
liquidated. There may be instances where a forced liquidation can take
several months or less than 30 days.127

106. I have calculated the net liquidation value of SolarCity assuming

orderly liquidation value. Buyers of businesses with financial and viability

126
AIRA Standards for Distressed Business Valuation, (Medford, OR: Association
of Restructuring Advisors, 2014), p. 23.
127
Ibid. at 23 – 24.
71
attributes resembling those of SolarCity consider net liquidation value because: (1)

they do not want to pay going-concern prices for a company that is not a going

concern; (2) they have the option of waiting until the company files for Chapter 11

protection or is forced into an involuntary Chapter 7 and, at the point, acquiring the

company or its assets at a price based on liquidation value; (3) the true purchase

price of acquiring a business such as SolarCity is not only the cost of acquiring the

net assets, but also the investment required to rehabilitate the business, which lost

$820 million in 2016 (Exhibit 13); and (4) bankruptcy courts normally require

creditors to receive at least as much as they would in a Chapter 7 liquidation before

approving a Chapter 11 reorganization plan or the sale of assets of a bankrupt

company.

107. My liquidation analysis is provided in Exhibit 53 and based on

assumptions that are detailed in Exhibits 54 and 55. Key assumptions are the

following:

a. I used the acquisition-method (fair value) balance sheet and book

values as of the Merger Date contained in the Tesla 2016 Form 10-

K128 and the KPMG Preliminary Valuation of Certain Assets,

128
Tesla 2016 Form 10-K, pp. 73 and 74.
72
 Liabilities, and Non-controlling Interests of SolarCity

Corporation.129

b. VIEs—The estimated assets and liabilities of the VIEs were

deducted from the assets (Exhibit 52) and liabilities and equity

(Exhibit 53) liquidation analysis because “SolarCity Corporation’s,

or the Company’s consolidated assets [include] . . . assets of variable

interest entities or VIEs that can only be used to settle obligations of

the VIEs.”130 I provided separately for estimated liquidated value of

the VIEs as follows (Exhibit 52):

i. I deducted the estimated net book value of the VIE assets

(Exhibit 54) and VIE liabilities (Exhibit 55) at the Merger

Date from the assets and liabilities of SolarCity based on net

book values disclosed in the Forms 10-Q and 10-K of

SolarCity as of September 30, 2016. Amounts of assets and

liabilities were not disclosed as of the Merger Date, so I used

the average of the amounts as of the two measurement dates,

which did not change significantly between the two dates.131

129
KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non-
controlling Interests of SolarCity Corporation, p. 4 (PWC-TESLA00000594).
130
SolarCity Form 10-K, filed March 1, 2017, p. 40.
131
Net assets of $3,480,232 as of 9/30/16 vs. $3,536,670 as of 12/31/16
(Exhibit 40).
73
 Fair values were not disclosed for the assets and liabilities of

the VIEs, so net book values had to be used for purposes of

this analysis. The principal assets of the VIEs, and of

SolarCity, are the solar energy systems. To the extent that the

solar energy systems of the VIEs were worth more than net

book value at the Merger Date, such excess value would be

retained outside of the VIE, and would increase the liquidation

value of solar energy systems held outside of the VIE, thereby

increasing the liquidation value of non-VIE assets, more than

offsetting the impact of using net book values in the VIE

liquidation analysis. On a net basis, it should not have a

material impact of the conclusion from performing the

liquidation analysis.

ii. I also subtracted the appraised value of the redeemable and

noncontrolling VIE interests, and the noncontrolling

(nonredeemable) VIE interests (Exhibit 55) based on the

appraised values for these interests as of the Merger Date

reflected in the Tesla 2016 Form 10-K (Exhibit 53).

iii. The net of the foregoing provides an estimate of the net

liquidation value that would potentially be realizable by

74
SolarCity over a period of more than 30 years following the

Merger Date. There are several factors that would limit the

net proceeds realizable from the potential sale of SolarCity’s

interest in the VIEs, including but not limited to the following:

- They are an idiosyncratic asset category, meaning there is a

risk specific to each pool of VIE assets. As a consequence,

there is a limited universe of potential buyers.

- Proceeds would be realized over a period of more than 30

years. The principal market for similar assets would

typically be funds that acquire interests in private equity

funds or hedge funds in the secondary market. The funds

typically have a ten-year life, so holding an investment

whose proceeds would be realized over a period of more

than 30 years would further reduce the potential pool of

buyers.

- SolarCity has a subordinated interest to VIE lenders and

investors that does not begin to realize cash flows until

contractually specified payments have been made. The

subordinated position protects lenders and the potential

return of the investors in the VIEs at the expense of

75
 SolarCity. SolarCity’s risk in the VIEs is inverse to that of

the investors. Investors that funded the VIEs, protected by

the SolarCity “equity tranche” are likely to have less

interest in the SolarCity subordinated position with a payout

that is projected to span over more than three decades.

- Two key risk assumptions underlying the appraised values

of the VIEs are that: (1) there would be no defaults; and (2)

100% of consumers would renew their leases upon the

termination of their initial lease—generally 20 years from

installation. The former assumption is contrary to audited

results of the VIEs, which reveal that several of the larger

VIEs had bad debt expense exceeding 2% of revenues or

cash flow from operating activities during the year ended

December 31, 2016 (Exhibit 56), and the bad debt expense

was increasing. Data on consumer mortgages reveals that

as mortgages become more seasoned (i.e., more has elapsed

since the origination date), default rates increase

(Exhibit 57). Ten years after mortgage origination, the

cumulative default rate was about 2% on Fannie Mae and

Freddie Mac mortgages that originated between 1999 and

76
 2003, and higher for subsequent vintage years (Exhibit 57).

If more than 2% of consumers default on their home during

the first ten years of a mortgage, where the consequences of

a default can be severe in terms of losing the home,

uprooting the family, and having an impaired credit rating

that would complicate getting a new home, then it can

reasonably be expected that the default rate would be higher

on solar panels where the consequences are far less severe.

Increase default could also be expected if the system was

operating below expected quality levels.

- A 100% renewal rate at an increase price is also unrealistic.

It is unlikely that 100% of customers will renew a contract

at an increased price for a 20-year solar energy system,

given that costs and related prices are declining (Exhibit 9),

equipment efficiency is improving, and a 20-year-old

system is likely to have degraded.

- The improbable nature of each of the aforementioned

assumptions—100% renewal at increased prices with no

defaults—would likely result in a reduced realization of

liquidation value as a percent of net asset value.

77
 - The aggregate dollar amount of SolarCity’s residual interest

in the VIEs was approximately $2.4 billion as of the Merger

Date (Exhibit 53). There would be a limited market to

purchase SolarCity’s interest in bulk, due to the

aforementioned limitations, and the sheer size of the

investment. It is therefore likely that the VIE interests,

numbering 47 as of the Merger Date,132 would have to be

sold in pieces, with varying degrees of interest in the

different pieces, translating into deeper discounts from net

asset value for some of the less desirable VIE interests.

iv. The best arm’s length basis for estimating the pricing in the

secondary market of SolarCity’s residual interest in the VIEs

(the “VIE Interests”) comes from purchases of interests in

private equity funds in the secondary market. The aggregate

global size of that market was $40 billion in 2016

(Exhibit 58). The unadjusted net asset value of the VIE

Interests represents approximately 6% of the global

transactional activity during 2016.133 Even if potential buyers

132
KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non-
controlling Interests of SolarCity Corporation, p. 827 (PWC-TESLA00001117).
133
$2.4 billion (Exhibit 52) ÷ $40 billion (Exhibit 57) = 6%.
78
 of the VIE Interests are not private equity (“PE”) secondary

funds, their pricing of PE portfolios in the secondary market is

relevant to the liquidation value of the VIE Interests.

The VIE Interests do not have the appreciation potential that

is present in most private equity portfolios. The VIE Interests

constitute an attritting portfolio whose contractual proceeds

are projected to be realized over a period of more than three

decades. The return is realized by purchasing the right to

receive the contractual cash flows at a discounted present

value. The discount rate used by KPMG—the outside firm

engaged by Tesla to calculate the present value of the

contractual cash flows of the residential solar energy assets

that constituted the principal assets of the VIEs—was

6.25%.134 Target rates of return of private equity investor are

normally in excess of 15%. Accordingly, a heavily

discounted price from net asset value would be expected.

I have used an assumed realization rate of 40% to 50% of the

net asset value (“NAV”) of the VIE Interests to estimate their

134
KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non-
controlling Interests of SolarCity Corporation as of November 21, 2016, pp. 22ff
(PWC-TESLA0000312).
79
liquidation value. The bases for my range of price/net asset

value assumption includes:

 During 2016, 50% of secondary sales of interests in

natural resources funds and 33% of secondary sales of

interests in real estate funds—two areas where the

underlying assets are illiquid—were consummated at

price/NAV multiples below 80% (Exhibit 59).

 During 2016, 33% of secondary sales of interests in

private debt funds—which lack the appreciation

potential of private equity investments—were

consummated at price/NAV multiples below 80%

(Exhibit 59).

 During 2016, 63% of secondary sales of interests in

venture capital funds—which often have idiosyncratic

portfolio investments—were consummated at

price/NAV multiples below 80% (Exhibit 58).

 In 2009, when market conditions were relevant to those

impacting the VIE Interests secondary sales of private

equity portfolios were consummated at an average

price/NAV multiple of 63% (Exhibit 60).

80
  My application of a price/NAV multiple of 40% to 50%

is based on: (1) the previously described investment

attributes of the VIE Interests; and (2) the reduction in

net proceeds that normally occurs in a liquidations, as

compared to an ordinary-course transaction.

c. Cash, short-term investments, and restricted cash—100% realization.

A liquidation may prevent some of the conditions from being

realized that would enable the use of restricted cash. By assuming a

realization percentage of 100%, my estimate of net liquidation value

is increased.

d. Accounts and rebates receivable—60% to 70% net realizable value.

Factors that would reduce net liquidation proceeds include:

i. Consumers will often not pay the full amounts due because:

(1) they may have service or warranty problems that are not

being met, or they are concerned will not be met, by the

bankrupt company; (2) withholding payments is a means by

which they can resolve disputes; and (3) they may assume

(correctly) that a deal can be worked out with a company

going out of business.

81
 ii. The full amount of rebates may not be collected if the

company ceases operations and does not comply with the

requirements to earn the rebates.

iii. Collection costs are often in excess of 10% of aggregate

balances due, particularly in consumer accounts receivable

which tend to be smaller balances which require substantial

effort in relation to the balances due.

iv. In its liquidation analysis, Verango, Inc.—formerly the

number 3 residential solar installer that filed for Chapter 11

bankruptcy protection in September 2016135—valued its

receivables at 25% to 50% of net book value (Exhibit 61).

My liquidation analysis, at 60% to 70% of net book value, is

therefore on the high side.

e. Inventories—20% to 30% net realizable value. SolarCity’s

inventory is primarily comprise of raw materials, and to a lesser

extent, work-in-process (Exhibit 24 footnotes, p. 1). In a

liquidation, a company ceases operation, and does not complete the

assembly and installation necessary to convert the raw materials and

https://www.pv-magazine.com/2016/09/26/verengo-solar-files-for-bankruptcy-
135

will-sell-solar-assets-to-crius-energy_100026260/.
82
 work-in-process into a saleable product. In the Verengo liquidation

analysis, finished goods were valued at 50% of net book value, and

no value was attributed to raw materials and other inventory

(Exhibit 61). My assumption of a net realizable value of 20% to

30% is conservative on the high side.

f. Prepaid expenses and other current assets—50% to 75% of net

realizable value. The composition of these assets is not disclosed. I

have conservatively assumed a high realization percentage. It is

above the 0% to 25% assumed in the Verango liquidation analysis

(Exhibit 61).

g. Property, plant, and equipment—30% to 50% of net realizable value.

The composition of the gross book value of property, plant, and

equipment is detailed in Exhibit 24 (see footnotes, p. 2.) In

reviewing the composition of the gross book value of this asset class:

i. 23.9% is comprised of leasehold improvements, for which no

value is generally realized in bankruptcy. If anything, there

may be costs associated with removing the leasehold

improvements to restore the premises to a condition suitable to

the lessor.

83
 ii. 9.5% is comprised of vehicles, whose value in the resale

market is often below net book value.

iii. Almost 50% is comprised of used manufacturing and lab

equipment, as well as computer hardware and software, whose

value in liquidation is often well below net book value.

h. Build-to-suit-lease asset under construction—0% net realizable

value. The book value represents the cumulative capitalized costs of

the Buffalo Gigafactory 2. It is matched by a liability of the same

amount (Exhibits 54 and 55). This represents the capitalized costs,

to be amortized during the period of the applicable contract. It is not

a tangible asset that can be sold. It is unlikely that a third party

would pay money to assume the benefits associated with these

capitalized costs, given the $5 billion commitment to the State of

New York associated with this facility. It has no liquidation value.

i. Solar energy systems, leased and to be leased—50% to 60% of net

appraised value, excluding the net book value of the solar energy

systems applicable to the VIEs. The same considerations relevant to

determining the net realizable value of the VIE Interests are

applicable to valuing the solar energy systems leased and to be

leased. The assumed realization percentage is based on pricing in PE

84
 secondary sales as previously described. I have applied a 50% to

60% realization percentage, rather than the 40% to 50% applicable to

the VIE Interests, because the cash flows from the solar energy

systems are not subordinated interests.

j. Intangible assets, excluding technology—0% net realizable value. In

the M&A market buyers may pay a premium above net asset value

due to the potential to earn a return above what would be expected

from the net tangible assets of the acquired company. SolarCity has

not historically generated a positive return on investment.

Accordingly, it is not likely that its intangible assets have any value,

with the possible exception of its technology.

k. Technology—0% – 10% net realizable value. These assets are

primarily comprised of:

i. Silevo high-performance solar cell technology acquired in

September 2014, with an assigned acquisition cost of $115

million.136

ii. Zep Solar single mounting system, acquired in December

2013, with an assigned acquisition cost of $60.1 million.137

136
p. 32 (PWC-TESLA0000249).
137
Ibid.
85
 iii. Capitalized software costs of $46.1 million.138

In the acquisition method balance sheet Tesla stepped up the

technology assets from a net book value of $124.96 million to a fair

value of $243.9 million.139 In my experience, it is unlikely that in

liquidation these assets would realize any value if the business is to

be discontinued. My maximum realization of 10% of the stepped-up

appraised value in the acquisition method balance sheet presented by

Tesla in its 2016 Form 10-K is, in my opinion, the high end of what

may be realized if a hypothetical buyer was interested in the

technology on a stand-alone basis.

l. MyPower customer notes receivable—60% – 70% net realizable

value. I used the same assumption as was used to calculate the net

realizable value of accounts receivable, as they are similar assets. It

is possible that, due to the long-term nature of these receivables, the

net realizable value may be less than the amount reflected above.

My assumed net realizable value is conservative on the high side.

Ibid.
138
139
KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non-
controlling Interests of SolarCity Corporation, as of November 30, 2016, p. 4
(PWC-TESLA0000294).
86
m.Other noncurrent assets—0 – 25% net realizable value. The

composition of these assets is not disclosed. They could include

landlord deposits that may not be refundable if leases are terminated,

capitalized costs that must be reflected on financial statements for

accounting purposes, but do not consist of transferrable assets, or

various other assets appearing on the balances sheet, the nature of

which is not disclosed. For purposes of conservatism on the high

side, I have assumed a realization percentage as high as 25% of

KPMG’s appraised fair value. There is considerable likelihood that

nothing would be realized from these amounts reflected on

SolarCity’s going-concern, fair-value balance sheet.

n. Liabilities (Exhibit 55)—book values at the Merger Dates, rather

than fair values, represent, based on the information available to me,

the best estimate of the contractual obligations that would be most

relevant to creditors’ claims against SolarCity at the Merger Date.

Fair value would not be appropriate, as it considers the value of the

applicable claim in the secondary market, which would be reduced if

the credit quality of a debt instrument, or the conversion value of a

convertible security has declined due to the deteriorating SolarCity

stock price. For example, the convertible notes have a book value of

87
 $885.9 million, but a fair value of $766.8 million due to the reduced

value of the SolarCity conversion feature. In a bankruptcy, the

holders of the convertible notes would present a claim for the face

value of the notes, which approximates the amount loaned to

SolarCity, rather than the discounted fair value, which represents a

lower amount due to the reduced value of the conversion feature.

The adjustments that I made from book value are:

i. VIE liabilities were deducted, as previously explained.

ii. The correction to accrued liabilities as of the Merger Date that

was reflected in the 2017 Tesla Form 10-K.140

iii. The deferred revenue of associated with the U.S. Treasury

grant income was eliminated, since it does not reflect a

liability, but rather, a provision to recognize the revenue that

was previously received over the period to which it relates for

accrual accounting purposes.

iv. Other deferred revenue was reflected at fair value, which

represents the amount of the actual liability, rather than a

GAAP provision.

140
Tesla 2017 Form 10-K, p. 85.
88
 108. The sum of net liquidation value of assets, net of liabilities, plus the

liquidation value of VIEs, represents the net liquidation value of SolarCity as of

the Merger Date, before considering other costs of liquidation. The average of the

minimum and the maximum net liquidation value is a deficit value of $1.952

billion (Exhibit 53). Since values are not normally expressed in negative terms,

the common stock of SolarCity would be deemed to be worthless as of the Merger

Date. The amount of the deficiency would be further increased if provisions were

made for:

a. Administrative and other costs of a Chapter 11 or Chapter 7

proceeding that may be required to convey the assets free and clear

of liens;

b. Wind-down costs to effectuate a liquidation, including payroll,

benefits, severance costs, general and administrative costs, and other

costs that would have a priority status in a bankruptcy proceeding or

which would have to be paid on a current basis outside of

bankruptcy;

c. Transfer costs, taxes, and other liquidation costs that may not have

been fully provided for;

89
 d. Claims for executory contracts (e.g., remaining obligations under

leases, employment contracts, or purchase agreements) that are not

reflected on the balance sheet; and

e. Off-balance-sheet and contingent obligations for items such as

warranty and other customer obligations that may not be fully

reflected on the balance sheet, claims by tax authorities for tax

credits improperly taken, and expenses and liabilities related to

outstanding litigation.

109. Based on the foregoing, it is my opinion, as expressed to a reasonable

degree of professional certainty, that the common stock of SolarCity was worthless

as of the Merger Date based on the liquidation premise of value (Exhibit 53).

VII. FAIR VALUE IF SOLARCITY WERE A GOING CONCERN

A. Alternative Measures of Price or Value.

110. The Fallacy of Price. Investors often confuse the concepts of price and

value. Price is what an investor must pay to purchase an asset, or can realize from

selling an asset, at a moment in time; value is what the asset is really worth. They

may not always be the same. Examples of when price may differ from value

include instances in which: (1) material information is not disclosed to the market,

so that it cannot possibly be reflected in price; and (2) the stock price is inflated by

90
perceptions of speculative potential. Several examples of instances in which

market price provided a misleading perception of value are cited in Table 3.

TABLE 3 
Examples of Price Distortions of Value 
Company  Date  Price  Date  Price  Event 
NASDAQ Composite Index  10/5/98  1419.12  3/10/00  5048.62  Tech bubble 
NASDAQ Composite Index  3/10/00  5048.62  10/9/02  1114.11  Prices normalized 
Enron  11/12/01  23.40  12/3/01  0.99  Chapter 11 filing 
Thornburg Mortgage  2/7/08  140.10  3/10/08  10.70  Liquidity crisis 
Bear Stearns  3/13/08  57.00  3/17/08  10.78  Liquidity crisis 
Lehman Brothers  9/3/08  16.94  9/17/08  0.06  Chapter 11 filing 
Dendreon  8/3/11  35.84  8/4/11  11.69  Slower‐than‐ expected growth 
Facebook  5/18/12  42.05  8/31/12  18.03  Concerns about monetization 
Zynga  7/25/12  5.09  8/2/12  2.70  Earnings miss 
Source:  Refinitiv 

111. The speculative component of stock price can be a preponderance of its

traded price. Dr. Aswath Damodaran—a Professor of Finance at New York

University Stern School of Business and a prolific writer of books and articles on

business valuation who has been called “Wall Street’s Dean of Valuation”141—

explains this phenomenon as follows:

In most publicly traded firms, equity has two features. The first is
that the equity investors run the firm and can choose to liquidate its
assets and pay off other claim holders at any time. The second is that
the liability of equity investors in some private firms and almost all
publicly traded firms is restricted to their equity investments in these
firms. This combination of the option to liquidate and limited
liability allows equity to have the features of a call option. In firms

141
https://worldredeye.com/2019/03/wall-streets-dean-of-valuation-nyu-stern-
professor-aswath-damodaran-headlines-bigsur-partners-event-series-at-east-
miami/.
91
 with substantial liabilities and negative earnings, the option value of
equity may be in excess of the discounted cash flow value.142

112. An illustration of this concept may be provided by understanding stock

option pricing, and the relationship between firm value, option price, and debt.

a. Normally, firm value – debt = equity value, where firm value =

present value of projected free cash flows to the firm (“PV FCFF”).

Under those circumstances, the equity would be deemed to be

worthless if PV FCFF < 0. However, for a speculative company, it

is possible that even if PV FCFF were less than debt there could be a

positive equity value due to the speculative potential of the company,

as represented by its option price. Exhibit 62 illustrates an example

in which a positive stock price can be maintained as long as firm

value, debt, and option price changed on a parallel path. In that

instance, stock price would be unchanged.

b. Exhibit 63 illustrates an example in which the speculative potential

exhibited in the option value of a stock is realized, as firm value

surpasses the amount of debt outstanding. In this example, a larger

Aswath Damodaran, Investment Valuation: Tools and Techniques for

142

Determining the Value of Any Asset, Third Edition, (Hoboken: John Wiley &
Sons, Inc., 2012), p. 826.
92
 portion of stock price is comprised of firm value, rather than option

value, and the stock appreciates.

c. Exhibit 64 illustrates an example in which debt increases more

rapidly than firm value, in which case stock price and option price

decline. Factors that contribute to a decline in option price may

include, but are not limited to:

i. An inability of the firm to demonstrate the ability to achieve

speculative potential;

ii. Difficulty of a money-losing firm to continue to fund losses, in

which case the time value of the option would decrease;

and/or

iii. Reduced market appetite for risk, higher pricing of risk, or

diminished perceived prospects for the sector in which the

company operates.

113. Factors previously described contributed to the rapidly declining stock

price of SolarCity (Exhibit 26). After more than a decade of experience, despite

becoming the largest residential solar panel installer in the U.S., SolarCity had

failed to find a means of achieving financial viability. The market was effectively

saying, to quote the famous Rabbi Hillel, “if not now, when?” Additional

downward pressure was applied to SolarCity’s stock price due to the risk of

93
potential inability to continue to fund losses at the level necessary to remain in

business. The looming cash crisis hastened the potential expiration date of the

option feature of SolarCity’s stock price; the time component of the option price

decreased.

114. A polynomial trendline analysis of SolarCity’s closing month-end stock

prices reveals that, after peaking in February 2014, it began declining at an

increasing rate (Exhibit 27), and was following a path trending towards zero. The

closing monthly stock price was below the polynomial trendline five of the eight

months preceding the announcement of the proposed Merger (Exhibit 27).

115. Once the proposed Merger was announced, it placed a floor on the

SolarCity stock price. The deterioration SolarCity’s stock price slowed

(Exhibit 28). On June 21, 2016, Tesla announced that, subject to completing due

diligence, it had proposed an exchange ratio of 0.122 to 0.131 shares of Tesla

common stock for each share of SolarCity common stock.143 The exchange ratio

was finalized and announced on August 1, 2016 as 0.110 shares of Tesla common

stock for each share of SolarCity common stock.144 From that point forward, there

was a high correlation between fluctuations in Tesla’s stock price and fluctuations

in SolarCity’s stock price (Exhibit 29). A share of SolarCity stock was roughly

143
Tesla Form 8-K, filed June 21, 2016, Ex. 99.1.
144
Tesla Form 8-K, filed August 1, 2016, p. 2.
94
equivalent to 0.11 times Tesla’s stock price. As shareholder approval of the

Merger became more inevitable, there was an increasingly close convergence

between 0.11 times Tesla’s stock price and SolarCity’s stock price (Exhibit 29).

116. Counterfactual Valuation Premise: Going-Concern Assumption. As

previously stated, SolarCity was not a going concern as of the Merger Date.

Accordingly, liquidation value is the appropriated valuation premise. The common

stock of SolarCity was worthless as of the Valuation Date based on the liquidation

premise of value.

117. The counterfactual premise is the going-concern premise of value,

which presumes that the subject company has the ability to continue to operate as a

going concern. Valuation methods that are commonly considered under the going-

concern premise are: (1) the market approach; (2) the income approach; and (3)

the asset approach. Under the going-concern premise that is both counterfactual

and hypothetical with respect to SolarCity as of the Merger Date, I have considered

each of the aforementioned valuation approaches and applicable valuation

methodologies.

B. Market Approach

118. Market Approach: SolarCity Stock Price. As previously stated,

SolarCity’s stock price was declining at an increasing rate until the proposed

Merger was announced (Exhibits 26 – 28). From that point forward, the erosion

95
of SolarCity’s stock price subsided. Once the Merger exchange ratio was finalized

and announced on August 1, 2016, SolarCity’s stock price fluctuations became

highly correlated with those of Tesla (Exhibit 29). SolarCity stock became a

proxy for owning 0.11 shares of Tesla,145 with SolarCity stock always trading

below 0.11 times Tesla (Exhibit 65) in recognition of the risk that if, for any

reason, the Merger did not close, SolarCity’s stock price was likely to resume the

pre-Merger-announcement price decline. During the waning days preceding the

Merger close, there was convergence between SolarCity’s stock price and 0.11

times Tesla’s stock price to remove the possibility of arbitrage transactions

(Exhibit 65).

119. After the proposed Merger announcement on June 21, 2016, and

especially after the finalization of the Merger exchange ratio on August 1, 2016,

SolarCity’s stock ceased to be priced based on its own merits, or lack thereof.

SolarCity essentially became a Tesla tracking stock up until the Merger closed, and

SolarCity shareholders actually received Tesla common stock in exchange for their

SolarCity common stock. Accordingly, the price of SolarCity’s stock both prior to

Tesla’s public offer and following the execution of the Merger Agreement, are

irrelevant to its going-concern value, if any, as of the Merger Date. Therefore, I

have not considered SolarCity’s stock price as a relevant benchmark for purposes

145
0.11 was the Merger exchange ratio.
96
of estimating a hypothetical going-concern price per share of SolarCity common

stock as of the Merger Date.

120. Market Approach: Capitalization Multiples of Guideline Public

Companies. If SolarCity’s common stock price at the Merger Date fails to provide

a meaningful indication of going-concern value, an alternative frame of reference

is pricing benchmarks based on capitalization multiples as of the Merger Date of

publicly traded companies that have investment characteristics relevant to

SolarCity (the “Guideline Public Companies” or “GPCs”).

121. Companies that I considered as potential GPCs, and my rationale for

inclusion or exclusion are provided below:146

a. Canadian Solar Inc. (CSIQ)

i. Provider of solar power products, services, and system

solutions in North America, Europe, Africa, Middle East,

Australia, and Asia.

ii. Excluded from GPC analysis because the company is a global

manufacturer rather than a U.S. installer.

b. Enphase Energy, Inc. (ENPH)

146
My initial screen of potential GPCs was done using information from Refinitiv
and other investment information sources commonly relied upon by investment,
valuation, and financial professionals.
97
 i. Designs, develops, manufactures and sells microinverter

systems for the solar photovoltaic industry.

ii. Excluded from GPC analysis because the company is a

manufacturer rather than an installer.

c. First Solar, Inc. (RSLR)

i. Designs, manufactures, and sells PV solar modules with a

thin-film semiconductor technology.

ii. Excluded from GPC analysis because the company is a

manufacturer rather than an installer.

d. NRG Energy, Inc. (NRG)

i. Integrated power company engaged in producing, selling, and

delivering electricity and related products and services.

ii. In 2016 was the 4th largest installer of residential solar

systems.

iii. Excluded from GPC analysis because: (1) most of $11.3

billion in annual revenues as of the Merger Date were in areas

outside of solar energy; and (2) in early 2017 NRG announced

its intention to withdraw from the solar panel installation

business.

98
e. SolarEdge Technologies, Inc. (SEDG)

i. Provides power optimizers, inverters, and monitoring

software.

ii. Excluded from GPC analysis because: (1) provides products

rather than doing solar installations; and (2) revenues are

volatile (declined by 50% in 2016 then almost tripled in 2017),

although the company was highly profitable.

f. SunPower Corp. (SPWR)

i. Global energy company with annual revenues of $1.9 billion

as of the Merger Date that delivers complete solar solutions to

residential, commercial, and power plant customers.

ii. Excluded from GPC analysis because the company is a

manufacturer rather than an installer. Sales and installations

are done by independent dealers. Also, during 2016

residential sales constituted just 12% of revenues.

g. Sunrun Inc. (RUN)

i. At the Merger Date the second largest residential solar energy

systems installer.

ii. Included in the GPC analysis.

99
 h. Terraform Power Inc. (TERP)

i. U.S.-based company that owns and operates a portfolio of

solar and wind assets located in the U.S., Canada, the U.K.,

Chile, and other countries.

ii. 2016 revenue mix: 58% solar; 42% wind.

iii. Excluded from GPC analysis because: (1) a large portion of

2016 revenues came from outside the solar industry; (2) the

company was an energy seller, lacking a presence in activities

such as solar panel installation; and (3) the company’s

financial performance was radically different than that of

SolarCity, with revenues zooming past SolarCity, increasing

from $18.7 million in 2013 to $654.6 million in 2016, and

healthy 2016 pre-tax profits of $87.9 million.

i. Vivint Solar, Inc. (VSLR)

i. Surpassed SolarCity and is now the second largest residential

solar systems installer.

ii. Included in the GPC analysis.

122. My analysis of the above, as well as other less relevant GPC

candidates, enabled me to identify two companies—Sunrun, Inc. (“Sunrun”) and

Vivint Solar, Inc. (“Vivint”) – that are appropriate for purposes of performing a

100
GPC analysis. Sunrun, Vivint, and SolarCity are the three largest residential solar

panel installers. In 2016 SolarCity was roughly equivalent to the combined size of

Sunrun and Vivint, based on number of residential installations (Exhibit 65) and

annual revenues (Exhibit 66). Sunrun and Vivint have both since surpassed

SolarCity in terms of number of residential installations (Exhibit 66).

123. A deeper dive into the GPC data as of the Merger Date (Exhibit 67)

provides several useful insights:

a. Revenues (Exhibit 68)—at the Merger Date SolarCity was larger

than each of the two GPCs, but roughly the same size in terms of

revenues as the two GPCs combined, with a similar revenue growth

trend during 2015 and the trailing 12 months ended September 2016.

b. EBITDA and cash flow from operations (Exhibit 69)—although

SolarCity had roughly equivalent trailing 12-month revenues as the

combined total of Sunrun and Vivint, it lost approximately twice as

much as they lost on a combined basis, as measured by both

EBITDA and cash flow from operating activities. Despite being

much larger than either of the two GPCs, SolarCity did not realize

any financial benefits from economies of scale.

c. Funded debt (Exhibit 70)—SolarCity had more than triple the

combined indebtedness of the GPCs. In comparison to investors in

101
 the GPCs, SolarCity investors were exposed to more business risk,

due to SolarCity having losses, as measured by EBITDA and cash

flow from operating activities that were approximately double the

combined losses of the GPCs, despite similar revenue levels, and

more financial risk, due to having more than triple the combined

indebtedness of the GPCs.

d. Market value of equity compared to SolarCity equity value implied

by the Merger Price (Exhibit 71)—despite similar combined

revenues to those of SolarCity, half the annual losses, as measured

by EBITDA and cash flow from operating activities, and one-third

the indebtedness of SolarCity, the combined market capitalization of

equity of the two GPCs is less than 40% of the SolarCity equity

value implied by the Merger Price. Assuming that the GPCs are

efficiently priced by the market, which can reasonably be assumed

since the market capitalization of equity of Vivint and Sunrun was

approximately $300 million and $500 million, respectively, at the

Merger Date, it would imply that the Merger Price for SolarCity

stock was grossly inflated.

e. Enterprise value of the GPCs compared the SolarCity enterprise

value implied by the Merger Price (Exhibit 72)—the aggregate

102
 enterprise value of the GPCs was approximately 43% of the

enterprise value of SolarCity implied by the Merger Price and net

debt assumed by Tesla in the Merger. For reasons previously

discussed, this would imply that the Merger Price for SolarCity stock

was grossly inflated.

f. Capitalization multiples of the GPCs compared to SolarCity

capitalization multiples implied by the Merger Price (Exhibit 73)—

the only capitalization multiples that could be developed at the

Merger Date were revenue capitalization multiples, since SolarCity

and the GPCs lacked positive earnings and EBITDA that are

normally used for the commonly applied price/earnings or enterprise

value/EBITDA capitalization multiples. By default, only revenue

capitalization multiples could be calculated. Despite several factors

favoring the GPCs compared to SolarCity in terms of reduced

business risk and financial risk, with similar, if not better, upside

potential, the implied revenue capitalization multiples of SolarCity,

based on the Merger Price, as measured by price/revenues and

enterprise value/revenues, were significantly greater than those of

either of the GPCs. Again, this would suggest an inflated Merger

Price.

103
 124. To develop a pro forma price/share for SolarCity common stock, I

applied the average enterprise value/revenue multiple of the GPCs to the trailing

12 months revenues of SolarCity as of the Merger Date (Exhibit 74). The

capitalized revenues resulting from the product of the two aforementioned amounts

is a pro forma enterprise value of SolarCity, based on capitalization multiples of

the GPCs. To convert a pro forma enterprise value to a pro forma equity value, I

added SolarCity’s cash as of the Merger Date, and subtracted funded debt and the

appraised value of the noncontrolling interests as of the Merger Date. The net

amount was negative, implying that the common stock of SolarCity was worthless

as of the Merger Date (Exhibit 74).

125. Based on my application of the GPC Method as of the Merger Date, I

make the following observations:

a. The GPC Method implies that the common stock of SolarCity was

worthless as of the Merger Date (Exhibit 74).

b. A comparison of the capitalization multiples of the GPCs as of the

Merger Date to the capitalization multiples of SolarCity implied by

the Merger Price (Exhibit 73) indicates that the Merger Price was

inflated, based on a comparison of the financial and valuation

attributes of the GPCs to those of SolarCity summarized on

Exhibit 67, and shown graphically on Exhibits 68 through 72.

104
 c. Neither Evercore, on behalf of its client, the Tesla board of directors,

nor Lazard, on behalf of its client, the SolarCity board of directors,

purported to have done a GPC analysis pertaining to SolarCity,

based on disclosures in the Merger Proxy or their respective fairness

opinions included with the Merger Proxy. A GPC analysis is one

that is typically employed in connection with advising clients and

rendering fairness opinions. Sunrun and Vivint are the two logical

companies to use as GPCs. Had they done a GPC analysis, it is

likely that they would have reached a similar conclusion to that

which I reached in performing the GPC analysis—that the common

stock of SolarCity was worthless. This would have been an

inconvenient conclusion for them to reach when trying to

successfully guide a transaction.

126. Market Approach: Precedent Merger & Acquisition Transactions.

The precedent M&A transactions method is applied by developing M&A

capitalization multiples from precedent M&A transactions and applying them to

the financial parameters of the subject company to develop an indication of the

potential value of the subject company in an M&A transaction. There are several

reasons why this method is inappropriate to estimate the value of SolarCity

common stock, as described below:

105
a. SolarCity was not a going concern as of the Merger Date. Acquirors

normally do not purchase all of the assets and assume all of the

liabilities of firms that are not going concerns. Rather, they tend to

selectively purchase those assets that they wish to acquire at

liquidation prices, and only assume those liabilities that must be

conveyed in connection with the applicable assets. The transactions,

if achievable, typically involve the sale of the entity’s assets on a

piecemeal basis, and yield net liquidation value. My liquidation

analysis indicated that the common stock of SolarCity was worthless

in liquidation.

b. The acquisition of SolarCity, if achievable, would be the acquisition

of an overleveraged, financially troubled company. Acquirers of

financially distressed businesses displaying the financial

characteristics of SolarCity do not normally purchase equity because

it is typically worthless. They either purchase assets on a debt-free

basis, normally through the bankruptcy court, at prices resembling

liquidation value, or they sanitize the subject company’s balance

sheet by funding a Chapter 11 plan of reorganization. That is the

means by which the assets of the residential solar installers

106
 Sungevity Inc.147 and Verengo, Inc.148 were acquired during the first

half of 2017. Under such circumstances the net recoveries on the

assets would be similar to net liquidation value, which would render

the common stock of SolarCity to be worthless.

c. The concept of fair market value at going-concern values assumes

the existence of a willing and knowledgeable acquirer. There is no

evidence of such a theoretical buyer as of the Merger Date.

i. SolarCity retained Lazard as its financial advisor to explore

various strategic alternatives, including the sale of the

company. Such efforts did not uncover a viable potential

buyer of the common stock of SolarCity.149

ii. SolarCity was too large for any of its competitors to acquire.

It was the combined size of its two largest competitors in the

residential solar installation business—Sunrun and Vivint

Solar (Exhibit 67)—but with much worse financial

performance and a high degree of leverage. Acquisition by

either Sunrun or Vivint Solar was impractical. The fourth

147
https://www.marketwatch.com/story/solar-company-sungevity-files-for-
bankruptcy-agrees-to-sell-assets-2017-03-13.
148
https://www.bayardlaw.com/legal-updates/delaware-bankruptcy-court-confirms-
plan-sale-verengo.
149
LAZ_TES00039096-211, at 143.
107
 largest residential solar installer—NRG—exited the business

during the first half of 2017.150 There is no evidence that an

industry acquisition could be achieved.

iii. Private equity firms would not be logical acquirers of

SolarCity. Acquisitions by private equity firms of companies

the size of SolarCity are normally done as leveraged buyouts.

SolarCity was already overleveraged as of the Merger Date,

and lacked the financial capacity to take on additional debt by

an acquirer. Also, given the substantial historical losses and

cash flow deficits of SolarCity (Exhibit 11), it lacked the

financial capability to service debt.

iv. The median deal size of private equity acquisitions in 2016

was $32.4 million.151 The combined value attributable to

SolarCity equity and net debt152 was $6.5 billion.153 There

were only three buyouts in the entire world by private equity

firms of a comparable or greater size during 2016,154 and none

150
https://www.greentechmedia.com/articles/read/nrg-sheds-the-final-remnants-of-
its-home-solar-business#gs.qm5mlr.
151
https://pitchbook.com/news/articles/recapping-global-pe-activity-during-2016.
152
Net debt = funded debt – cash.
153
Exhibit 67, footnote 2.
154
https://docs.preqin.com/press/Buyout-Deals-2016.pdf.
108
 of them were distressed acquisitions. It is unlikely that a

private equity firm would commit the capital necessary to

acquire SolarCity and fund ongoing capital requirements given

its historical financial performance as of the Merger Date.

v. There is no evidence that a synergistic buyer, such as a

manufacturer of solar equipment, would acquire SolarCity in

order to become more vertically integrated. It would not be

desirable for a supplier to enter the residential installation

business if it is unprofitable. Sunrun and Vivint Solar, despite

having grown since the Merger Date, were still unprofitable in

2018.155 Sunnova Energy International Inc.—a leading

residential solar and energy storage service provider that went

public in July 2019—uses local dealers to originate, design,

and install residential solar energy systems, rather than to

incur the costs (and losses) of having a national sales and

installation network. There is not a financially attractive

reason for a manufacturer or supplier to enter the residential

solar installation business if it is unprofitable.

155
Refinitiv.
109
 vi. I was unable to identify any going-concern acquisitions to

provide a basis for applying the precedent M&A transactions

method. Lazard and Evercore did not identify any precedent

M&A transactions to use as pricing benchmarks for SolarCity.

127. Based on the foregoing, it is my professional opinion, as expressed to a

reasonable degree of financial certainty, that:

a. The precedent M&A transactions method cannot be applied to

calculate a going-concern value for the common stock of SolarCity

as of the Merger Date.

b. The absence of alternative opportunities for SolarCity to resolve its

financial crisis as of the Merger Date through a financial bailout by

an acquirer other than Tesla would likely have enabled Tesla to

acquire SolarCity at a price below the Merger Price if Tesla deemed

such an acquisition to be financially beneficial to Tesla shareholders.

C. Asset Approach

128. Adjusted Appraised Net Asset Value and Fair Saleable Net Asset Value

(Exhibits 75 through 77). Net asset value (“NAV”) is, by default, a key valuation

method for valuing financially troubled companies such as SolarCity if the

counterfactual and hypothetical going-concern premise were to be applied. The

reasons include, but are not limited to, the following:

110
a. Net asset values, when reduced by liabilities, are more objective

measures of value for financially troubled companies. Distressed

acquisitions of financially troubled companies commonly occur at

discounts from net asset value due to the riskiness of the financially

distressed companies and the need for the potential buyers to: (1)

fund losses; (2) restructure debt; and (3) develop and successfully

implement a plan to reverse historical losses.

b. Discounted cash flow analysis, while useful for valuing going

concerns, is more speculative in valuing financially troubled

companies. The quality of a discounted cash flow analysis is

dependent upon the achievability of the financial projections.

Typically, such projections assume improved financial performance

that deviates from historical financial performance, and they further

assume that the financially troubled company will have access to the

capital necessary to support the company during the course of the

turnaround plan. Such projections are viewed with skepticism,

particularly if the projections are prepared by the management team

that got the company into financial difficulty, or by third parties that

may lack full access to relevant information.

111
 Financial projections provide a means for a prospective buyer to

evaluate the potential financial benefit of a successful turnaround.

However, the potential turnaround is speculative, and should inure to

the financial benefit of the acquirer of the financially troubled

company, not paid to the sellers. Accordingly, DCF analysis is less

relevant to establishing a purchase price for a financially troubled

company unless it reveals that the acquisition should be at a price

that is significantly below net asset value.

c. The Guideline Public Company Method and the Precedent M&A

Transactions Method, as previously discussed, are less relevant, if

not irrelevant, to valuing financially troubled companies, because the

GPCs and precedent M&A transactions typically do not pertain to

companies or transactions that share the financial distress of

SolarCity. Accordingly, capitalization multiples from GPCs and

precedent M&A transactions generally are not useful for valuing a

financially trouble company because they inflate the capitalized

value.

129. I applied two variations of net asset value: (1) adjusted appraised net

asset value; and (2) fair saleable net asset value.

112
 a. Adjusted appraised net asset value is based on the appraised value of

assets of the subject company, reduced by liabilities and other

valuation provisions as of the valuation date. A deficiency of

adjusted appraised net asset value is that there is no assurance that a

buyer would pay that price, even in a distressed acquisition, if the

buyer cannot achieve an economically necessary return on

investment. Many acquisitions of financially troubled companies

occur at prices below adjusted appraised net asset value.

b. Fair saleable net asset value is more relevant to the potential value of

a financially troubled company if the going-concern premise is to be

applied. It takes into consideration assumptions that an acquirer

would make, without applying any discounts for financial distress,

return on investment, or need to provide capital infusions. Fair

saleable net asset value takes into consideration pricing in the

transactional arena, rather than hypothetical appraised value that may

reflect standalone values in place, rather than transactional values.

130. To apply both variations of net asset value, my starting point was:

a. The appraised value of the SolarCity assets as of the Merger Date,

based on independent appraised values performed by KPMG as of

113
 the Merger Date,156 and reported in the 2016 Tesla Form 10-K.157

b. The book value of SolarCity liabilities as of the Merger Date that

was reflected in the KPMG appraisal158 underlying the amounts

reported in the 2016 Tesla Form 10-K.

c. The appraised value of noncontrolling interests in the SolarCity VIEs

as of the Merger Date, based on independent appraised values

performed by KPMG as of the Merger Date,159 and reported in the

2016 Tesla Form 10-K.160

131. I have made the following adjustments to the appraised asset value of

both variations of NAV (Exhibit 76):

a. I have adjusted accounts receivable, inventory, and noncurrent

MyPower notes receivable for the post-closing adjustments to their

156
KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non-
controlling Interests of SolarCity Corporation, as of November 30, 2016, p. 4
(PWC-TESLA0000294).
157
2016 Tesla Form 10-K, p. 74.
158
KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non-
controlling Interests of SolarCity Corporation, as of November 30, 2016, p. 4
(PWC-TESLA0000294).
159
KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non-
controlling Interests of SolarCity Corporation, as of November 30, 2016, p. 4
(PWC-TESLA0000294).
160
Tesla 2016 Form 10-K, p. 74.
114
 fair value as of the Merger Date that were reported in the 2017 Tesla

Form 10-K.161

b. I have added back the $93.2 million deduction from net asset value

associated with negative goodwill. The concept of negative goodwill

is an accounting concept, rather than a valuation concept. An asset

cannot have a negative value.

c. I have deducted the appraised values of the following intangible

assets, aggregating $429.8 million:

i. Favorable power purchase agreements/leases—$68 million.

ii. Leasehold interest—$1.5 million.

iii. PBI intangible—$69.7 million.

iv. FIT intangible—$3.2 million.

v. Technology—$243.9 million.

vi. Trade names and trademarks—$43.5 million.

The above appraised values were calculated by KPMG to allocate

the $2.1 billion consideration paid by Tesla to acquire SolarCity162

among tangible and recognized intangible assets, as well as liabilities

Tesla 2017 Form 10-K, p. 85.

161

162
KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non-
controlling Interests of SolarCity Corporation, as of November 30, 2016, p. 4
(PWC-TESLA0000294).
115
and noncontrolling interests. The intangible assets are not assets that

would be sold by SolarCity under the going-concern assumption.

Rather, they represent the calculated value as of the Merger Date

associated with the incremental cash flows that an acquirer could

realize as a result of ownership and control of the intangible assets.

An inflated purchase price can lead to an inflated value of intangible

assets. The concept of allocating a portion of an acquisition price to

intangible assets is mandated, if justified, under GAAP. The GAAP

requirement is not intended to suggest that a third-party would pay

the value attributed to intangible assets in the transactional arena.

The value, if any, of intangible assets results from their potential to

enable the party controlling them to earn a superior return on net

tangible assets as a result of owning, controlling, or realizing the

financial benefit attributed to the intangible assets. SolarCity has no

historical track record of realizing positive earnings or cash flows as

of the Merger Date (Exhibit 11). Accordingly, the GAAP

requirement to allocate a portion of a $2.1 billion purchase price to

intangible assets cannot be justified for purposes of calculating NAV

in the context of a going-concern valuation.

116
 132. I have used the book value (Exhibit 77), rather than appraised value, of

liabilities in both variations of NAV, because book value is more indicative of the

claims of creditors as of the Merger Date. For example, the book value as of the

Merger Date of the convertible senior, excluding those issued to related parties,

was $885.9 million; the appraised value was only $766.8 million because the

conversion feature was worthless (Exhibit 55). The applicable creditors’

collective claims against SolarCity would have been based on book value, not

appraised value.

133. The adjustments that I made to the book value of liabilities in both

variations of NAV were:

a. I added the $33.5 million post-closing adjustment to accrued

liabilities of SolarCity as of the Merger Date that was reflected in the

2017 Tesla Form 10-K.163

b. I subtracted $929.6 million from deferred revenues, aggregating $1.2

billion on the SolarCity balance sheet, based on the fair value of the

associated obligations reflected in the 2016 Tesla Form 10-K based

on the KPMG appraisal.164 The book value of deferred revenues is

Tesla 2017 Form 10-K, p. 85.

163

164
KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non-
controlling Interests of SolarCity Corporation, as of November 30, 2016, p. 4
(PWC-TESLA0000294).
117
 based on the GAAP requirement to allocate previously-received

revenues over the period of time that they would be earned. Under

the acquisition method of accounting, upon a change in control, the

deferred revenue would be reflected based on the estimated cost of

fulfilling the remaining obligations associated with the deferred

revenues. This adjustment increased NAV by $929.6 million.

c. I subtracted $359.2 million pertaining to the current and noncurrent

deferred U.S. Treasury grant income. Like deferred revenue, the

book value reflected on the SolarCity balance sheet as of the Merger

Date reflects the GAAP requirement to recognize the revenue, and

amortize the deferred revenue reflected on the balance sheet, over

the period to which the grant pertains. Under the acquisition method

of accounting, upon a change in control, the deferred grant income

would be reflected based on the estimated cost of fulfilling the

remaining associated with the deferred grant income. The

acquisition method balance sheet makes no provision for any such

costs.165 Accordingly, this adjustment increase NAV by $359.2

million.

165
Ibid.
118
 134. The differences between the two variations for determining NAV are as

follows, and discussed in additional detail below:

a. Residential solar energy systems (“Residential Solar Assets”

Exhibit 78):

i. Adjusted appraised value—I recreated the KPMG appraisals,

using the same timing and amount of projected cash flows, but

discounting them to a present value based on a weighted

average cost of capital of 8.47% that I tailored to the specific

financial attributes of the Residential Solar Assets as of the

Merger Date (Exhibit 82). KPMG valued the Residential

Solar Assets using a discount rate of 6.75%.166 The 6.75%

discount rate is, in my opinion, too low. The WACC

calculations KPMG itself performed specifically for valuing

the Residential Solar Assets indicates that the WACC should

be 8.0%.167 Further, SolarCity itself used discount rates as

high as 8% to value deployments in publicly released quarterly

166
Exhibit 79 and KPMG Preliminary Valuation of Certain Assets, Liabilities, and
Non-controlling Interests of SolarCity Corporation, as of November 30, 2016, pp.
29ff (PWC-TESLA0000319).
167
KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non-
controlling Interests of SolarCity Corporation, as of November 30, 2016, p. 16
(PWC-TESLA0000306).
119
 reports of MW deployed.168 Finally, Evercore estimated

SolarCity’s WACC to be 11%.169 Since the Residential Solar

Assets comprise the majority of SolarCity’s value, these

Assets should be valued at a WACC that is similar to that of

SolarCity. By using a discount rate of just 6.75% to value the

Residential Solar Assets, the resulting calculation of fair value

that was consolidated into the Tesla balance sheet appears to

be inflated.

I verified the reasonableness of the adjusted appraised values

of the Residential Solar Assets resulting from my use of

WACC (Exhibits 81ff) , without any provisions for bad debts

or non-renewals of contracts at the end of the contractual term

(as assumed by KPMG), by making provisions for bad debts,

based on the audit financial statements of the VIEs, as well as

an assumption of a 90% renewal rate at the end of the

contractual term, rather than 100, but using KPMG’s assumed

6.75% discount rate. The test that I performed using cash

flows adjusted for bad debts and 10% non-renewals resulted in

168
SolarCity Q3 2016 Review, dated November 9, 2016, pp. 11 and 12 (2016-11-09
TESLA00709901).
169
Merger Proxy, p. 81.
120
a pro forma adjusted appraised value that was even below that

which I calculated using the WACC (Exhibit 81A). Since my

valuation was higher than that which resulted from the

adjusted cash flows, and I used conservative assumptions that

would tend to increase the calculated value, it causes me to

believe that third-party purchasers and/or other appraisers may

attribute an even lower value to the Residential Solar Assets

than I did in my adjusted appraised value, which amounted to

86.7% of KPMG’s calculation of appraised value

(Exhibit 78).

I would have preferred to have performed my analyses on the

spreadsheets that were used by KPMG to perform its

appraisal, but they were not produced by the defendants. I

received only a PDF version of most, but not all, of the

calculations. I replicated the calculations for some of the

Residential Solar Assets by developing spreadsheets that

contained key inputs (Exhibit 81), and replicating key

calculations.

121
 ii. Fair saleable value—65% of KPMG’s calculation of appraised

value, based on previously discussed private equity secondary

sales.

b. Non-residential solar energy systems (“Non-Residential Solar

Assets”) (Exhibit 78):

i. KPMG determined the fair value of the Non-Residential Solar

Assets using DCF, in the same way that it valued the

Residential Solar Assets. KPMG used a 6.75% discount rate

in the majority of those for which I was able to find

information, but occasionally used a discount rate of 7.25%

(Exhibit 80). For the reasons previously discussed, I believe

that the discount rates employed by KPMG were low,

resulting in what I believe to be inflated fair values allocated

to the Non-Residential Solar Assets that were consolidated

into the Tesla consolidated financial statements. I developed

an estimate of the adjusted appraised value of the Non-

Residential Solar Assets based on the results of my valuation

calculations that I used to verify the KPMG appraised value of

the Residential Solar Assets.

122
 c. Held-for-lease assets and construction in progress (Exhibit 78):

i. Under both NAV approaches I used book value rather than

appraised value because I would not expect a market

participant to pay a premium above cost.

d. Other solar energy assets (Exhibit 78):

i. Under both NAV approaches:

- Reconciliation reflected in the KPMG appraisal as $9.7

million—I attribute no value to an asset that cannot be

identified.

- Google capital lease asset and systems held at corporate and

other adjustments, aggregating $50 million—I have used

the KPMG appraised value.

135. Redeemable non-controlling interests in the VIEs (“Redeemable

Interests” Exhibit 86).

a. Adjusted appraised value—based on the appraisal approach and the

assumptions developed by KPMG, adjusted based on the weighted

average cost of capital (“WACC”) assumptions tailored to capital

structure and related cost of debt and equity relevant to the Solar

Assets as of the Merger Date (Exhibit 77).

b. Fair saleable value—based on KPMG appraisal.

123
 136. Non-Redeemable noncontrolling interests in the VIEs (“Non-

Redeemable Interests Exhibit 86).

a. Adjusted appraised value—based on appraisal approach and

assumptions developed by KPMG, adjusted based on the WACC

assumptions tailored to capital structure and related cost of debt and

equity relevant to the Solar Assets as of the Merger Date

(Exhibit 82).

b. Fair saleable value—KPMG appraisal.

137. A discussion of key assumptions underlying the values reflected for the

Residential Solar Assets, Non-Residential Non-Redeemable Interests, and

Redeemable Interests is provided below.

138. A DCF analysis uses a company’s WACC as the discount rate if cash

flow projections are unlevered, i.e. pre-debt repayment cash flows.170 When cash

flows are unlevered, the cash flows are available to repay debt and then to equity

holders so they are discounted to a present value at the company’s weighted cost of

debt and cost of equity (the WACC). SolarCity’s projections only provide levered

cash flows, i.e. post-debt repayment cash flows.171 Levered cash flows refer to

cash flows after net changes in debt, interest payments, and income taxes (reduced

170
Commonly referred to as free cash flows to the firm or FCFF.
171
Commonly referred to as free cash flows to equity holders or FCFE.
124
by the interest tax shield). Levered cash flows are available to equity holders, and

could theoretically be used to pay dividends; they must be discounted at the

company’s cost of equity. Although I find it unlikely that SolarCity would

generate sufficient cash to service debt, pay any income taxes due, and have any

remaining available to equity holders, for illustrative purposes I calculate the

present value of those unrealistic levered cash flow projections discounted by

SolarCity’s cost of equity in my DCF analysis.

139. Weighted Average Cost of Capital (Exhibit 82) is a blended discount

rate that reflects the cost of equity capital and the after-tax cost of funded debt,

weighted based on its proportionate share of each component of capital on the

applicable capital structure as of the Merger Date. The assumptions that I

developed are the following:

a. Blended cost of debt—5.1%, as reported just twelve days prior to the

Merger Date in the SolarCity Q3 2016 Review, November 9, 2016,

p. 7.

b. Interest tax shield was calculated using an assumed effective tax rate

of 40%, based on the assumption developed by KPMG.172 This

results in a 3.06% after-tax cost of debt for SolarCity.

172
Preliminary Valuation of Certain Assets, Liabilities, and Non-Controlling
Interests of Solar City Corporation as of November 21, 2016, p. 16 (PWC-
TESLA00000306).
125
 c. Cost of equity—13.22%. I used the median cost of equity from 26

alternative calculations (Exhibit 78) based on the capital asset

pricing model and the build-up method. These methodologies use

market inputs for the risk-free rate (Exhibit 83), the equity risk

premium (Exhibit 84), and alternative measures of a size premium

developed from the University of Chicago CRSP data base and the

Duff & Phelps Risk Premium Report. The calculations of cost of

equity were done using the Duff & Phelps Cost of Capital Navigator,

which is the most comprehensive cost of capital tool available to the

valuation profession. The output from my calculations is provided

as Appendix 1. My cost of equity capital of 13.22% (Exhibit 82) is

below the midpoint of the range of 12% to 15% used by Evercore in

the discounted cash flow analysis that it used to value SolarCity,173

and slightly below the 13.5% cost of equity capital developed by

KPMG to value the Residential Solar Assets.174

173
Merger Proxy, p. 78.
174
Preliminary Valuation of Certain Assets, Liabilities, and Non-Controlling
Interests of Solar City Corporation as of November 21, 2016, p. 16 (PWC-
TESLA00000306).
126
d. I weighted the components of capital based on the relative weights of

debt and equity for the Solar Energy Portfolio reported in the

SolarCity Q3 2016 Review (Exhibit 82) as follows:

i. Debt—46.7%.

ii. Equity—53.3%.

The projections pertain to cash flows that are projected to be realized

over a period of more than 30 years following the Merger Date. As

debt is repaid, equity would become a larger component of the

capital structure of the Residential Solar Assets. If I used the

average mix of debt and equity over the projection period to

calculate the WACC, it would be more heavily weighted towards

equity, the most expensive component of capital, and therefore

would result in a higher WACC and lower calculations of value. By

using the Merger Date capital structure for purposes of weighting

the components of capital, a lower WACC and higher calculations of

value occur.

e. The application of the aforementioned weights to the after-tax cost of

debt and cost of equity resulted in a WACC of 8.47%. This was

slightly higher than the WACC of 8.00% developed by KPMG to

127
 value the Residential Solar Assets,175 but below the range of 9.5% to

10.5% used by Lazard in connection with the discounted cash flow

analysis underlying its fairness opinion.176

f. In the matter In re Appraisal of Jarden Corporation, the Court of

Chancery of the State of Delaware calculated the company’s WACC

using the capital asset pricing model. a cost of equity calculation in

arriving at a decision in the case.177 I calculated SolarCity’s cost of

equity capital in a manner similar, while adapted to SolarCity’s

specific financial attributes. SolarCity’s cost of equity capital using

the Court’s approach in Jarden is 14.91% if a 2-year adjusted beta

were employed, and 15.70% if a 3-year adjusted beta were employed

(Exhibit 82.1). Each of these pro forma calculations of the cost of

equity capital is above that which I employed. Had I used the

alternative costs of equity capital, they would have increased the

WACC in Exhibit 82, and reduced my calculations of the adjusted

appraised value of the Residential Solar Assets and Non-Residential

Solar Assets in Exhibit 78, thereby reducing my calculations of net

175
Ibid.
176
Merger Proxy, p. 92.
177
In re: Appraisal of Jarden Corporation, Consolidated C.A. No. 12456–VCS
(Court of Chancery of State of Delaware, July 19, 2019), ¶ 99ff.
128
 asset value in Exhibits 75 and 76. If adjusted appraised net asset

value were used as the means for quantifying damages alleged by the

plaintiffs, such an adjustment of the cost of equity capital would

increase the amount of computed damages. Using the higher pro

forma costs of equity capital resulting from the pro forma costs of

equity capital from Exhibit 82.1 as the discount rate for my DCF

analysis in Exhibit 90 would also reduce the pro forma value

resulting from DCF analysis and, if it were a basis for measuring

alleged damages, would increase the amount of computed damages.

140. Adjusted appraised value of the Residential Solar Assets (Exhibit 78)

were developed by KPMG, by state and vintage year.178 The appraisal is based on

projections for individually calculated Residential Solar Assets, including

projections of revenues, expenses, taxes, and tax credits that extend over a period

of more than 30 years following the Merger Date. The projected amounts were

discounted to a present value by KPMG, generally at a discount rate of 6.75%

(Exhibit 79). I calculated an adjusted appraised value for the Residential Solar

Assets using the following assumptions:

178
Preliminary Valuation of Certain Assets, Liabilities, and Non-Controlling
Interests of Solar City Corporation as of November 21, 2016, pp. 29ff (PWC-
TESLA00000319).
129
 a. I relied upon the projections developed by KPMG. However, I

believe that the following KPMG assumptions are inflated:

i. KPMG assumes that there would be no defaults.179 As I

previously stated, such an assumption is in conflict with actual

bad debts that were already being experienced by the VIEs

(Exhibit 56). It is also inconsistent with residential mortgage

default rates (Exhibit 57), which are likely to be lower than

default rates on residential solar contracts, due to the downside

of defaulting on a mortgage, and having the home foreclosed

upon, rather than defaulting on a residential solar contract, and

having to resume getting electrical power from the grid.

ii. KPMG assumes that there would be a 100% renewal rate at an

increased rate the end of the contractual term, typically 20

years after the solar energy system was installed. That appears

aggressive because: (1) systems degrade over time; (2) new

systems tend to be less costly (Exhibit 9), leading to lower

costs to consumers, and more efficiency; and (3) if a new

system can be leased or financed at a lower cost than a 20-

179
Ibid.
130
 year-old system, it is likely that many consumers would not

choose to renew the contract.

b. KPMG performed three calculations of the weighted average cost of

capital, which ranged between 6.75% and 8%, or an average of

7.17%.180 I performed 26 alternative calculations of the weighted

average cost of capital relevant to the Residential Solar Assets,

which resulted in an average of 8.49% (Exhibit 77). Despite their

WACC calculations, KPMG used a discount rate of 6.75% to

discount to a present value the projected cash flows of the

Residential Solar Assets (Exhibit 79).

c. I replicated the calculations of the appraised value of the Residential

Solar Assets by selecting five states and vintage years that accounted

for 46.9% of KPMG’s calculation of appraised value (Exhibit 78). I

adopted all of KPMG’s assumptions with respect to projected cash

flows, absence of defaults, and 100% renewal rate. I provided for

the risk that the latter two assumptions may not be realized by using

my calculation of WACC (8.47% per Exhibit 82) as the discount

rate that is most justifiable for valuing the Residential Solar Assets.

180
Preliminary Valuation of Certain Assets, Liabilities, and Non-Controlling
Interests of Solar City Corporation as of November 21, 2016, pp. 15 – 17 (PWC-
TESLA00000305 – 307).
131
 Also, I added a 1% premium to my assumed discount rate for

projected cash flows beginning the assumed renewal rate to take into

consideration the risk that some of the residential solar contracts may

not be renewed upon the contractual expiration date (as opposed to

KPMG’s 100% renewal assumption).

d. The sum of my calculations of the present value of the projected cash

flows of the Residential Solar Assets that I performed resulted in

aggregated values of 86.7% of the KPMG calculations. (Exhibit 78)

The calculations that I performed represented 46.9% of KPMG’s

appraised value of the Residential Solar Assets (Exhibit 78). I

attributed the results of the sample to the entire asset category, and

thereby reflected it at 86.7% of KPMG’s calculation of appraised

value.

141. Fair saleable value of Residential Solar Assets (Exhibit 78)—the

price/net asset value from secondary sales of private interests is the best arm’s

length measure of transactional value. These transactions are based on appraised

value of the applicable PE interests. In my liquidation analysis, I assumed a net

realizable value of 40% to 50% of appraised value. On an assumed going-concern

basis I would expect the value attributed to the Residential Solar Assets in the

context of their contribution to the value to SolarCity to be on the low end of the

132
ranges reflected in Exhibits 59 and 60 due to: (1) the absence of an active market

for similar assets; (2) the idiosyncratic nature of the assets; (3) the large size of the

portfolio; (4) the long-term payout of the portfolio; and (5) the lack of any

significant appreciation potential of the portfolio, unlike other private equity assets.

Based on the foregoing, I have assumed that the fair saleable value of the

Residential Solar Assets as components of the value of SolarCity would be

approximately 65% of KPMG’s net appraised value.

142. KPMG developed its appraised values for the Non-Residential Solar

Assets in the same manner as it did for the Residential Solar Assets, based on DCF.

The projected cash flows for the majority for which I was able to obtain

information were discounted to a present value at a compounded annual discount

rate of 6.75% (Exhibit 80). I believe that the minimum discount rate that is

appropriate is no less than the WACC of 8.47% (Exhibit 82). My recalculation of

a sample representing almost half of KPMG’s estimate of the fair value of the

Residential Solar Assets resulted in an average calculation of fair value amounting

to 86.7% of that which was calculated by KPMG (Exhibit 78). Based on the

relationship between KPMG’s valuation and my verification of KPMG’s

valuations (Exhibit 81ff), I have rounded up my analyses, at 86.7% of KPMG’s

fair valuation calculations, to assume that a similar relationship exists for the Non-

Residential Solar Assets, since the calculation methodology and discount rates are

133
similar to those employed by KPMG to developed its appraised values for the

Residential Solar Assets. For purposes of conservatism on the high side, I

developed the adjusted appraised value of the Non-Residential Solar Assets,

assuming that such adjusted appraised value would approximate 90% of KPMG’s

calculation of appraised value.

143. Adjusted appraised value of the Redeemable Interests and the Non-

Redeemable Interests—At the Merger Date there were 20 Redeemable Interests

and 27 Non-Redeemable Interests. KPMG calculated the fair value of these

interests based on discounted cash flow analysis. I reviewed the KPMG

calculations.181 They were prepared based on the projected cash flows available to

the holders of the interests in each VIE, discounted to a present value as of the

Merger Date using discount rates ranging from 8% to 11%, depending upon the

VIE. I replicated the KPMG calculations, based on three VIEs constituting 32.5%

of the aggregate appraised value of Redeemable Interests (Exhibit 88ff), and eight

VIEs constituting 71.6% of the Non-Redeemable Interests (Exhibit 89ff). I used

the same cash flow assumptions employed by KPMG, including both the timing

and amount, but discounted the projected cash flows to a present value at the

WACC of 8.47% that I developed (Exhibit 82), except in those instances in which

181
Preliminary Valuation of Certain Assets, Liabilities, and Non-Controlling
Interests of Solar City Corporation as of November 21, 2016, pp. 825ff (PWC-
TESLA0000001115ff).
134
KPMG employed a discount rate in excess of my calculation of WACC, in which

case I deferred to the discount rate assumed by KPMG. There is a basis for using

an even lower discount rate than WACC. Generally, the preponderance of the cash

flows was projected to be realized within five years of the Merger Date, thereby

reducing the risk of defaults and nonrenewals. My analyses resulted in amounts

that were 98.8% of the appraised values of the Redeemable Interests determined by

KPMG (Exhibit 86) and 99.1% of the appraised value of the Non-Redeemable

interests determined by KPMG (Exhibit 87). I attributed the results from my

statistically significant samples to the entire category of Non-Redeemable and

Redeemable Interests for purposes of determining their impact upon adjusted

appraised NAV.

144. I assumed that market participants would most likely rely upon the

KPMG appraisal rather than discounting the appraised amounts to reduce their

deduction from net asset value.

145. The sum of the asset values developed under each approach, reduced

by liabilities and the values of the Redeemable and Non-Redeemable Interests

constitutes the net asset value based on each approach to determine NAV. Tesla

also attributed $87.5 million to the fair value of Tesla stock options and restricted

stock units for vested SolarCity awards that were replaced in connection with the

135
Merger.182 Such an adjustment would reduce the NAV applicable to SolarCity

shareholders. However, the amount of the adjustment was specific to the Merger

Price, and would have to be adjusted to reflect an amount applicable to the value

resulting from the alternative applications of NAV. I have not received the

information on SolarCity share-based compensation that would be necessary to

make this adjustment, so I have not done so. As a consequence, my calculation of

NAV is higher if no provision is made for SolarCity’s share-based compensation.

146. I divided the net asset value under each approach by the number of

shares purchased by Tesla in the Merger. The resulting amount is the range of

value resulting from the alternative applications of net asset value.

147. The net asset value per share of SolarCity common stock as of

November 21, 2016 was:

a. $10.23 per share based on adjusted appraised value (Exhibit 75);

and

b. $1.59 per share based on fair saleable value (Exhibit 75).

148. Both calculations of value assume the going-concern premise, which

was counterfactual for SolarCity based on its financial condition as of the Merger

Date.

182
Tesla Form 10-K, filed March 1, 2017, p. 73.
136
 D. Income Approach

149. Discounted Cash Flow Analysis. The income approach is often viewed

with skepticism in valuing financially troubled companies. It is applied by

capitalizing and/or discounting to a present value a measure of historical or

projected income, such as EBITDA, net income, or “cash flow,” and adjusting the

capitalized or sum of the present value of the projected amounts by making

adjustments for nonoperating assets, liabilities, and other adjustments relevant to

fair value. The challenge to applying the income approach to financially troubled

companies, including SolarCity, is that they generally lack positive income

measures such as earnings or cash flow, and may have projections that are viewed

as being speculative, unreliable, and/or developed for the purpose of presenting

adequate cash flows to obtain funding on reasonable terms. In their internal credit

memoranda, a credit officer of Bank of America—one of SolarCity’s lead

commercial lenders—wrote that SolarCity had consistently fallen short of

projections.183 I have applied the income approach, using DCF, but regard it to be

an unreliable valuation approach for the reasons previously cited.

150. Martin Whitman—a famous investor in distressed businesses who has

been a fellow speaker with me at several turnaround conferences—synthesized

183
BOFA_00005370 (“[SolarCity] has a consistent track record of missing plan
due to the timing of contract monetization, overspending in SG&A, management
turnover in the finance department, and difficulty in forecasting performance.”)
137
knowledge that he gained from more than thirty years of distressed in vesting in his

book Distress Investing: Principles and Technique. He wrote:

The analysis that goes into the valuation of a company in financial

distress is very similar to the analysis of a leveraged buyout (LBO) or
a management buyout (MBO). Several factors complicate the
valuation process, however. Unlike someone valuing an LBO
company, distress investors seldom have the chance to undertake a
thorough due diligence investigation. Rather, they have to rely
exclusively on the public record. Moreover, companies in financial
distress tend to be weaker and not as well managed as LBO targets.
What were formerly viewed as valuable assets become less valuable
in the hands of a debtor that files for Chapter 11. These factors
introduce substantially higher valuation risks that will be reflected in
the difference between the true economic value of the estate and that
used to value the postreorganization company.

Traditional valuation approaches give much weight to the view that

firms are strict going concerns. Accordingly, most valuations focus
only on the ability of firms to generate cash flows or earnings from
operations in the future. We view companies as having elements of
both going concern and resource conversion [i.e., liquidation]. Thus,
our approach to valuing companies is less a matter of general
principle and more a matter of understanding the business and valuing
both the going concern as well as its resource conversion attributes.

The reader should be aware that almost all estimates of future cash
flows and future earnings are notorious for their unreliability. Thus,
for any reasonable Chapter 11 plan of reorganization to meet a
feasibility standard, the capitalization of a company upon
reorganization should be conservative. Forecasts, while essential for
valuation, are famously unreliable in the real world.184

Martin J. Whitman and Fernando Diz, Distress Investing: Principles and

184

Technique, (Hoboken: John Willey & Sons, Inc., 2009), pp. 134 – 135.
138
 151. There are three key ingredients to any DCF analysis: (1) the cash flow

projections; (2) the calculation of terminal value;185 and (3) the discount rate. The

cash flow projections are of particular importance, because they also are a key

basis for developing the estimate of terminal value. Deficiencies in the cash flow

projections will typically have an even greater impact on undermining the

reasonableness of the terminal value estimate.

152. I have reviewed the SolarCity Revised Sensitivity Case provided by

Evercore to the Tesla Board in connection with the Proposed Merger,186 and which

constitute the basis for the DCF performed by Evercore to support its fairness

opinion. The plaintiffs’ industry expert, Juergen Moessner, analyzed the Revised

Sensitivity Forecasts, and underlying assumptions, and issued a report pertaining

thereto, including a modification (the “SITC Phase Out Case”) to normalize the

terminal year to account for the phase-out of the Solar ITCs and more accurately

depict a “steady state” for SolarCity. I defer to Mr. Moessner’s expert opinion, as

presented in his expert report, pertaining to the Revised Sensitivity Case, but make

the following observations pertaining the unsuitability of the Revised Sensitivity

Case for valuation purposes as of the Merger Date.

185
Terminal value is the value of the firm or the value of equity at the end of the
projection period.
186
Merger Proxy, p. 103.
139
a. SolarCity had a complex capital structure as of the Merger Date,

including 47 VIEs with complex structures impacting the

distribution of projected cash flows to lenders, investors in the VIEs,

and SolarCity, as well as numerous debt obligations (Exhibit 24).

The Revised Sensitivity Case purports to represent the after-tax cash

flows available to SolarCity shareholders, but there is a lack of

transparency to the financial projection model that was used to

generate them. Cash flow projections that cannot be evaluated also

cannot be relied upon for valuation purposes.

b. The Revised Sensitivity Case assume aggressive rates of increase in

MW deployed (Exhibit 90), particularly between 2018 and 2020,

when they were assumed to increase by 25% to 30% per year. Since

MW deployed drives the whole model, aggressive assumptions in

that area can be expected to inflate the projected cash generation.

c. The projections of MW deployed proved to be enormously

aggressive, particularly considering that pre-Merger trends were in

evidence that TPO—the mainstay of SolarCity’s historical

deployments—were declining, the MyPower program had been

eliminated, and Tesla was planning to eliminate the SolarCity direct

sales activity, which was responsible for a large portion of pre-

140
 Merger sales. Although projections are seldom developed with

complete clarity regarding the future, the disparity between projected

and actual deployments is astounding (Exhibits 91 and 92). The

annualized year-to-date deployments are scarcely more than 10% of

what was projected.

d. It is a “red flag” when inadequately supported cash-generation

projections show SolarCity as being almost breakeven on a cash-

generation basis in 2017, and cash-generation positive thereafter

(Exhibit 90), considering the massive cash flow deficits historically

sustained (Exhibit 11).

e. It does not seem credible that a company projected to have a cash

generation of only $27 million in 2020, after deducting for the

phaseout of the Solar ITC, could justify a value of over $2 billion in

the Merger.

f. The unadjusted Revised Sensitivity Case assumes that SolarCity

would realize a positive cash generation of $437 million in 2020,

before adjusting for the phase-out of the Solar ITC. This may differ

from taxable income, but the Revised Sensitivity Case does not have

information that can be used to evaluate taxable income. However,

it is not unreasonable to assume that if SolarCity was projected to

141
 generate significant cash generation and cash flows, it would also be

projected to have significant taxable income.

The audited financial statements contained in the 2016 SolarCity

Form 10-K indicate that it had gross deferred tax assets of $898

million as of December 31, 2016.187 Gross deferred tax assets consist

of benefits, such as net operating loss carryforwards, that may be

used to shield future income from taxation. In order to realize these

benefits, the subject company must have taxable income. These

deferred tax assets have limits with respect to the amount of time

within which they must be used before they expire. For example, net

operating loss carryforwards must be used within 20 years of the

taxable loss. The footnotes to the 2016 audited financial statements

of SolarCity disclosed a $423 million valuation allowance that was

offset against the deferred tax assets. The valuation allowance

represents the portion of the deferred tax benefits that are projected

to expire before they can be used. It constitutes almost 50% of the

deferred tax benefits.

If SolarCity could credibly generate the level of cash flows reflected

in the Revised Sensitivity Case, it is likely that the deferred tax

187
SolarCity Form 10-K, filed March 1, 2017. p. 86.
142
 benefits would be fully utilized, and there would be no valuation

allowance. The presence of a valuation allowance of almost 50% is

inconsistent with the Revised Sensitivity Case, and implies that

SolarCity was unable to defend its forecasts to its independent

auditors, or that they used a forecast that was less optimistic than the

Revised Sensitivity Case.

153. While I do not believe that a DCF analysis is an appropriate method for

determining the fair value of SolarCity as of the Merger Date, I have nonetheless

prepared a DCF analysis using the SITC Phase Out Case for illustrative purposes

(Exhibit 90). Key assumptions that I employed include:

a. I relied upon the SITC Phase Out Case prepared by Mr. Moessner,

and explained in his expert report.188

b. I discounted to a present value projected annual cash generation,

including the Tax Equity Adjustment,189 using the mid-year

assumption,190 using the cost of equity capital that I developed in

Exhibit 82.

188
Expert Report of Juergen Moessner dated August 12, 2019.
189
The Tax Equity Adjustment represents the projected value realized from the
monetization of the tax equity benefits in 2021—the last year that they would be
fully realizable.
190
The mid-year assumption assumes that the projected cash flows, realized
throughout the year, would on average, be realized at the middle of each year.
143
 c. I calculated terminal value at the end of the forecast period using the

Gordon Growth Model (“GGM”). GGM is a widely used method

for calculating terminal value; it was employed by Evercore in the

DCF underlying its fairness opinion. GGM is applied to cash flows

such as those projected in the SITC Phase Out Case which are

supposed to represent cash flows available to equity holders (i.e.,

free cash flow to equity, or FCFE) based on the following formula:

TV = [(FCFE2020P x (1 + gLT)] ÷ (k – gLT), where

• FCFE2020P = terminal cash flow, projected for 2020,

adjusted for the phase-out of the solar investment tax

credit.

• gLT = long-term FCFE growth rate, which Evercore has

assumed to be 3% - 5%.191 For purposes of this analysis I

have assumed that it is 4%.

• k = cost of equity capital, which I provided for at the

13.22% rate that I calculated in Exhibit 82.

154. The sum of the projected annual net generation of cash, Tax Equity

Adjustment, and terminal value, discounted to a present value at the cost of equity

capital, represents the pro forma value of the common stock of SolarCity as of the

191
Merger Proxy, p. 77.
144
Merger Date. I divided the net asset value under each approach by the number of

shares purchased by Tesla in the Merger.192

155. The application of DCF as applied above results in a pro forma value of

the common stock of SolarCity based on DCF of $6.14 per share as of

November 21, 2016 (Exhibit 90). This calculation is for presentation purposes

only. It is limited by:

a. Reliance upon the cash flows upon which the DCF is based which, in

my opinion, lack credibility; and

b. The going-concern premise, which was counterfactual for SolarCity

based on its financial condition as of the Merger Date.

E. The Fairness Opinion Valuations Are Unreliable

156. Evercore and Lazard performed certain financial analyses to support

their fairness opinions. In my opinion, the analyses that Evercore and Lazard

(collectively, the “Investment Bankers”) prepared to support their fairness opinions

do not provide an appropriate basis for determining the fair value of SolarCity

common stock as of the Merger Date.

157. The Investment Bankers’ valued SolarCity on the going-concern

premise. As I stated in my report, SolarCity was not a going-concern on a stand-

192
2016 Tesla Form 10-K, p. 84.
145
alone basis. Accordingly, any valuation analyses prepared under the going-

concern premise are based on a false premise.

158. There are practical reasons why the Investment Bankers would be

incentivized to embrace the going-concern premise:

a. They stood to earn substantial fees if the Merger was completed.

b. It would be difficult for Evercore to render an opinion that the

Merger was fair, from a financial point of view, to the shareholders

of Tesla if they assumed that SolarCity was not a going concern.

Under those circumstances, as evident from my valuation analyses,

Tesla would be grossly overpaying for the common stock of

SolarCity.

c. It would be difficult for Lazard to render a fairness opinion under the

premise that SolarCity was not a going concern. If SolarCity was

not a going concern, then any price would be fair. For example,

when my former employer, and subsequently, my client, Bear

Stearns was forced to merger with JPMorgan Chase during the Great

Recession as a result of a liquidity crisis, Lazard rendered a fairness

opinion that a price of $2 per share. A week later, when it was

apparent that there would be resistance to a $2 purchase price, the

146
 offer was raised to $10 per share, and Lazard rendered a fairness

opinion that $10 per share was also fair.

Although any price can be fair for a company that is running out of

cash and lacks alternatives for survival, rendering a fairness opinion

based on the premise that SolarCity was not a going concern, and

presenting that opinion in a public SEC filing—particularly in a joint

proxy statement sent to the shareholders of SolarCity and Tesla—

could adversely impact the willingness of the Tesla shareholders to

approve the Merger. Lazard would ultimately be doing a disservice

to its client.

If the Investment Bankers were, figuratively speaking, willing to

hold their noses, they could muster up a rationale to opine that the

Merger was fair, from a financial point of view, to the shareholders

of their respective clients.

159. Evercore financial justifications:

a. DCF based on SolarCity Revised Sensitivity Case193—Mr.

Moessner’s report explains the deficiencies of these projections. I

raised some other issues above. Setting aside the general

deficiencies that I described in my report of using DCF to value

193
Merger Proxy, p. 75.
147
 SolarCity, the SolarCity Revised Sensitivity Case is a flawed set of

projections for a number of reasons. Deficient projections can

render a DCF valuation to be useless.

b. Evercore “reviewed the reported prices and the historical trading

activity of SolarCity Common Stock and Tesla Common Stock.” As

I wrote in my report, SolarCity common stock was declining rapidly

until the proposed Merger was announced. Subsequently,

particularly once the exchange ratio was announced on August 1,

2016, its price was largely based on the pricing of Tesla common

stock, rather than the value of Solar City.

160. The Investment Bankers each performed a DCF. However, lacking a

credible set of financial projections, any calculations of value resulting there from

would not be reliable.

161. Evercore prepared a Precedent Premiums Paid Analysis to support its

fairness opinion.194 Such analysis is not relevant to the fair value of SolarCity

common stock as of the Merger Date because:

a. As I stated in my report, subsequent to the announcement of the

proposed Merger on June 21, 2016—five months before the Merger

closed—the accelerating erosion of SolarCity stock price subsided

194
Merger Proxy, p. 80.
148
 (Exhibits 26 and 27), and the stock began to largely trade as a Tesla

common stock equivalent (Exhibit 29), especially after the final

exchange ratio was announced on August 1, 2016. Accordingly,

applying a premium to SolarCity’s stock price was irrelevant if its

stock price had not been indicative of the investment attributes of

SolarCity for at least five months prior to the Merger Date.

b. The premiums on M&A transactions identified in the Precedent

Premiums Paid Analysis have no relevance to SolarCity.195 The

targets include companies such as AOL, Inc., Trulia Inc., and Ingram

Micro Inc. that are in businesses that lack any remote relationship to

SolarCity. Moreover, they were not distressed acquisitions. The

Merger Proxy indicates that “Evercore noted that none of the

companies that participated in the selected transactions are directly

comparable to SolarCity or Tesla and none of the transactions in the

selected transactions analysis are directly comparable to the

Merger.” Accordingly, the no weight should be given to this

analysis.

195
Ibid.
149
Executed on: August 26, 2019
New York, New York

_____________________________
Ronald G. Quintero

150
 TABLE OF CONTENTS

Section Description Page

I Assignment.......................................................................................... 1
II Professional Qualifications ................................................................. 1
III Summary of Professional Opinions .................................................... 4
IV Background:
A. Tesla Overview .............................................................................. 9
B. SolarCity Overview ....................................................................... 12
C. The Merger..................................................................................... 21
V SolarCity Was Not Viable as an Independent Entity:
A. SolarCity’s Liquidity Crisis ........................................................... 22
B. Insolvency Considerations ............................................................. 39
C. Viability Analysis .......................................................................... 54
VI Fair Value When SolarCity Was Not a Going Concern:
A. Valuation Methods Considered ..................................................... 70
B. Net Liquidation Value ................................................................... 71
VII Fair Value If SolarCity Were a Going Concern:
A. Alternative Measures of Value ...................................................... 90
B. Market Approach ........................................................................... 95
C. Asset Approach .............................................................................. 110
D. Income Approach ........................................................................... 137
E. The Fairness Opinion Valuations Are Unreliable ........................ 145

Tables
1 Inability of SolarCity to Pay Debts as They Come Due ..................... 47
2 SolarCity Net Present Value Created per Watt Deployed .................. 62
3 Examples of Price Distortions of Value ............................................. 91

Figures
1 SolarCity Year-to-Date Revenues and Gross Margin Through
June 30, 2016 ...................................................................................... 15

Exhibits
1 Information Sources
2 Tesla Financing Rounds Since 2004
3 Overview of Tesla Financings
Tesla:
4 Annual Income Summary
5 Annual Cash Flow Summary
6 Discretionary Cash Flow and Cash Flow from Financing Activities
7 Balance Sheet
i
 TABLE OF CONTENTS

8 Growth in Revenues and Funded Capital

9 PV System Cost Benchmark Summary
10 Third-Party, and Customer-Owned, Residential Solar Systems
SolarCity:
11 Annual Revenues, Losses, and Discretionary Cash Flow
12 Annual Discretionary Cash Flow Deficits Compared to Funds Raised
13 Income Statement for the Five Years Ended December 31, 2016
14 Analysis of Income for the Five Years Ended December 31, 2016
15 Cash Flow Statement for the Five Years Ended December 31, 2016
16 Quarterly Cash Flow: September 2011 Through September 2016
17 Quarterly Revenues, Discretionary Cash Flow, and Change in Debt
and Equity
18 Quarterly Cash Flow Deficits and Capital Raised per Dollar of
Revenues
19 Balance Sheet as of the Five Years Ended December 31, 2016
20 Composition of the Balance Sheet as of the Five Years Ended
December 31, 2016
21 Composition of the Balance Sheet as of September 30, 2016
22 Capitalization as of the Five Years Ended December 31, 2016
23 Debt and Equity Funding as of the Five Years Ended December 31,
2016
24 Balance Sheet as of the Merger Date and December 31, 2016
25 Scheduled Debt Maturities as of December 31, 2016
26 Monthly Stock Chart from IPO to Merger Date
27 Polynomial Trendline Analysis of Month-End Stock Price
28 Daily Stock Chart: January 4 – November 18, 2016
29 Index of SCTY and TSLA Stock Prices After Exchange Ratio Was
Announced
30 Going-Concern Flowchart Adapted from FASB ASC Subtopic 205-40:
Presentation of Financial Statements—Going Concern
31 Email from Lyndon Rive Dated July 9, 2016
32 SolarCity Updated Liquidity by Month
33 Simplified Example of the Absolute Priority Rule of the Bankruptcy Code
34 SolarCity Historical and Projected Financials
35 Criteria for Evaluating Insolvency
SolarCity:
36 Assets as of Alternative Dates
37 Liabilities and Equity at Alternative Dates
38 Fair Value of Current Assets Minus Current Liabilities
39 Deterioration in Net Working Capital and Cash
ii
 TABLE OF CONTENTS

40 Liquidity and Leverage Ratios

41 Evaluating Solvency After Deducting Net Assets of Variable Interest
Entities
42 Quarterly Calculations of Altman’s Z-Score
43 Quarterly Altman’s Z-Score
44 KPMG Cash-Based Analysis of Financial Performance
45 KPMG SolarCity Cash-Based Analysis Chart
46 KPMG Gross Margin Analysis
47 Financial Viability Analysis Based on SEC Filings
48 Financial Viability Analysis Based on SolarCity Cost Structure
49 SolarCity Costs per Dollar of Revenues
50 Net Value Created per Watt Deployed
51 Business Segment Viability Analysis Based on Transaction Price and
Purchase Price Allocation
52 Allocation of SolarCity Acquisition Price
53 Net Liquidation Value
54 Liquidation Value of Assets
55 Impact of Liabilities and Non-Controlling Interests on Liquidation
Value
56 Analysis of Variable Interest Entity Bad Debt History
57 Cumulative Mortgage Default Rate by Vintage Year
58 Global Transaction Value of Private Equity Portfolio Secondary Sales
59 2016 Private Equity Portfolio Secondary Transaction Pricing
60 Historical Private Equity Portfolio Secondary Transaction Pricing
61 Verengo Inc. Liquidation Analysis
Examples:
62 Firm Value and Debt Grow on a Parallel Path; Option & Stock Price
Unchanged
63 Firm Value + Option Price Grow More Rapidly than Debt: Stock Price
Appreciates
64 Firm Value + Option Price Grow Less Rapidly than Debt; Stock Price
Declines
65 SCTY vs. 0.11 x TSLA Following Announcement of Merger Exchange
Ratio
66 Leading U.S. Residential Installers
67 Comparison of SolarCity to the Guideline Public Companies
68 Comparative Revenues of Vivint Solar, Sunrun, and SolarCity
69 Comparative TTM 9/16 EBITDA and Cash Flow from Operating
Activities of Vivint Solar, Sunrun, and SolarCity
70 Comparative Funded Debt of Vivint Solar, Sunrun, and Solar City
iii
 TABLE OF CONTENTS

71 Market Value of Equity of Vivint Solar, Sunrun, Combined, and SolarCity

Equity Value Implied by the Merger Price
72 Enterprise Value of Vivint Solar, Sunrun, Combined, and SolarCity
Enterprise Value Implied by the Merger Price
73 Capitalization Multiples of Vivint Solar, Sunrun, and Implied by the
SolarCity Merger Price
74 Development of a Pro Forma Price per Share of SolarCity Stock Based on
the Guideline Public Company Method
75 Summary of Net Asset Value Calculations
76 Calculation of Adjusted Appraised Net Asset Value and Fair Saleable Net
Asset Value
77 Calculation of Liabilities and Non-Controlling Interests for Adjusted
Appraised Net Asset Value and Fair Saleable Net Asset Value
78 Development of Adjusted Appraised Value and Fair Saleable Value of
Solar Energy Systems Leased and to be Leased
Analysis of Discount Rates Used by KPMG to Calculate the Fair Value
of:
79 Residential Solar Energy Assets
80 Non-Residential Solar Energy Assets
81 Verification of Fair Value Calculations of the Residential Solar Energy
Systems
81A Verification of KPMG Fair Value of California Residential Systems
Placed in Service in 2013 Using KPMG Discount Rates, with
Provisions for Bad Debts and Non-Renewals
81B Development of a Basis for a Residential Solar Asset Bad Debt Provision
82 Development of the Weighted Average Cost of Capital
83 Cost of Equity Capital Based on Alternative Assumptions
83A Cost of Equity Capital Supplemental Calculation
84 Risk-Free Rate and Equity Risk Premium Benchmarks
85 SCTY 2-Year and 3-Year Raw and Adjusted Weekly Bet
KPMG Fair Value and Adjusted Appraised Value of:
86 Redeemable Non-Controlling Interests
87 Non-Redeemable Non-Controlling Interests
Verification of Fair Value of:
88 Redeemable Non-Controlling Interests
89 Non-Redeemable Non-Controlling Interests
90 Discounted Cash Flow Analysis
91 SolarCity Rooftop Megawatts Deployed
92 SolarCity Projected vs. Actual MW Deployed
93 Description of Chartered Capital Advisers, Inc.
iv
 TABLE OF CONTENTS

Ronald G. Quintero:
94 Deposition and Expert Testimony
95 Professional Training Activities
96 Publishing Activities
97 Curriculum Vitae

Appendix
1 Development of Cost of Equity Capital Based on Duff & Phelps Cost of
Capital Navigator

v
 EXHIBIT 1
Information Sources
Litigation Documents
● Complaint dated September 30, 2016

Nonpublic Information
● Expert Reports:
- Murray M. Beach in re Tesla Motors, Inc. Stockholder Litigation dated August 12, 2019
- Juergen Moessner in re Tesla Motors, Inc. Stockholder Litigation dated August 12, 2019

● Deposition Transcripts and Exhibits:

- Hayes Barnard and marked exhibits
- George Bilicic (Lazard) and marked exhibits
- Brad Buss and marked exhibits
- Toby Corey and marked exhibits
- Robyn Denholm and marked exhibits
- Ira Ehrenpreis and marked exhibits
- Antonio Gracias and marked exhibits
- Donald Kendall and marked exhibits
- Courtney McBean (Evercore) and marked exhibits
- Elon Musk Vol. One and marked exhibits
- Kimbal Musk and marked exhibits
- Lyndon Rive and marked exhibits
- Peter Rive and marked exhibits
- Tanguy Serra and marked exhibits
- Radford Small and marked exhibits
- Jeffrey Straubel and marked exhibits
- Jason Wheeler and marked exhibits

● Written Discovery:
- Elon Musk’s Responses and Objections to Co-Lead Plaintiffs’ First Set of Interrogatories

● Documents produced in litigation by beginning Bates No.:

TESLA00000003 TESLA00082877 TESLA00137077

TESLA00302251 TESLA00021496 TESLA00082337
TESLA00709901 TESLA00302251 TESLA00011144
TESLA00001346 TESLA00587197 TESLA00495392
TESLA00001348 TESLA00001455 TESLA00534760
TESLA00142716 TESLA00218031 TESLA00505137
TESLA00445192 TESLA00218033 TESLA00248910
TESLA00591665 TESLA00000001 TESLA00009972
TESLA00739014 TESLA00001459 TESLA00709889
TESLA00600885 TESLA00000123 TESLA00709896
TESLA00600812 TESLA00001469 TESLA00709901
TESLA00600826 TESLA00000463 TESLA00709904
TESLA00600415 TESLA00001112 TESLA00524259
TESLA00600454 TESLA00001112 TESLA00082877
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 EXHIBIT 1
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TESLA00600824 BOFA_00002977 LAZ_TES00023640
TESLA00026783 BOFA_00003021 LAZ_TES00023669
TESLA00525059 BOFA_00002853 LAZ_TES00023686
TESLA00143191 BOFA_00003679 LAZ_TES00023734
TESLA00254563 CGMI_00000270 LAZ_TES00066435
TESLA00525107 CS007668 LAZ_TES00044397
TESLA00525193 EY-TES-EM-000371 LAZ_TES00044398
TESLA00083773 EY-TES-2015-EWP-005587 LAZ_TES00044415
TESLA00083781 EY-TES-2016-EWP-005596 LAZ_TES00044436
TESLA00440697 EY-TES-2015-EWP-000740 LAZ_TES00044460
TESLA00253851 EY-TES-EM-000403 LAZ_TES00044465
TESLA00526418 EY-TES-EM-026277 LAZ_TES00044471
TESLA00524801 EY-TES-2016-EWP-002328 LAZ_TES00000123
TESLA00088079 EY-TES-EM-026278 LAZ_TES00023765
TESLA00137177 EY-TES-2016-EWP-00103 NC000000043
TESLA00061372 EY-TES-EM-024460 NC000165364
TESLA00519343 EY-TES-EM-026275 PWC-TESLA00000007
TESLA00038955 EY-TES-EM-024571 PWC-TESLA00000016
TESLA00426250 EY-TES-EM-000405 PWC-TESLA00000206
TESLA00248715 EY-TES-2016-EWP-000575 PWC-TESLA00000205
TESLA00248717 EVR-TESLA_00082788 PWC-TESLA00000206
TESLA00430971 EVR-TESLA_00082794 PWC-TESLA00000291
TESLA00446154 EVR-TESLA_00085476 PWC-TESLA00001239
TESLA00441605 EVR-TESLA_00085478 PWC-TESLA00001273
TESLA00446155 EVR-TESLA_00195847 PWC-TESLA00001275
TESLA00446153 EVR-TESLA_00195874 PWC-TESLA00001278
TESLA00736485 KPMG-Tesla_SolarCity_0016149 PWC-TESLA00001279
TESLA00142722 KPMG-Tesla_SolarCity_0016150 PWC-TESLA00001322
KPMG-Tesla_SolarCity_0016151 PWC-TESLA00001324
KPMG-Tesla_SolarCity_0016152 PWC-TESLA00001325
PWC-TESLA00001505
SC_Third_Parties_0034972
SC_Third_Parties_0034972
SC_Third_Parties_003497

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● Frank Andorka, Verengo Solar files for bankruptcy, will sell solar assets to Crius Energy, PV
MAGAZINE (September 26, 2016), https://www.pv-magazine.com/2016/09/26/verengo-solar-
files-for-bankruptcy-will-sell-solar-assets-to-crius-energy_100026260/.

● Nichola Groom, Salvador Rodriguez, Kristina Cooke, Exclusive: Tesla to close a dozen solar
facilities in nine states – documents, REUTERS (June 21, 2018), https://www.reuters.com/
article/us-tesla-solar-exclusive/exclusive-tesla-to-close-a-dozen-solar-facilities-in-nine-states-
documents-idUSKBN1JI013.

● Cloister Research, Tesla’s Executive Exodus Continues, SEEKING ALPHA (December 21,
2016), https://seekingalpha.com/article/4031941-teslas-executive-exodus-continues.

● Andrew Sendy, What traits define the best solar companies and how to use these to find local
solar providers, SOLAR ESTIMATE (February 8, 2018), https://www.solar-
estimate.org/news/what-traits-define-the-best-solar-companies-and-how-to-use-these-to-find-
local-solar-providers.

● Andrew Sendy, Why the solar providers near you are often the best solar companies to buy
from, SOLAR REVIEWS (May 6, 2018), https://www.solarreviews.com/blog/why-the-solar-
panel-installer-nearest-to-you-is-most-likely-also-the-best-company-to-buy-solar-from.

● S&P Global Ratings Definitions, S&P GLOBAL RATINGS (July 5, 2019),

https://www.standardandpoors.com/en_US/web/guest/article/-/view/sourceId/504352.

6 of 9
 EXHIBIT 1
Information Sources
● Elon Musk, The Secret Tesla Motors Master Plan (just between you and me), TESLA BLOG
(August 2, 2016), https://www.tesla.com/blog/secret-tesla-motors-master-plan-just-between-
you-and-me.

● Tesla and Solarcity, TESLA BLOG (November 1, 2016), https://www.tesla.com/blog/tesla-and-

solarcity.

● Tesla Makes Offer to Acquire SolarCity, TESLA BLOG (June 21, 2016), https://www.tesla.com
/blog/tesla-makes-offer-to-acquire-solarcity.

● Tesla Gigafactory, TESLA, https://www.tesla.com/gigafactory.

● Matt D’Angelo, Tesla Michigan Tool and Die plant reportedly purchased by industrial real
estate investors, TESLARATI (September 25, 2017), https://www.teslarati.com/tesla-michigan-
tool-and-die-plant-purchased-brennan-investment/.

● Simon Alvarez, Tesla to end Home Depot partnership as it closes 12 solar facilities: report,
TESLARATI (June 22, 2018), https://www.teslarati.com/tesla-home-depot-partnership-solar-
facilities/.

● Armen Hareyan, You Will Be Surprised to Know How Many Tesla Dealership and Stores are
in USA Compared to Other Brands, TORQUE NEWS (June 23, 2016)
https://www.torquenews.com/1/you-will-be-surprised-know-how-many-tesla-dealership-and-
stores-are-usa-compared-other-brands.

● Hamza Shaban, Elon Musk: Tesla has moved from ‘production hell’ to ‘delivery logistics
hell’, WASHINGTON POST (September 17, 2018), https://www.washingtonpost.com
/technology/2018/09/17/elon-musk-tesla-has-moved-production-hell-delivery-logistics-
hell/?utm_term=.d5854247e901.

● Tesla, Inc. History, WIKIPEDIA, https://en.wikipedia.org/wiki/Tesla,_Inc.#History.

● U.S. PV Leaderboard, WOOD MACKENZIE (June 16, 2019), https://www.woodmac.com/our-

expertise/focus/Power--Renewables/U.S.-PV-Leaderboard/.

● “Wall Street’s Dean of Valuation” NYU Stern Professor Aswath Damodaran Headlines
BigSur Partners Event Series at EAST, Miami, WORLDREDEYE (March 1, 2019),
https://worldredeye.com/2019/03/wall-streets-dean-of-valuation-nyu-stern-professor-aswath-
damodaran-headlines-bigsur-partners-event-series-at-east-miami/.

● Robert Walton, What happened to the Tesla solar roof?, UTILITY DRIVE (March 28, 2019),
https://www.utilitydive.com/news/what-happened-to-the-tesla-solar-roof/550942/.

● In re: Appraisal of Jarden Corporation, Consolidated C.A. No. 12456–VCS (Court of

Chancery of State of Delaware, July 19, 2019).

● International Glossary of Business Valuation Terms.

7 of 9
 EXHIBIT 1
Information Sources
● E. Levy, CFA, Tesla Motors Inc., S&P Capital IQ, October 28, 2016

● Preqin Special Report: Secondary Fund Manager Outlook: H1 2017, Preqin (March 29,
2017), https://www.preqin.com/insights/special-reports-and-factsheets/preqin-special-report-
secondary-fund-manager-outlook-h1-2017/17631.

● Presentation of Financial Statements—Going Concern (Subtopic 205-40), FINANCIAL

ACCOUNTING STANDARDS BOARD, https://www.fasb.org/resources/ccurl/599/
128/ASU%202014-15.pdf.

● SolarCity Preannounces Q2 2016 Operating Metrics and Updates 2016 Guidance, SOLARCITY
(August 1, 2016) https://www.prnewswire.com/news-releases/solarcity-preannounces-q2-
2016-operating-metrics-and-updates-2016-guidance-300306736.html.

● The Private Equity Secondary Market, 2017, Coller Capital, https://www.collercapital.com/

● sites/default/files/Coller%20Capital%20%E2%80%93%20the%20private%20equity%20seco
ndary%20market.pdf.

● Ratings Symbols and Definitions, Moody’s Analytics, Moody’s Investor Service, 2010.

● Refinitiv (formerly known as Thomson Reuters Eikon), https://www.refinitiv.com/en.

● Capital IQ, https://www.capitaliq.com.

● Thomsen Reuters Datastream, https://infobase.thomsonreuters.com.

● Cost of Capital Navigator, Valuation Handbook 2016 and 2017, DUFF & PHELPS, LLC.

● Ryan Roth, “Solar Panel Installation in the US,” IBISWorld, May 2018

● SECURITIES AND EXCHANGE COMMISSION FILINGS

- TESLA/SOLARCITY, Joint Proxy Statement/Prospectus, October 12, 2016.

- SOLARCITY, Form 10-K, for years ending 2011-2016; Forms 10-Q for three quarters
ending September 30, 2015, and September 30, 2016.

- TESLA, Forms 10-K, Form 10-K, for years ending 2011-2018; Forms 10-Q for three
quarters ending September 30, 2014, October 3, 2015, September 30, 2016; Form S-1,
January 29, 2010, Amended and Restated Certificate of Incorporation of Tesla Motors, Inc.

● Diane Vazza Nick Kraemer, 2016 Annual Global Default Study and Rating Transitions, S&P
Global Ratings (April 13, 2017), https://www.spglobal.com/en/research-
insights/articles/2016-annual-global-corporate-default-study-and-rating-transitions.

● U.S. Solar Photovoltaic System Cost Benchmark: Q1 2017, National Renewable Energy
Laboratory (September 11, 2017), https://www.osti.gov/biblio/1390776-solar-photovoltaic-
system-cost-benchmark-q1.
8 of 9
 EXHIBIT 1
Information Sources
● Verengo, Inc. Seconded Amended Combined Disclosure Statement and Chapter 11 Plan of
Reorganization Proposed by the Debtor and Debtor in Possession, dated March 29, 2017.

● David Whiston, CFA, CPA, CFE, “Tesla Motors Inc,” Morningstar, August 3, 2016.

● MARTIN J. WHITMAN AND FERNANDO DIZ, DISTRESS INVESTING: PRINCIPLES AND TECHNIQUE.

● www.tesla.com

9 of 9
 EXHIBIT 2 
Tesla Financing Rounds Since 2004  

Source:  Crunchbase 
 EXHIBIT 3 
Overview of Tesla Financings 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2

Source:  Crunchbase 
 EXHIBIT 4
Tesla, Inc.
Annual Income Summary for the Seven Years Ended December 31, 2018
2012 2013 2014 2015 2016 2017 2018
$ Million
Net revenues $413 2,013 3,198 4,046 7,000 11,759 21,461
Cost of revenues (383) (1,557) (2,317) (3,123) (5,401) (9,536) (17,419)
Gross profit 30 456 881 923 1,599 2,223 4,042
Selling, general & admin. exp. (150) (286) (604) (922) (1,432) (2,477) (2,834)
Research & development exp. (274) (232) (465) (718) (834) (1,378) (1,460)
Unusual expense 0 0 0 0 0 0 (136)
Operating income (loss) (394) (61) (187) (717) (667) (1,632) (388)
Interest expense, net 0 (33) (100) (117) (164) (399) (637)
Other income, net (2) 23 2 (42) 85 (178) 20
Income (loss) before taxes (396) (71) (285) (876) (746) (2,209) (1,005)
Income tax provision 0 (3) (9) (13) (27) 691 (58)
Net income (396) (74) (294) (889) (773) (1,518) (1,063)
Minority interest 0 0 0 0 98 279 86
Extraordinary item 0 0 0 0 0 (723) 0
Net inc. attributable to S/H ($396) (74) (294) (889) (675) (1,961) (976)
Percent of Net Revenues
Net revenues 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues ‐92.7% ‐77.3% ‐72.5% ‐77.2% ‐77.2% ‐81.1% ‐81.2%
Gross profit 7.3% 22.7% 27.5% 22.8% 22.8% 18.9% 18.8%
Selling, general & admin. exp. ‐36.3% ‐14.2% ‐18.9% ‐22.8% ‐20.5% ‐21.1% ‐13.2%
Research & development exp. ‐66.3% ‐11.5% ‐14.5% ‐17.7% ‐11.9% ‐11.7% ‐6.8%
Unusual expense 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% ‐0.6%
Operating income (loss) ‐95.4% ‐3.0% ‐5.8% ‐17.7% ‐9.5% ‐13.9% ‐1.8%
Interest expense, net 0.0% ‐1.6% ‐3.1% ‐2.9% ‐2.3% ‐3.4% ‐3.0%
Other income, net ‐0.5% 1.1% 0.1% ‐1.0% 1.2% ‐1.5% 0.1%
Income (loss) before taxes ‐95.9% ‐3.5% ‐8.9% ‐21.7% ‐10.7% ‐18.8% ‐4.7%
Income tax provision 0.0% ‐0.1% ‐0.3% ‐0.3% ‐0.4% 5.9% ‐0.3%
Net income ‐95.9% ‐3.7% ‐9.2% ‐22.0% ‐11.0% ‐12.9% ‐5.0%
Minority interest 0.0% 0.0% 0.0% 0.0% 1.4% 2.4% 0.4%
Extraordinary item 0.0% 0.0% 0.0% 0.0% 0.0% ‐6.1% 0.0%
Net inc. attributable to S/H ‐95.9% ‐3.7% ‐9.2% ‐22.0% ‐9.6% ‐16.7% ‐4.5%

Gross profit less R&D expense ‐59.1% 11.1% 13.0% 5.1% 10.9% 7.2% 12.0%

Source:  Refinitiv
 EXHIBIT 5
Tesla, Inc.
Annual Cash Flow Summary for the Seven Years Ended December 31, 2018 ($ MM)
2012 2013 2014 2015 2016 2017 2018
Cash Flow from Operating Activities
Net income ($396.2) (74.0) (294.0) (888.7) (773.0) (2,240.6) (1,062.6)
Depreciation 28.8 106.1 231.9 422.6 947.1 1,636.0 1,901.1
Other non‐cash items 58.6 83.8 261.6 434.9 396.0 1,040.5 1,201.4
Changes in net operating assets 44.9 149.0 (256.8) (493.3) (693.9) (496.6) 58.0
(263.8) 264.8 (57.3) (524.5) (123.8) (60.7) 2,097.8 a
Cash Flow from Investing Activities
Pur. of P&E, excl. cap. leases, net of sales (239.2) (264.2) (969.9) (1,634.9) (1,280.8) (3,414.8) (2,100.7) b
Pur. of solar en. systems leased & to be leased (159.7) (666.5) (218.8) c
Acquisition of businesses, net of cash acquired (12.3) 213.5 (114.5) (17.9)
Sale of business
Purchases and sales of investments, net 25.0 (16.7) 16.7
(Increase) in other restricted cash (1.3) 0.1 (3.8) (26.4) (206.1) (223.1)
Other investing cash flow 8.6 14.8
(206.9) (249.4) (990.4) (1,673.6) (1,416.4) (4,419.0) (2,337.4) d
Cash Flow from Financing Activities
Convertible and other debt proceeds 660.0 2,300.0 319.0 2,853.0 7,138.1 6,176.2
Repayment of convertible and other debt (1,857.6) (3,995.5) (5,247.1)
Repayments of related party debt (165.0) (100.0)
Proceeds from DOE loans 188.8
Repayment of DOE loans (12.7) (452.3)
Collateralized lease borrowings, net 3.3 568.7 769.7 511.3 (559.2)
Principal on capital leases & other (2.8) (8.4) (11.2) (203.8) (46.9) (103.3) (180.8)
Purchase of conv. note hedges (177.5) (603.4) (17.0) (204.1)
Conv. note settlement proceeds 287.2
Stock, option & warrant proceeds 246.4 630.6 489.6 856.6 1,865.6 712.2 295.7
Payments for settlement of warrants (230.4) (0.0)
Debt & equity issuance costs (16.9) (35.1) (20.0) (63.1) (15.0)
Proceeds from inv. by noncont. int. in subs. 201.5 789.7 437.1
Distributions paid to noncontrolling int. in subs. (21.3) (261.8) (227.3)
Buyouts of noncontrolling interests in subs. (0.4) (6.0)
419.6 635.4 2,143.1 1,523.5 3,744.0 4,414.9 573.8 e
Effect of foreign exchange fluctuations (2.3) (6.8) (35.5) (34.4) (7.4) 39.5 (22.7) f
Net change in cash (53.3) 644.0 1,060.0 (708.9) 2,196.3 (25.3) 311.4 a+d+e+f=g
Inclusion of restricted cash 597.0 h
Beginning cash 255.3 201.9 845.9 1,905.7 1,196.9 3,393.2 3,367.9 i
Ending cash $201.9 845.9 1,905.7 1,196.9 3,393.2 3,367.9 4,276.4 g+h+i

Discretionary Cash Flow
Cash flow from operating activities ($263.8) 264.8 (57.3) (524.5) (123.8) (60.7) 2,097.8 a
Pur. of P&E, excl. cap. leases, net of sales (239.2) (264.2) (969.9) (1,634.9) (1,280.8) (3,414.8) (2,100.7) b
Pur. of solar en. systems leased & to be leased 0.0 0.0 0.0 0.0 (159.7) (666.5) (218.8) c
($503.0) 0.6 (1,027.2) (2,159.4) (1,564.3) (4,142.1) (221.7) a+b+c
Sources:  Refinitiv and Forms 10‐K
 EXHIBIT 6
$ MM Tesla Discretionary Cash Flow and Cash Flow from Financing Activities:  2012 ‐ 2018
$4,415 
$4,500

$3,744 

$3,500

$2,500
$2,143 

$1,524 
$1,500

$635  $574 
$420 
$500
$1 
2012

2013

2014

2015

2016

2017

2018
($500) ($222)
($503)

($1,027)
($1,500)
($1,564)

($2,500) ($2,159)

($3,500)

($4,142)
($4,500)
Discretionary cash flow Cash flow from financing activities Source:  Exhibit 5
 EXHIBIT 7
Tesla, Inc.
Balance Sheet as of the Seven Years Ended December 31, 2018 ($ MM)
Dec‐12 Dec‐13 Dec‐14 Dec‐15 Dec‐16 Dec‐17 Dec‐18
Assets
Current assets:
Cash and equivalents $202 846 1,906 1,197 3,393 3,368 3,686
Restricted cash 19 3 18 23 106 155 193
Accounts receivable, net 27 49 227 169 499 515 949
Inventory 269 340 954 1,278 2,067 2,264 3,113
Prepaid expenses and other current assets 8 28 76 125 194 268 366
525 1,266 3,180 2,791 6,260 6,571 8,306
Operating lease vehicles, net 10 382 767 1,791 3,134 4,117 2,090
Solar energy systems, lease & to be leased, net 738 5,920 6,347 6,271
Property, plant, and equipment, net 552 1,829 3,403 5,983 10,027 11,330
Goodwill and intangibles, net 376 421 351
MyPower notes receivable, net of current 506 457 422
Restricted cash—long term 5 6 11 32 268 442 398
Other assets 22 24 43 75 217 273 572
$1,114 2,417 5,830 8,092 22,664 28,655 29,740
Liabilities
Current liabilities:
Accounts payable $40 304 778 916 1,860 2,390 3,404
Accrued liabilities 303 108 269 423 1,210 1,731 2,094
Deferred revenue 2 92 192 424 763 1,015 630
Resale value guarantees 137 180 787 503
Customer deposits 139 163 258 283 664 854 793
Current portion of LTD and capital leases 4 8 611 633 984 797 2,568
Current portion of related‐party debt 51 166 100
539 675 2,108 2,816 5,827 7,675 9,992
LTD and capital leases, net of current portion 411 13 1,819 2,040 5,860 9,418 9,404
Related‐party debt, net of current portion 99
Convertible debt, net of current portion 586 10
Deferred revenue, net of current portion 3 181 292 446 852 1,178 991
Resale value guarantees, net of current portion 236 488 1,294 2,210 2,309 329
Other long‐term liabilities 36 58 154 365 1,891 2,443 2,710
989 1,749 4,861 6,961 16,750 23,023 23,426
Redeemable noncontrolling interests in subs. 367 398 556
Convertible senior notes 58 42 9
Equity
Common stock and additional paid‐in capital 1,190 1,807 2,345 3,415 7,774 9,178 10,249
Accumulated other comprehensive (loss) income (4) (24) 33 (8)
Accumulated deficit (1,065) (1,140) (1,434) (2,322) (2,997) (4,974) (5,318)
125 667 911 1,089 4,753 4,237 4,923
Noncontrolling interests in subsidiaries 785 997 834
Total Liabilities and Equity $1,114 2,417 5,830 8,092 22,664 28,655 29,740

Sources:  Forms 10‐K
 EXHIBIT 8
Tesla's Growth in Revenues and Funded Capital as of the Seven Years Ended December 31, 2018 ($MM)
$25,000 $25,000

$21,461 

$20,000 $20,000

$11,972 

$15,000 $15,000
$10,315 

$7,119  $11,759 

$10,000 $10,000

$7,000 

$5,000 $10,249  $5,000

$2,673  $9,178 
$4,046  $7,774 
$2,430 
$607  $3,198 
$466  $2,013  $3,415 
$1,807  $2,345 
$1,190  $413 
$0 $0
Dec‐12 Dec‐13 Dec‐14 Dec‐15 Dec‐16 Dec‐17 Dec‐18

Equity Debt Annual revenues Source:  Exhibit 7

  
EXHIBIT 9 
PV System Cost Benchmark Summary (Inflation Adjusted):  2010 – 2018 
 

 
                        Source:  Ran Fu, David Feldman, and Robert Margolis, 
                        U.S. Solar Photovoltaic System Cost Benchmark:  Q1 2018, 
(Golden, CO:  National Renewable Energy Laboratory, 
2018), p. viii
 EXHIBIT 10 
Third‐Party, and Customer‐Owned, Residential Solar Systems 
2011 – 2015A and 2016 – 2021E 
 

 
 
https://www.greentechmedia.com/articles/read/small‐distributed‐solar‐companies‐are‐retaking‐the‐industry‐heres‐why#gs.r8c47n 
 EXHIBIT 11
SolarCity Annual Revenues, Losses, and Discretionary Cash Flow ($000)

$730,342 

$399,619 
$255,031 
$126,908  2012 $163,837  2013 2014 2015 2016
($113,726) ($151,758)

($388,726) ($375,230)
($551,558)

($768,822)
($820,347)

($1,403,704)

($2,182,682)

($2,632,065)

Revenues Net loss Discretionary cash flow Source:  Exhibits 13 and 15

 EXHIBIT 12
SolarCity Annual Discretionary Cash Flow Deficits Compared to Funds Raised ($000)

$2,632,065 

$2,394,779 

$2,182,682 
$2,106,272 

$1,489,966 
$1,403,704 

$972,384 

$551,558 
$498,335 
$388,726 

2012  2013  2014  2015  2016 

Discretionary cash flow deficit (i.e., negative number) Cash flow from financing activities Source:  Exhibit 15

 EXHIBIT 13
SolarCity Corporation
Income Statement for the Five Years Ended December 31, 2016 ($000)
2012 2013 2014 2015 2016
Revenue:
Operating leases & solar energy systems incentives $46,098 82,856 173,636 293,543 422,326
Solar energy systems and components sales 80,810 80,981 81,395 106,076 308,016
126,908 163,837 255,031 399,619 730,342
Cost of revenue:
Operating leases & solar energy systems incentives (14,596) (32,745) (92,920) (165,546) (253,653)
Solar energy systems and components sales (84,856) (91,723) (83,512) (115,245) (225,269)
(99,452) (124,468) (176,432) (280,791) (478,922)

Gross profit 27,456 39,369 78,599 118,828 251,420

Operating expenses:
Sales and marketing (69,392) (97,426) (238,608) (457,185) (442,590)
General and administrative (49,075) (89,801) (156,426) (244,508) (228,980)
Pre‐production (69,306)
Restructuring and other (105,922)
Research and development (1,520) (19,162) (64,925) (54,963)
(118,467) (188,747) (414,196) (766,618) (901,761)

Loss from operations (91,011) (149,378) (335,597) (647,790) (650,341)

Interest and other expenses:
Interest expense—recourse debt (14,522) (28,145) (42,162)
Interest expense—non‐recourse debt (13,537) (29,905) (74,527)
Interest expense (20,142) (25,738)
Other int. and amort. of debt discounts and fees, net (27,699) (33,889) (39,965)
Other expense, net (2,519) (1,441) (10,611) (25,767) (13,660)
(22,661) (27,179) (66,369) (117,706) (170,314)

Loss before income taxes (113,672) (176,557) (401,966) (765,496) (820,655)

Income tax benefit (provision) (54) 24,799 26,736 (3,326) 308
Net loss (113,726) (151,758) (375,230) (768,822) (820,347)
Net loss attributable to noncontrolling interests
and redeemable noncontrolling interests (14,391) (95,968) (319,196) (710,492) (1,059,121)
Net income (loss) attributable to parent ($99,335) (55,790) (56,034) (58,330) 238,774
Source:  Form 10‐K
 EXHIBIT 14
Analysis of Income for the Five Years Ended December 31, 2016
Percent of Revenues
2012 2013 2014 2015 2016
Revenue:
Operating leases & solar energy systems incentives 36.3% 50.6% 68.1% 73.5% 57.8%
Solar energy systems and components sales 63.7% 49.4% 31.9% 26.5% 42.2%
100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue:
Operating leases & solar energy systems incentives ‐11.5% ‐20.0% ‐36.4% ‐41.4% ‐34.7%
Solar energy systems and components sales ‐66.9% ‐56.0% ‐32.7% ‐28.8% ‐30.8%
‐78.4% ‐76.0% ‐69.2% ‐70.3% ‐65.6%

Gross profit 21.6% 24.0% 30.8% 29.7% 34.4%

Operating expenses:
Sales and marketing ‐54.7% ‐59.5% ‐93.6% ‐114.4% ‐60.6%
General and administrative ‐38.7% ‐54.8% ‐61.3% ‐61.2% ‐31.4%
Pre‐production 0.0% 0.0% 0.0% 0.0% ‐9.5%
Restructuring and other 0.0% 0.0% 0.0% 0.0% ‐14.5%
Research and development 0.0% ‐0.9% ‐7.5% ‐16.2% ‐7.5%
‐93.3% ‐115.2% ‐162.4% ‐191.8% ‐123.5%

Loss from operations ‐71.7% ‐91.2% ‐131.6% ‐162.1% ‐89.0%

Interest and other expenses:
Interest expense—recourse debt 0.0% 0.0% ‐5.7% ‐7.0% ‐5.8%
Interest expense—non‐recourse debt 0.0% 0.0% ‐5.3% ‐7.5% ‐10.2%
Interest expense ‐15.9% ‐15.7% 0.0% 0.0% 0.0%
Other int. and amort. of debt discounts and fees, net 0.0% 0.0% ‐10.9% ‐8.5% ‐5.5%
Other expense, net ‐2.0% ‐0.9% ‐4.2% ‐6.4% ‐1.9%
‐17.9% ‐16.6% ‐26.0% ‐29.5% ‐23.3%

Loss before income taxes ‐89.6% ‐107.8% ‐157.6% ‐191.6% ‐112.4%

Income tax benefit (provision) 0.0% 15.1% 10.5% ‐0.8% 0.0%
Net loss ‐89.6% ‐92.6% ‐147.1% ‐192.4% ‐112.3%
Net loss attributable to noncontrolling interests
and redeemable noncontrolling interests ‐11.3% ‐58.6% ‐125.2% ‐177.8% ‐145.0%
Net income (loss) attributable to parent ‐78.3% ‐34.1% ‐22.0% ‐14.6% 32.7%

Source:  Exhibit 13
 EXHIBIT 15
SolarCity Corporation
Cash Flow Statement for the Five Years Ended December 31, 2016 ($000)
2012 2013 2014 2015 2016
Cash flow from operating activities
Net loss ($113,726) (151,758) (375,230) (768,822) (820,347)
Adjustments:
Depreciation, amortization, and write‐offs 20,809 41,448 97,880 166,653 308,773
Other non‐cash items 6,797 (26,033) 9,613 7,611 (60,069)
Changes in operating assets and liabilities:
Restricted cash (864) (13,059) (17,699) (48,650) (91,388)
Other net operating assets 126,778 323,917 67,587 (146,676) 154,254
39,794 174,515 (217,849) (789,884) (508,777)
Cash flow from investing activities
Solar energy systems, leased & to be leased (420,153) (716,947) (1,162,963) (1,665,641) (1,611,010)
Purchase of property, plant, and equipment (8,367) (9,126) (22,892) (176,540) (62,895)
Purchases and sales of short‐term investments 0 (138,633) 126,145 11,243
Other, net (3,826) (20,326) (10,698) (26,667)
($428,520) (729,899) (1,344,814) (1,726,734) (1,689,329)
Cash flow from financing activities
Net proceeds from debt:
Borrowings under long‐term debt $152,804 203,228 369,801 1,093,261 1,376,177
Repayments of long‐term debt (77,299) (65,328) (336,557) (215,933) (866,946)
Proceeds from issuance of solar bonds 51,334 3,122 47,146 32,436
Repayments of solar bonds (1,461) (1,820) (14,827)
Proceeds from issuance of solar bonds to related parties 530 165,020 265,010
Repayments of solar bonds to related parties (330) (165,110)
Proceeds from solar asset‐backed notes 262,880 119,790 221,035
Repayments of solar asset‐backed notes (5,932) (15,863) (64,090)
Proceeds from financing obligation 145,846 57,780 44,563 43,125 69,007
Repayment of capital lease obligations (28,442) (1,594) (2,772) (6,036) (10,318)
Proceeds from investments by noncontrolling interests
and redeemable noncontrolling interests in subsidiaries 161,426 362,692 777,963 1,097,487 1,420,819
Distributions paid to noncontrolling interest and
redeemable noncontrolling interests in subsidiaries (144,493) (137,005) (117,125) (109,511) (148,862)
Proceeds from U.S. Treasury grants 113,648 127,476 342
Other proceeds from debt obligations, net (361) (44,918) (14,666) (9,006) (481)
$323,129 552,204 982,149 2,207,330 2,113,850
Net proceeds from common stock equivalents:
Proceeds from issuance of common stock $92,386 174,083
Proceeds from issuance of convertible senior notes 222,518 552,765 99,805
Proceeds from issuance of cv. sr. notes to related parties 12,975
Purchase of capped call options (65,203)
Proceeds from options and warrants 1,952 23,579 20,255 11,650 4,072
Proceeds from issuance of conv. redeemable pfd. stock 80,868
Tax impact of stock option exercise 63,019 (11,650)
$175,206 420,180 507,817 187,449 (7,578)

$498,335 972,384 1,489,966 2,394,779 2,106,272

Net change in cash $109,609 417,000 (72,697) (121,839) (91,834)

Beginning cash 50,471 160,080 577,080 504,383 382,544
Ending cash $160,080 577,080 504,383 382,544 290,710
Source:  Form 10‐K
 EXHIBIT 16
SCTY Quarterly Cash Flow:  September 2011 Through September 2016 ($MM)

$798.7 

$702.8 
$665.1  $670.1 
$638.3 

$535.8 
$495.7 
$429.8  $430.4  $427.1 

$203.9  $197.3  $199.0 

$151.0  $158.4 
$98.9  $117.8  $90.5 
$70.7 
($13.1) $26.4 
($13.0)
($55.3) SEP‐12 DEC‐12 MAR‐13 JUN‐13 SEP‐13 DEC‐13 MAR‐14 JUN‐14 SEP‐14 DEC‐14 MAR‐15 JUN‐15 SEP‐15 DEC‐15 MAR‐16 JUN‐16 SEP‐16
SEP‐11 DEC‐11 MAR‐12 JUN‐12
($83.2) ($86.5) ($85.6)
($130.0) ($131.7) ($113.4)
($163.7)
($220.9) ($215.4)
($302.3)
($371.7)
($418.7)

($514.2) ($496.8)
($582.2)
($652.7) ($637.8)
($730.0)

($823.1)

Discretionary cash flow Cash flow from financing activities Source:  Refinitiv

 EXHIBIT 17
SCTY Quarterly Revenues, Discretionary Cash Flow, and Change in Debt and Equity ($MM)
$797.4 
$751.3 

$667.2 
$637.1 

$534.6 
$484.9  $491.8 
$434.7  $426.7  $426.0 

$195.7  $185.8  $200.6 

$180.2 
$153.2 
$104.5  $113.9  $115.5  $122.6 
$92.8  $98.4  $104.9  $86.5  $102.8 
$63.5  $61.3  $58.3  $71.8  $67.5 
$30.0  $37.9  $48.6  $47.3 
$23.8  $12.9  $5.1 
$0.5  $4.1  $3.3  ($4.8) $3.6  $3.8  $3.0  $1.3  $1.2  $1.1  $1.2 
DEC‐12 MAR‐13 JUN‐13 SEP‐13 DEC‐13 MAR‐14 JUN‐14 SEP‐14
($48.5) DEC‐14 MAR‐15 JUN‐15 SEP‐15 DEC‐15 MAR‐16 JUN‐16 SEP‐16
($86.5) ($85.6)
($131.7) ($113.4)

($220.9) ($215.4)

($302.3)
($371.7)
($418.7)

($514.2) ($496.8)

($582.2)
($652.7) ($637.8)

($730.0)

($823.1)

Revenues Discretionary cash flow Net increase in debt Net issuance of equity Source:  Refinitiv

 EXHIBIT 18
SolarCity Quarterly Cash Flow Deficits and Capital Raised per Dollar of Revenues
Interpretation:  SolarCity incurred deficit discretionary cash flows
(CFO + capital expenditures) of $2.10 to $8.66 for each dollar of
$14.06 
revenues, which was funded by raising debt and equity of $1.86
to $14.06 for each dollar of revenues

$12.05 

$7.36  $7.13 
$7.16 
$6.92 
$6.38  $6.38  $6.41 
$5.99  $5.88 
$5.66  $5.32 
$5.21 
$4.93  $4.82 
$4.67 
$4.39 

$3.30  $3.39  $3.43 

$3.11  $3.25 
$2.67 
$2.33  $2.49 
$2.26  $2.30 
$2.09 
$1.86 

$1.00  $1.00  $1.00  $1.00  $1.00  $1.00  $1.00  $1.00  $1.00  $1.00  $1.00  $1.00  $1.00  $1.00  $1.00 

MAR‐13 JUN‐13 SEP‐13 DEC‐13 MAR‐14 JUN‐14 SEP‐14 DEC‐14 MAR‐15 JUN‐15 SEP‐15 DEC‐15 MAR‐16 JUN‐16 SEP‐16

Discretionary cash flow deficit per dollar of revenues CFF per dollar of revenues Revenues Source: Refinitiv

 EXHIBIT 19
SolarCity Corporation
Balance Sheet as of the Five Years Ended December 31, 2016 ($000)
Dec‐12 Dec‐13 Dec‐14 Dec‐15 Dec‐16
Assets
Current assets:
Cash, cash equivalents, and short‐term investments $160,080 577,080 642,694 393,855 290,710
Restricted cash 7,516 19,182 20,875 39,864 74,717
Accounts and rebates receivable 42,646 43,142 52,729 45,543 77,288
Inventories 87,903 111,394 217,223 342,951 172,713
Prepaid expenses and other current assets 17,272 36,865 68,878 79,925 77,497
315,417 787,663 1,002,399 902,138 692,925
Solar energy systems, leased and to be leased, net 1,002,184 1,682,521 2,796,796 4,375,553 5,828,755
Property, plant, and equipment, net 18,635 22,407 101,914 262,387 244,736
Build‐to‐suit lease asset under construction 284,500 807,593
Goodwill and intangible assets, net 278,169 539,557 517,109 461,989
MyPower customer notes receivable, net of current 488,461 517,244
MyPower deferred costs 215,708 232,369
Other assets 25,606 38,774 145,545 241,262 345,145
$1,361,842 2,809,534 4,586,211 7,287,118 9,130,756
Liabilities
Current liabilities:
Accounts payable $62,986 121,556 237,809 364,973 207,643
Accrued liabilities 52,334 72,157 152,408 276,506 265,987
Current portion of deferred revenue 31,516 59,899 86,238 103,078 124,722
Distributions payable to noncontrolling interests 12,028 20,390 8,552 26,769 24,085
Payable to parent, net 11,693
Current portion of long‐term debt 20,613 7,422 12,931 180,048 617,588
Current portion of solar bonds issued to related parties 43,263 165,120 165,000
Current portion of other funded debt 34,140 56,782 25,890 76,868 102,589
213,617 338,206 567,091 1,193,362 1,519,307
Long term debt, net of current portion 83,533 238,612 290,414 1,006,595 1,092,426
Convertible senior notes 230,000 796,000 881,585 873,194
Convertible senior notes issued to related parties 12,975 11,669
Solar asset‐backed notes, net of current portion 49,780 304,393 395,667 549,205
Solar bonds, net of current portion 35,678 50,179
Solar bonds issued to related parties, net of current portion 100 100,100
Build‐to‐suit lease liability 284,500 807,593
Other funded debt 140,639 78,505 73,379 68,940 81,917
Deferred revenue, net of current portion 204,396 410,161 557,408 1,010,491 1,086,417
Deferred U.S. Treasury grant income, net of current portion 286,884 412,469 397,486 382,283 343,264
Other liabilities and deferred credits 117,846 202,677 257,668 280,379 340,432
1,046,915 1,960,410 3,243,839 5,552,555 6,855,703

Redeemable and Noncontrolling Interests in Subsidiaries 44,709 186,788 320,935 343,623

Equity
Shareholders' or parent's (post‐Merger) equity 214,320 617,598 745,642 878,566 1,223,285
Noncontrolling interests in subsidiaries 100,607 186,817 409,942 535,062 708,145
314,927 804,415 1,155,584 1,413,628 1,931,430

Total Liabilities and Equity $1,361,842 2,809,534 4,586,211 7,287,118 9,130,756

Source:  Form 10‐K
 EXHIBIT 20
SolarCity Corporation
Composition of the Balance Sheet as of the Five Years Ended December 31, 2016
Dec‐12 Dec‐13 Dec‐14 Dec‐15 Dec‐16
Assets
Current assets:
Cash, cash equivalents, and short‐term investments 11.8% 20.5% 14.0% 5.4% 3.2%
Restricted cash 0.6% 0.7% 0.5% 0.5% 0.8%
Accounts and rebates receivable 3.1% 1.5% 1.1% 0.6% 0.8%
Inventories 6.5% 4.0% 4.7% 4.7% 1.9%
Prepaid expenses and other current assets 1.3% 1.3% 1.5% 1.1% 0.8%
23.2% 28.0% 21.9% 12.4% 7.6%
Solar energy systems, leased and to be leased, net 73.6% 59.9% 61.0% 60.0% 63.8%
Property, plant, and equipment, net 1.4% 0.8% 2.2% 3.6% 2.7%
Build‐to‐suit lease asset under construction 0.0% 0.0% 0.0% 3.9% 8.8%
Goodwill and intangible assets, net 0.0% 9.9% 11.8% 7.1% 5.1%
MyPower customer notes receivable, net of current 0.0% 0.0% 0.0% 6.7% 5.7%
MyPower deferred costs 0.0% 0.0% 0.0% 3.0% 2.5%
Other assets 1.9% 1.4% 3.2% 3.3% 3.8%
100.0% 100.0% 100.0% 100.0% 100.0%
Liabilities
Current liabilities:
Accounts payable 4.6% 4.3% 5.2% 5.0% 2.3%
Accrued liabilities 3.8% 2.6% 3.3% 3.8% 2.9%
Current portion of deferred revenue 2.3% 2.1% 1.9% 1.4% 1.4%
Distributions payable to noncontrolling interests 0.9% 0.7% 0.2% 0.4% 0.3%
Payable to parent, net 0.0% 0.0% 0.0% 0.0% 0.1%
Current portion of long‐term debt 1.5% 0.3% 0.3% 2.5% 6.8%
Current portion of solar bonds issued to related parties 0.0% 0.0% 0.9% 2.3% 1.8%
Current portion of other funded debt 2.5% 2.0% 0.6% 1.1% 1.1%
15.7% 12.0% 12.4% 16.4% 16.6%
Long term debt, net of current portion 6.1% 8.5% 6.3% 13.8% 12.0%
Convertible senior notes 0.0% 8.2% 17.4% 12.1% 9.6%
Convertible senior notes issued to related parties 0.0% 0.0% 0.0% 0.2% 0.1%
Solar asset‐backed notes, net of current portion 0.0% 1.8% 6.6% 5.4% 6.0%
Solar bonds, net of current portion 0.0% 0.0% 0.0% 0.5% 0.5%
Solar bonds issued to related parties, net of current portion 0.0% 0.0% 0.0% 0.0% 1.1%
Build‐to‐suit lease liability 0.0% 0.0% 0.0% 3.9% 8.8%
Other funded debt 10.3% 2.8% 1.6% 0.9% 0.9%
Deferred revenue, net of current portion 15.0% 14.6% 12.2% 13.9% 11.9%
Deferred U.S. Treasury grant income, net of current portion 21.1% 14.7% 8.7% 5.2% 3.8%
Other liabilities and deferred credits 8.7% 7.2% 5.6% 3.8% 3.7%
76.9% 69.8% 70.7% 76.2% 75.1%

Redeemable and Noncontrolling Interests in Subsidiaries 1.6% 4.1% 4.4% 3.8%

Equity
Shareholders' or parent's (post‐Merger) equity 15.7% 22.0% 16.3% 12.1% 13.4%
Noncontrolling interests in subsidiaries 7.4% 6.6% 8.9% 7.3% 7.8%
23.1% 28.6% 25.2% 19.4% 21.2%

Total Liabilities and Equity 100.0% 100.0% 100.0% 100.0% 100.0%

Source:  Exhibit 19
 EXHIBIT 21
Composition of the SolarCity Balance Sheet as of September 30, 2016 ($000)
$9,000,000
$8,680,828 $8,680,828

Other assets, $508,199 
Shareholders' equity, $971,932 
$8,000,000 Intangible assets, $472,557 
MyPower notes receivable, 
$526,703  Non‐controlling interests, 
$7,000,000 $1,026,778 

Other liabilities, $877,201 
$6,000,000

Build‐to‐suit lease liability, 
$752,425 
$5,000,000

Solar energy systems,
$5,493,026  Deferred revenues, $1,564,637 
$4,000,000

$3,000,000

$2,000,000
Funded debt, $3,487,855 
Build‐to‐suit leased asset, 
$752,425 
$1,000,000 Property, plant, and equipment, 
$250,934 
Other current assets, $356,563 
Cash & restricted cash, $320,421 
$0
Assets Liabilities and Equity Source:  Form 10‐Q
 EXHIBIT 22
SolarCity Capitalization as of the Five Years Ended December 31, 2016 ($000)

$8,113,312

$1,223,285 

$6,298,158 $1,051,768 

$878,566 

$1,211,139 
$855,997 

$357,612 
$3,941,676
$1,113,569  $622,194 
$745,642 
$299,836  $807,593 
$596,730  $374,956 
$2,483,572 $284,500  $568,833 
$643,646  $409,531 
$617,598 
$560,874 
$231,526  $412,816 
$137,724  $894,560 
$1,154,694 $470,060  $26,450 
$306,372 
$214,320  $427,809 
$100,607  $1,710,014 
$235,912  $207,610  $777,726 
$52,935  $1,186,643 
$298,260 
$201,449  $230,000 
$246,034  $294,570 
$104,146 
DEC‐12 DEC‐13 DEC‐14 DEC‐15 DEC‐16

Long‐term debt Convertible senior notes Solar asset‐backed notes Build‐to‐suit liability Other funded debt

Deferred UST grant income Deferred revenue Noncontrolling int. in subs. Shareholders' equity Source:  Exhibit 23
 EXHIBIT 23
SolarCity Corporation
Debt and Equity Funding as of the Five Years Ended December 31, 2016
Dec‐12 Dec‐13 Dec‐14 Dec‐15 Dec‐16
$000
Deferred U.S. Treasury grant income $298,260 427,809 412,816 299,836 357,612
Deferred revenue 235,912 470,060 643,646 1,113,569 1,211,139
Long‐term debt 104,146 246,034 294,570 1,186,643 1,710,014
Solar bonds:
Due to related parties 530 165,220 265,100
Other 3,122 48,867 66,761
Solar asset‐backed notes 52,935 306,372 409,531 568,833
Financing obligation 154,650 107,964 103,068 103,419 133,948
Convertible senior notes:
Due to related parties 12,975 11,669
Other 230,000 777,726 881,585 549,205
Capital lease obligation 28,688 27,126 27,791 39,475 34,777
Liability for receipts from an investor 18,111 72,520 3,213 17,975 76,828
Liability for assigned note receivable 44,780
Build‐to‐suit liability 26,450 284,500 807,593
839,767 1,634,448 2,599,304 4,563,595 5,838,259
Redeemable noncontrolling interests in subsidiaries 44,709 186,788 320,935 343,623
Shareholders' or parent's (post‐Merger) equity 214,320 617,598 745,642 878,566 1,223,285
Noncontrolling interests in subsidiaries 100,607 186,817 409,942 535,062 708,145
$1,154,694 2,483,572 3,941,676 6,298,158 8,113,312

Percent of Total
Deferred U.S. Treasury grant income 25.8% 17.2% 10.5% 4.8% 4.4%
Deferred revenue 20.4% 18.9% 16.3% 17.7% 14.9%
Long‐term debt 9.0% 9.9% 7.5% 18.8% 21.1%
Solar bonds: 0.0% 0.0% 0.0% 0.0% 0.0%
Due to related parties 0.0% 0.0% 0.0% 2.6% 3.3%
Other 0.0% 0.0% 0.1% 0.8% 0.8%
Solar asset‐backed notes 0.0% 2.1% 7.8% 6.5% 7.0%
Financing obligation 13.4% 4.3% 2.6% 1.6% 1.7%
Convertible senior notes: 0.0% 0.0% 0.0% 0.0% 0.0%
Due to related parties 0.0% 0.0% 0.0% 0.2% 0.1%
Other 0.0% 9.3% 19.7% 14.0% 6.8%
Capital lease obligation 2.5% 1.1% 0.7% 0.6% 0.4%
Liability for receipts from an investor 1.6% 2.9% 0.1% 0.3% 0.9%
Liability for assigned note receivable 0.0% 0.0% 0.0% 0.0% 0.6%
Build‐to‐suit liability 0.0% 0.0% 0.7% 4.5% 10.0%
72.7% 65.8% 65.9% 72.5% 72.0%
Redeemable noncontrolling interests in subsidiaries 0.0% 1.8% 4.7% 5.1% 4.2%
Shareholders' or parent's (post‐Merger) equity 18.6% 24.9% 18.9% 13.9% 15.1%
Noncontrolling interests in subsidiaries 8.7% 7.5% 10.4% 8.5% 8.7%
100.0% 100.0% 100.0% 100.0% 100.0%
Source:  Form 10‐K
 EXHIBIT 24
SolarCity Corporation
Balance Sheet as of the Merger Date and December 31, 2016 ($000)
11/16/16 1 12/31/16 2 Ref3 11/16/16 1 12/31/16 2 Ref3
Assets Liabilities
Current assets: Accounts payable $230,078 207,643
Cash and cash equivalents $213,523 290,710 Accrued liabilities 284,765 265,987 f
Restricted cash 129,196 74,717 Payable to parent, net NA 11,693
Inventory 191,878 172,713 a Distributions payable NA 24,085
Accounts receivable, net 74,619 66,949 Deferred UST grant income NA 357,612
Rebates receivable, net NA 10,339 Deferred revenue 271,128 1,211,139
Prepaid expenses & other current assets NA 77,497 Debt and capital leases 3,403,840 See footnotes
Solar energy systems, leased & to be leased 5,781,496 5,828,755 b Long‐term debt NA 1,710,014 g
Property, plant, and equipment 1,056,312 244,736 c Solar bonds NA 66,761 g
Built‐to‐suit lease asset under construction NA 807,593 d Solar bonds issued to related parties NA 265,100 g
MyPower notes receivable, net of current 498,141 517,244 Solar asset‐backed notes NA 568,833 g
Intangible assets 356,510 461,989 e Financing obligation 121,290 133,948 g
MyPower deferred costs NA 232,369 Convertible senior notes NA 873,194 g
Other assets 199,864 345,145 Convertible senior notes—related parties NA 11,669 g
$8,501,539 9,130,756 Build‐to‐suit lease liability NA 807,593 d
Long‐term deferred tax liability NA 481 h
Other liabilities 950,423 339,951 i
5,261,524 6,855,703
Noncontrolling interests in subsidiaries 1,066,517 1,051,768 j
Parent's equity 2,173,498 1,223,285
$8,501,539 9,130,756
Other
Variable interest entity (VIE)arrangements k
Lease pass‐through fund arrangements l

1
Acquisition method balance sheet from Tesla Form 10‐K for the year ended 12/31/18, p. 100
2
SolarCity balance sheet, based on adjusted historical cost, as reported in the SolarCity Form 10‐K for the year ended 12/31/16, pp. 39 and 40
3
See the following page
 EXHIBIT 24
SolarCity Corporation
Footnotes to Balance Sheet as of the Merger Date and December 31, 2016 ($000)
Ref
a
Composition of inventory—12/31/16:
Raw materials $140,888 81.6%
Work in progress 31,825 18.4%
$172,713 100.0%
Source:  SolarCity Form 10‐K for the year ended 12/31/16, p. 65
b
Solar energy systems, leased & to be leased—11/16/19 $5,781,496 Acquisition method balance sheet
Fair value per KPMG valuation analysis as of 3/31/16:
Total value indication for non‐Residential $297,308 TESLA00600417
Total value indication for other customer types 174,306 TESLA00600417
Residential solar energy systems 3,106,025 TESLA00600458
Residential PPA/lease contracts (45,747) TESLA00600459
Unreconciled difference (128,559)
$3,403,333 TESLA00600825
÷
Net book value $3,564,068 TESLA00600825
Fair value as percent of net book value 95.5%
KPMG assumed that initial direct costs, $398 MM at 3/30/16 were worthless, and book value of held for lease assets, Google capital lease asset, construction in 
progress, and systems held at corporate and other adjustments approximated fair value.  Applying the same approach to balance sheet as of 12/31/16 would 
result in the following:
Book Value Adj. "Fair Value" Comments
Solar energy systems leased to customers $5,008,487
Accumulated depreciation (447,011)
4,561,476 (205,266) 4,356,210 95.5% of net book value; see above
Initial direct costs 539,213 (539,213) 0
Solar energy systems under construction 404,439 404,439
Solar energy systems to be leased to customers 323,627 323,627
$5,828,755 (744,479) 5,084,276
Fair value as a percent of net book value 87.2%
Source of book value amounts:  SolarCity Form 10‐K for the year ended 12/31/16, p. 65
1 of 7
 EXHIBIT 24
SolarCity Corporation
Footnotes to Balance Sheet as of the Merger Date and December 31, 2016 ($000)
Ref
c
Acquisition method balance sheet appears to include built‐to‐suit lease asset under construction
Asset matches liability in amount
Composition of gross property, plant and equipment, 12, 23/16:
Manufacturing facilities—Freemont, CA:
Manufacturing and lab equipment $91,877 25.6%
Leasehold improvements 55,883 15.6%
Manufacturing facilities—China:
Manufacturing and lab equipment 21,789 6.1%
Land and buildings 6,786 1.9%
Vehicles 34,214 9.5%
Computer hardware and software 57,008 15.9%
Furniture and fixtures 15,285 4.3%
Leasehold improvements—other 29,661 8.3%
Other 45,773 12.8%
$358,276 100.0%
Source:  SolarCity Form 10‐K for the year ended 12/31/16, p. 63
d Build‐to‐suit lease arrangement is with the Research Foundation for the State University of New York to construct a 1 million SF manufacturing facility with 
capacity of 1 gigawatt.  SolarCity is required to achieve certain milestones, including hiring personnel in the facility, and spending $5 billion in capital and 
operational expenditures in the State of NY over 10 years.  If the Company fails to meet milestones, it must pay a $41.2 million program payment for each year 
Source:  SolarCity Form 10‐K for the year ended 12/31/16, p. 90
e
Intangible assets: KPMGe1 Acq. Methode2
Developed technology $270,000 113,361
Trade name 103,900 43,500
Favorable contracts and leases, net 112,817
In‐process R&D 86,832
$373,900 356,510
e1
TESLA00600813
e2
Tesla Form 10‐K for the year ended 12/31/18, p. 101

2 of 7
 EXHIBIT 24
SolarCity Corporation
Footnotes to Balance Sheet as of the Merger Date and December 31, 2016 ($000)
Ref
f
Accrued and other current liabilities, 12/31/16:
Accrued expenses $96,380
Accrued compensation 77,773
Accrued warranty 32,691
Accrued professional service fees 22,965
Current portion of capital lease obligation 11,104
Other current liabilities 25,074
$265,987
Source:  SolarCity Form 10‐K for the year ended 12/31/16, p. 67
g
Funded debt—12/31/16:
Long‐term debt $1,710,014
Solar bonds 66,761
Solar bonds issued to related parties 265,100
Solar asset‐backed notes 568,833
Financing obligation 133,948
Convertible senior notes 873,194
Convertible senior notes—related parties 11,669
$3,629,519

3 of 7
 EXHIBIT 24
SolarCity Corporation
Footnotes to Balance Sheet as of the Merger Date and December 31, 2016 ($000)
Ref
Unpaid Net Carrying Value Unused Interest
Description Principal Current Long‐Term Total Commit. Rate(s) Originated Maturity
Recourse debt:
Secured revolving facility $364,000 360,957 360,957 24,305 4 ‐ 6% 1/17 ‐ 12/17
Vehicle and other loans 23,771 17,235 6,536 23,771 2.9% ‐ 7.6% 3/17 ‐ 6/19
2.75% convertible notes 230,000 226,323 226,323 2.75% 10/13 11/18
1.625 senior notes 566,000 557,112 557,112 1.625% 9/14 11/19
Zero‐coupon, convertible notes 113,000 101,428 101,428 12/15 12/20
Solar Bonds 332,060 181,582 150,279 331,861 1.1% ‐ 6.5% Beg. 10/14 1/31
$1,628,831 559,774 1,041,678 1,601,452 24,305
Non‐recourse debt:
Term loan 75,467 73,825 73,825 52,173 4.2% 3/31/16 12/17
Term loan 183,388 5,860 171,994 177,854 4.5% 1/16 1/21
MyPower revolving credit facility 133,762 133,578 133,578 56,238 4.1% ‐ 6.6% 1/9/15 1/17
Revolving aggregation credit facility 424,757 413,792 413,792 335,243 4.0% ‐ 4.8% 5/4/15 12/18
Solar renewable energy cr. term loan 38,124 12,491 24,565 37,056 6.6% ‐ 9.9% 3/31/16 4/17 ‐ 7/21
Cash Equity Debt I 119,753 3,272 115,464 118,736 5.65% 5/2/16 7/33
Cash Equity Debt II 206,901 5,376 198,220 203,596 5.25% 9/8/16 7/34
Cash Equity Debt III 170,000 4,994 161,855 166,849 5.81% 12/16/16 1/35
Solar ABN, Series 2013‐1 41,899 3,330 35,826 39,156 4.8% 11/13 11/38
Solar ABN, Series 2014‐1 60,768 3,016 55,197 58,213 4.6% 4/14 4/44
Solar ABN, Series 2014‐2 186,851 7,055 173,625 180,680 4% Cl A; 5.4% Cl B 7/14 7/44
Solar ABN, Series 2015‐1 119,199 1,511 112,927 114,438 4.2% Cl A; 5.6% Cl B 8/15 8/45
Solar ABN, Series 2016‐1 50,119 1,202 44,313 45,515 5.3% Cl A; 7.5% Cl B 2/16 9/46
Solar ABN, Series 2016‐A 140,586 3,514 127,317 130,831 4.8% Cl A; 6.9% Cl B 11/21/16 9/48
$1,951,574 259,024 1,635,095 1,894,119 443,654

$3,580,405 818,798 2,676,773 3,495,571 467,959

4 of 7
 EXHIBIT 24
SolarCity Corporation
Footnotes to Balance Sheet as of the Merger Date and December 31, 2016 ($000)
Ref
Maturity Schedule:
Recourse, Non‐ Conv.
Excl. Conv. Recourse Senior
Sr. Notes Debt Notes Total
2017 $563,017 265,567 828,584
2018 131,564 479,792 230,000 841,356
2019 781 52,978 566,000 619,759
2020 14,994 50,830 113,000 178,824
2021 2,326 195,599 197,925
After 2021 7,149 906,808 913,957
$719,831 1,951,574 909,000 3,580,405
Source:  SolarCity Form 10‐K for the year ended 12/31/16, pp. 69 ‐ 76
h
Deferred tax assets:
Gross balance $897,593
Valuation allowance (422,889)
$474,704
Deferred tax liabilities:
Depreciation and amortization (269,685)
Other (205,500)
(475,185)
Net deferred tax assets (liability) ($481)
Source:  SolarCity Form 10‐K for the year ended 12/31/16, pp. 86 ‐ 87

5 of 7
 EXHIBIT 24
SolarCity Corporation
Footnotes to Balance Sheet as of the Merger Date and December 31, 2016 ($000)
Ref
i
Other liabilities:
Deferred gain on sale‐leaseback, net of current portion $48,304
Deferred rent expense 24,110
Interest rate swaps liability 12,109
Deferred solar renewable energy credits income 19,390
Capital lease obligations 34,777
Liability for receipts from an investor 76,828
Participation interest 16,713
Liability for assigned notes receivable 44,780
Other noncurrent liabilities 62,940
$339,951
Source:  SolarCity Form 10‐K for the year ended 12/31/16, p. 67
j
Noncontrolling interests in subsidiaries:
Redeemable $343,623 Redeemable at the option of the holder
Other 708,145
$1,051,768

6 of 7
 EXHIBIT 24
SolarCity Corporation
Footnotes to Balance Sheet as of the Merger Date and December 31, 2016 ($000)
Ref
k
Variable interest entities: SolarCity,
Consolidated VIE Net of VIE
Cash and cash equivalents $290,710 (44,091) 246,619
Restricted cash 74,717 (20,916) 53,801
Solar energy systems, net 5,828,755 (3,975,214) 1,853,541
Other assets 2,936,574 (93,251) 2,843,323
9,130,756 (4,133,472) 4,997,284
Funded debt (3,629,519) 563,004 (3,066,515)
Other liabilities (3,226,184) 729,349 (2,496,835)
Net assets $2,275,053 (2,841,119) (566,066)
Notes:
SolarCity is contractually committed to compensate certain fund investors for any losses that they may suffer in certain limited circumstances resulting from reductions in U.S. Treasury grants or
ITCs.

The Company is contractually required to make payments to one fund investor to ensure a specified minimum internal rate of return.  No payment had been made through 12/31/16.
Sources:  SolarCity Form 10‐K for the year ended 12/31/16, pp. 40, 77 ‐ 78 and p. 91
l
Lease pass‐through fund arrangements:
8 in place as of 12/31/16 structured as master leases with initial term of 10 ‐ 25 years.  
Cost of systems as of 12/31/16 was $963.4 million, or $886.6 million net of accumulated depreciation.
Source:  SolarCity Form 10‐K for the year ended 12/31/16, pp. 78 and 79

7 of 7
 EXHIBIT 25
SolarCity Scheduled Debt Maturities as of December 31, 2016 ($000)

$913,957

$841,356
$828,584

$265,567 

$619,759
$479,792  $52,978 
$781 

$906,808 

$131,564 
$563,017  $566,000 

$197,957
$178,824
$50,830 
$230,000  $14,994 
$195,599 
$113,000 

$2,326  $7,149 
2017 2018 2019 2020 2021 AFTER 2021

Convertible Senior Notes Other Recourse Debt Non‐Recourse Debt Source:  SolarCity 2016 Form 10‐K, p. 76

 $0
$10
$20
$30
$40
$50
$60
$70
$80
$90
Dec‐12
Jan‐13
Feb‐13
Mar‐13
Apr‐13
May‐13
Jun‐13
Jul‐13
Aug‐13
Sep‐13
Oct‐13
Nov‐13
Dec‐13
Jan‐14
Feb‐14
Mar‐14
Apr‐14
May‐14
Jun‐14
Jul‐14
Aug‐14
Sep‐14
Oct‐14
Nov‐14
Dec‐14
EXHIBIT 26

Jan‐15
Feb‐15
Mar‐15
Apr‐15
May‐15
Jun‐15
Jul‐15
Aug‐15
Sep‐15
SCTY Monthly Stock Chart from IPO to Merger Date

Oct‐15
Nov‐15
Dec‐15
Jan‐16
Feb‐16
Mar‐16
Apr‐16
May‐16
Jun‐16
Jul‐16
Aug‐16
Sep‐16
Oct‐16
Source:  Refinitiv

Nov‐16
 EXHIBIT 27
Polynomial Trendline Analysis of SolarCity Month‐End Stock Price:
January 2014 through May 2016
$90

$80

$70

$60

$50
y = ‐4E‐05x2 + 3.4697x ‐ 71834
R² = 0.7479
$40

$30

$20

$10

Source: Refinitiv
$0
Jan‐14 Apr‐14 Jul‐14 Oct‐14 Jan‐15 Apr‐15 Jul‐15 Oct‐15 Jan‐16 Apr‐16 Jul‐16
 EXHIBIT 28
SCTY Stock Chart:  January 4 ‐ November 18, 2016
35,000,000 $60

30,000,000
$50

25,000,000
$40

20,000,000
Merger 
$30
consideration 
finalized
15,000,000 Merger 
closed
Proposed $20
merger 
10,000,000
announced

$10
5,000,000

0 $0

Volume High Low Close Source:  Refinitiv

 EXHIBIT 29
Index of SCTY and TSLA Stock Prices After Exchange Ratio Was Announced
120.00

100.00

80.00

60.00

40.00

20.00

8/1/16 closing price for each stock = 100.00 Source: Refinitiv

0.00
8/1/16 8/8/16 8/15/16 8/22/16 8/29/16 9/5/16 9/12/16 9/19/16 9/26/16 10/3/16 10/10/16 10/17/16 10/24/16 10/31/16 11/7/16 11/14/16

SCTY TSLA
 EXHIBIT 30 
Going‐Concern Flowchart Adapted from FASB ASC Subtopic 205‐40: 
Presentation of Financial Statements—Going Concern 
 
• Current financial condition, including its 
liquidity sources (e.g., available liquid funds 
and available access to credit) 
Are there conditions or  • Conditional and unconditional obligations 
events, considered in the  due or anticipated within one year 
aggregate, that raise  • Funds necessary to maintain the entity’s 
substantial doubt about an  operations considering it current financial 
entity’s ability to continue  condition, obligations, and other expected 
as a going concern within  cash flows within one year 
one year?  • Other conditions and events, when 
considered in conjunction with the above, 
that may adversely affect the entity’s ability 
to meet its obligations 

Yes 

Consider management’s plans 
intended to mitigate the adverse 
conditions or events 

• Is it probable that management’s plans will 
be effectively implemented with one year? 
• Is it probable that management’s plans, 
Is it probable that  when implemented, will mitigate the 
management’s plans  relevant conditions or events that raise 
will be effectively  substantial doubt about the entity’s ability 
implemented?  to continue as a going concern? 

No 
Adapted from Presentation of Financial 
Statements—Going Concern (Subtopic 
205‐40), (Norwalk:  Financial Accounting 
Not a going concern  Standards Board, 2014), p. 12 
 EXHIBIT 31
Message
Sent: 7/9/2016 10:30:15 PM

First let me say I am really sorry that there is a surprise that we are running super low on cash. I thought I have really
communicated but clearly not well enough. Help me understand where I went wrong

• I gave you detailed forecast of cash balance and interweek challenges

o April to Nov our interweek balances are below our convents
• I told you that we are running crazy close and that the team thinks I am crazy for not raising capital
• I mentioned that we need to raise capital but the timing did not work because of the acquisition
• Originally you wanted to do the acquisition May and then you asked me if we could make it to June
• I told you we would need $200m loan and you even mentioned it to the your investor calls

Now what has gone wrong over the last 30 days. This is all mainly around the tight liquidity:
• Tax equity investors are funding later
• Debt investor fund later
• Because of tight liquidity BAML only allows us to get a 60% advance rate vs 70% on the cash flows which
reduces the day one cash from $2.70 to $2.50. I think we can get back to 70% advance rates once we improve
our liquidity.
• Sales volume is lower. This reduces the MW's we can install.
•

Lyndon Rive
CEO, Co-Founder I SolarCity

t: 650.963.5102

Get control over energy costs with America's #1 solar provider.

CA CSLB 888104, MA HIC 168572/EL-1136MR. Click here to view our complete list of license numbers by state.

CONFIDENTIAL TESLA00082877
 EXHIBIT 32

Updated 2016 Liquidity by Month

4.50

350

300

250

JOO

150

100

50

0 I

• Intra-month SCTY low assumed to be $150m less than Consolidated end of month balance, basec
historical average ,data
• Revolver Liquidity Covenant as of 12/31/15 was $116.2m, not currently expected to move significa
• May - August are at risk of tripping covenant; covenant was not tripped in February

CONFIDENTIAL TESLA00022463
 EXHIBIT 33 
Simplified Example of the  
Absolute Priority Rule of the Bankruptcy Code 
 
 

Secured Claims 

Superpriority Claims 

Unsecured Claims 

Senior Subordinated Claims 

Junior Subordinated Claims 

Preferred Stock 

Common Stock 
 EXHIBIT 34
SolarCity Historical and Projected Financials

-
Confidential

($ in miDions)
Yca1r Endin" Dcccmhcr .31,
2013A 20l➔A 2015A 2016E 2017E 2018E 201'.IE 2020E
---- 2021E 2022E 2023C 202➔E 202.rn 2026E
----
Deployed Projcets(MW) 263MW 502MW 778MW 951MW 1,212MW 1,485MW 1,745MW 2,006MW 2,257MW 2,257MW 2,483MW 2,607MW 2,737MW 2,806MW 9.8%
%Growl/; 90.9% 55.0% 22.2% 27.5% 22.5% 17.5% 15.0% 12.5% 0.0% 10.0% 5.0'% 5.0% 2.5%
Total Revenue $164 $255 $400 $591 $812 $1,122 $1,486 $1,904 $2,377 $2,880 $3,387 $3,933 $4,507 $5,111 22.7%
% Growlh 55.7% 56.7% 47.9% 37.}% 38.3% 32.4% 28.1% 24.9% 21. 1 % 17.6% 16.1% 14.6% 13.4%

Total COGS 124 174 278 3 3 352 472 611 771 950 1,142 1,345 1,566 1,869 2,102

Adj. Gross Profit $40 $81 $122 $218 $459 $650 $875 $1,133 $1,427 $1,737 $2,042 $2,367 $2,638 $3,009 23.2%
%1\ilargin U..5% }1.1% 30.4% }6.8% 56.6% 57.9% 58.9% 59.5% 60.0% 60.3% 60.3% 60.2% 58.5% 58.9%

Sales and laLketing 97 239 45 523 56 625 698 762 815 74 809 8"15 822 821
G&A 90 156 245 3 386 396 406 416 426 437 448 459 4 0 482
R&D 2 19 65 81 33 34 34 36 37 38 39 4-0 41 42
SBC from Ope.r. Exp.<1> (20) (63) (84) (108) (109) (l"l8) (128) (138)
(l4Z2 (144) (l5l) (155) (158) (161)
Total Oper. Exp. $169 $351 $683 $873 $877 $937 $1,010 $1,076 $1,131 $1,104 $1,144 $1,160 $1,175 $1,185 3.4%
%Margi11 102.9% /}7.6% 170.9% 147.7% 108.0% 83.4% 67.9% 56.5% .Jl.6% 38.4% 33.8% 29.5% 26.1% 23.2%

Adj. Bl'JDA (87) (172) (395) (387) (1.,8) 53 295 586 933 1,381 1,758 2,183 2,558 3,039 NM
%Margin 1M NM NM M M 4.7% 19.8% 30.8% 39.2% 48.0% 51.9% 55.5% 56.7% 59.5%

Adj. Operating Income ($128) ($270) ($561) ($655) ($417) ($287) ($135) $57 $295 $633 $898 $1,207 $1,463 $1,824 NM
%1\lfargin \II if M M NM NI \II 3.0% 12.4% 22.0% 26.5% 30.7% 32.5% 35.7%

Adj. Net Income ($152) ($375) ($769) ($879) ($679) ($623) ($540) ($427) ($283) ($72) $79 $285 $443 $439 NM
%1Wargin 1'\J"M M 1 if M UL M M M J1 ul 2.3% 7.3% 9.8% 8.6%

----1
rn
(I)
r
► Source: Company filings, Mocgan Smnley (5/12/2016)
0 ote: Assumes solru: ITC program t.ennu,otes in 2026
0
0 (1) Pcojected stock-bnsed compenS11tion is allocated to COGS and operating expendituces pro rat:, based on 2015 levels
0
0
0 EvERCORE 3
0
co
 EXHIBIT 35
Criteria for Evaluating Insolvency

Current liabilities
exceed current assets

Balance sheet tests

Unable to pay debts Probable liability of

(including contingent debts exceeds present
INSOLVENT
liabilities) as they fair saleable value of
come due assets

Cash flow tests

Unreasonably small
capital
 EXHIBIT 36
SolarCity Corporation
Total Assets at Alternative Dates ($000)
9/30/161 11/21/16 12/31/16 3
2
Book Value Book Value Fair Value2 Book Value
Current assets:
Cash and short‐term investments $259,342 213,523 213,523 290,710
Restricted cash 61,079 129,196 129,196 74,717
Accounts and rebates receivable 77,111 84,637 84,637 77,288
Inventories 206,205 181,825 192,303 172,713
Prepaid expenses and other current assets 73,247 74,900 74,900 77,497
676,984 684,081 694,559 692,925
Tangible assets and other assets:
Property, plant, and equipment, net 250,934 242,945 214,376 244,736
Build‐to‐suit lease asset under construction 752,425 802,008 802,008 807,593
1,003,359 1,044,953 1,016,384 1,052,329
Identifiable tangible and intangible assets:
Solar energy systems, leased and to be leased, net 5,493,026 5,695,768 5,785,279 5,828,755
Favorable power purchase agreements/leases 0 0 68,030
Leasehold interest 0 0 1,530
PBI intangible 0 0 69,650
FIT intangible 0 0 3,230
Technology 127,742 124,946 243,900 123,116
Trade names and trademarks 14,797 14,307 43,500 13,915
Other intangible assets 8,153 7,912 0 3,093
Goodwill 321,865 321,865 (93,247) 321,865
5,965,583 6,164,798 6,121,872 6,290,744
MyPower customer notes receivable, net of current 526,703 520,696 509,712 517,244
MyPower deferred costs 236,574 233,965 0 232,369
Other assets 271,625 213,091 213,091 345,145
Other accounting adjustments, net 0 0 971
$8,680,828 8,861,584 8,556,589 9,130,756

1
SolarCity Form 10‐Q for the quarter ended September 30, 2016, p. 2
2
KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non‐controlling Interests of SolarCity Corporation , p. 4 (PWC‐TESLA00000594)
3
SolarCity Form 10‐K for the year ended December 31, 2016, p. 39
 EXHIBIT 37
SolarCity Corporation
Liabilities and Equity at Alternative Dates ($000)
9/30/161 11/21/16 12/31/16 3
2
Book Value Book Value Fair Value2 Book Value
Liabilities
Current liabilities:
Accounts payable $253,077 230,078 230,078 207,643
Payable to parent, net 11,693
Accrued liabilities 236,951 251,229 251,229 265,987
Distributions payable to noncontrolling interests 25,106 27,632 27,632 24,085
Current portion of deferred revenue4 113,908 119,315 28,836 124,722
Current portion of deferred US Treasury grant income 14,549 14,348 0 14,348
Current portion of long‐term debt5 285,507 285,507 285,507 617,588
Current portion of solar bonds issued to related parties 165,100 165,100 165,100 165,000
Current portion of solar bonds4 17,385 16,984 16,984 16,582
4
Current portion of asset‐backed notes 19,658 19,643 19,643 19,628
4
Current portion of financing obligation 44,953 48,492 48,492 52,031
1,176,194 1,178,328 1,073,500 1,519,307
Long term debt, net of current portion 1,283,540 1,406,561 1,427,758 1,092,426
Convertible senior notes 884,679 885,910 766,777 873,194
Convertible senior notes issued to related parties 4 12,978 12,324 12,324 11,669
Solar asset‐backed notes, net of current portion 550,695 550,348 561,567 549,205
Solar bonds, net of current portion4 51,488 50,186 48,717 50,179
5
Solar bonds issued to related parties, net of current portion 100,100 100,100 100,100 100,100
Build‐to‐suit lease liability 752,425 802,008 802,008 807,593
Financing obligation, net of current portion 71,772 70,314 72,798 81,917
Deferred revenue, net of current portion4 1,084,442 1,084,828 245,688 1,086,417
2
Deferred U.S. Treasury grant income, net of current portion 351,738 344,859 0 343,264
Power purchase agreements, unfavorable 27,524
Other liabilities and deferred credits 362,067 208,795 208,795 340,432
6,682,118 6,694,559 5,347,555 6,855,703

Redeemable and Noncontrolling Int. in Subsidiaries 2 284,158 347,033 315,943 343,623

Equity
Shareholders'  equity 971,932 2,927 2,142,517 1,223,285
Noncontrolling interests in subsidiaries2 742,620 1,817,065 750,574 708,145
1,714,552 1,819,992 2,893,091 1,931,430

Total Liabilities and Equity $8,680,828 8,861,584 8,556,589 9,130,756

1
SolarCity Form 10‐Q for the Quarter Ended September 30, 2016, pp. 3, 13. and 14
2
KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non‐controlling Interests of SolarCity Corporation , p. 4 (PWC‐TESLA00000594)
3
SolarCity Form 10‐K for the Year Ended December 31, 2016, pp. 39 and 62
4
Since KPMG fair value analysis only reflects the total amounts, assumptions were made to allocate total among current and noncurrent amounts
 Book value is assumed to be the average of 9/30/16 and 12/31/16
 Fair value is assumed to be same proportion of total as 9/30/16
 Residual that is not allocated to current portion is reflected as noncurrent
5
Since KPMG fair value analysis only reflects the total amounts, assumptions were made to allocate total among current and noncurrent amounts
 Current portion is assumed to be unchanged since 9/30/16; residual amount is assumed to be noncurrent
 EXHIBIT 38
SolarCity Corporation
Components of the Balance Sheet Test:
Fair Value of Current Assets Minus Current Liabilities as of November 21, 2016 ($000)
Deferred Cur. Assets Funded Debt Fair Value
Net Revenues Excl. Restr. $ Related‐ Third‐ of Current
Book & UST Grant Finalization − Current Restricted Party Party Assets −
1 2 3
Value Adjustment Adjustments Oper. Lia. Cash Debt Debt Current Lia.
a b c d a + b + c + d
Current Assets
Cash and short‐term investments $213,523 213,523 213,523
Restricted cash 129,196 129,196 129,196
Accounts and rebates receivable 84,637 (10,018) 74,619 74,619
Inventories 181,825 10,053 191,878 191,878
Prepaid expenses and other current assets 74,900 74,900 74,900
$684,081 0 35 554,920 129,196 684,116
Current liabilities
Accounts payable 230,078 230,078 230,078
Accrued liabilities 251,229 33,536 284,765 284,765
Distributions payable to noncontrolling interests 27,632 27,632 27,632
Current portion of deferred revenue 119,315 (90,479) 28,836 28,836
Current portion of deferred US Treasury grant income 14,348 (14,348) 0 0
Current portion of long‐term debt 285,507 285,507 285,507
Current portion of solar bonds issued to related parties 165,100 165,100 165,100
Current portion of solar bonds 16,984 16,984 16,984
Current portion of asset‐backed notes 19,643 19,643 19,643
Current portion of financing obligation 48,492 48,492 48,492
$1,178,328 (104,827) 33,536 571,311 165,100 370,626 1,107,036

Insolvency Components ($494,247) 104,827 (33,501) (16,391) 129,196 (165,100) (370,626) (422,920)

Deferred revenue & UST grant adjustments 104,827
Finalization adjustments (33,501)
($422,920)
1
Exhibit 36
2
KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non‐controlling Interests of SolarCity Corporation, p. 4 (PWC‐TESLA00000594)
3
Tesla Form 10‐K for the year ended December 31, 2017, p. 85
 EXHIBIT 39
SolarCity's Deterioration in Net Working Capital and Cash ($MM)

$733.5 

$642.7 

$577.1  $575.8 
$539.4 
$519.6 
$489.1 
$449.5 
$431.1  $418.4 
$398.5  $405.3  $393.9 
$361.7 

$273.6  $259.3 

$159.6  $162.6 
$133.0  $145.7 
$127.3 

$62.3  $64.4 
$46.3 
($6.8) ($2.7)
MAR‐13 JUN‐13 SEP‐13 DEC‐13 MAR‐14 JUN‐14 SEP‐14 DEC‐14 MAR‐15 JUN‐15 SEP‐15 DEC‐15 MAR‐16 JUN‐16 SEP‐16

($291.3)

($374.9)

($489.6) ($499.2)

Net working capital Cash & short‐term investments Source:  Refinitiv

 EXHIBIT 40
SolarCity's Liquidity and Leverage Ratios
4.34 
4.24  4.20 

3.72 

3.34 

3.07 

2.61 
2.43 
2.33 
2.21 
2.08  2.11 
2.01  2.00  2.06 
1.89 
1.77  1.76 
1.69 

1.38  1.41 
1.29  1.34  1.32 
1.26  1.23 
1.10  1.07  1.05 
0.99  1.04  1.00 
0.93  0.98 

0.73  0.76 
0.70  0.67  0.69 
0.56  0.58 
0.47  0.44 
0.35  0.40 

MAR‐13 JUN‐13 SEP‐13 DEC‐13 MAR‐14 JUN‐14 SEP‐14 DEC‐14 MAR‐15 JUN‐15 SEP‐15 DEC‐15 MAR‐16 JUN‐16 SEP‐16

Current ratio Quick ratio Debt/equity Source:  Refinitiv

 EXHIBIT 41
SolarCity Corporation
Evaluating Solvency After Deducting Net Assets of Variable Interest Entities
As of November 21, 2016 ($000)
Net Assets
Net Book Variable‐Interest Entities Available to
Value1 9/30/2016 2 12/31/2016 3 Average Adjustments
4
SolarCity
a b c − (b + c)/2 = d e a + d + e
Assets
Current assets:
Cash and short‐term investments $213,523 47,267 44,091 (45,679) 167,844
Restricted cash 129,196 20,108 20,916 (20,512) 108,684
Accounts and rebates receivable 84,637 38,860 22,669 (30,765) (10,018) 43,855
Inventories 181,825 181,825
Prepaid expenses and other current assets 74,900 7,532 (3,766) 71,134
684,081 106,235 95,208 (100,722) (10,018) 573,342
Property, plant, and equipment, net 242,945 242,945
Build‐to‐suit lease asset under construction 802,008 802,008
Solar energy systems, leased and to be leased, net 5,695,768 3,731,864 3,975,214 (3,853,539) 1,842,229
Intangible assets, net 469,030 (321,865) 147,165
MyPower customer notes receivable, net of current 520,696 520,696
MyPower deferred costs 233,965 (233,965) 0
Other assets 213,091 49,873 63,050 (56,462) 156,630
$8,861,584 3,887,972 4,133,472 (4,010,722) (565,848) 4,285,014
Liabilities
Accounts payable (230,078) (7) (20) 14 (230,065)
Accrued liabilities (251,229) (4,178) (8,524) 6,351 (33,536) (278,414)
Distributions payable to noncontrolling interests (27,632) (25,106) (24,085) 27,632 0
Deferred revenue (1,204,143) 929,392 (274,751)
U.S. Treasury grant income (359,207) 359,207 0
Funded debt (4,413,475) (376,173) (563,004) 469,589 (3,943,887)
Other liabilities (208,795) (2,276) (1,169) 1,723 (207,073)
($6,694,559) (407,740) (596,802) 505,308 1,255,063 (4,934,189)

Contingent Obligations Uncertain

Net Assets $2,167,025 3,480,232 3,536,670 (3,505,415) 689,215 (649,175)

See footnotes on the following page
 EXHIBIT 41
SolarCity Corporation
Evaluating Solvency After Deducting Net Assets of
Variable Interest Entities as of November 21, 2016 ($000)
1
KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non‐controlling Interests of SolarCity Corporation , 
p. 4 (PWC‐TESLA00000594)
2
SolarCity Form 10‐Q for the quarter ended September 30, 2016, pp. 2 and 3
3
SolarCity Form 10‐K for the year ended December 31, 2016, p. 39
4
See text of report for discussion
 EXHIBIT 42
SolarCity Corporation
Quarterly Calculations of Altman Z‐Score:  March 2013 through September 2016
Multiple Mar‐13 Jun‐13 Sep‐13 Dec‐13 Mar‐14 Jun‐14 Sep‐14 Dec‐14 Mar‐15 Jun‐15 Sep‐15 Dec‐15 Mar‐16 Jun‐16 Sep‐16
Z‐Score
Working capital/total assets 1.2 0.052 0.048 (0.004) 0.192 0.163 0.062 0.156 0.114 0.065 0.010 (0.000) (0.048) (0.057) (0.071) (0.069)
Retained earnings/total assets 1.4 (0.184) (0.198) (0.166) (0.101) (0.108) (0.122) (0.086) (0.079) (0.078) (0.074) (0.069) (0.061) (0.060) (0.068) (0.055)
EBIT/total assets 3.3 (0.062) (0.073) (0.055) (0.065) (0.076) (0.078) (0.059) (0.087) (0.082) (0.077) (0.097) (0.090) (0.089) (0.078) (0.071)
MV of equity/total liabilities 0.6 0.666 1.197 1.027 1.416 1.497 1.539 1.003 0.814 0.695 0.631 0.439 0.467 0.205 0.196 0.153
Sales/total assets 1.0 0.021 0.024 0.025 0.017 0.022 0.020 0.014 0.016 0.013 0.018 0.017 0.016 0.015 0.023 0.023
Z‐Score 0.494 0.998 0.827 1.459 1.498 1.421 1.028 0.777 0.613 0.508 0.290 0.285 0.015 0.002 (0.019)

Financial Ratios
Working capital/total assets 0.044 0.040 (0.004) 0.160 0.136 0.052 0.130 0.095 0.054 0.008 (0.000) (0.040) (0.047) (0.060) (0.058)
Retained earnings/total assets (0.131) (0.141) (0.119) (0.072) (0.077) (0.087) (0.061) (0.057) (0.056) (0.053) (0.049) (0.043) (0.043) (0.048) (0.040)
EBIT/total assets (0.019) (0.022) (0.017) (0.020) (0.023) (0.024) (0.018) (0.026) (0.025) (0.023) (0.029) (0.027) (0.027) (0.024) (0.021)
MV of equity/total liabilities 1.110 1.995 1.711 2.359 2.494 2.565 1.672 1.356 1.158 1.052 0.732 0.779 0.342 0.327 0.256
Sales/total assets 0.021 0.024 0.025 0.017 0.022 0.020 0.014 0.016 0.013 0.018 0.017 0.016 0.015 0.023 0.023

Inputs ($ million)
Working capital $62.3 64.4 (6.8) 449.5 398.5 162.6 539.4 431.1 273.6 46.3 (2.7) (291.3) (374.9) (489.6) (499.2)
Total assets 1,427.6 1,607.8 1,925.9 2,809.5 2,927.9 3,142.3 4,149.4 4,551.2 5,041.0 5,704.7 6,512.3 7,287.1 7,959.2 8,224.1 8,680.8
Retained earnings (187.5) (226.9) (229.0) (202.3) (226.4) (274.0) (254.8) (258.4) (279.9) (302.2) (321.3) (316.7) (341.7) (397.2) (344.0)
Earnings before interest & taxes (26.7) (35.5) (31.9) (55.3) (67.0) (74.3) (74.3) (120.0) (125.7) (132.4) (191.1) (198.6) (213.5) (194.1) (186.1)
Market value (MV) of equity 1,421.4 2,954.9 2,876.3 5,171.1 5,759.9 6,532.1 5,721.7 5,161.9 4,966.8 5,204.9 4,168.0 4,993.0 2,416.1 2,399.4 1,970.5
Total liabilities 1,280.7 1,481.1 1,680.9 2,191.9 2,309.2 2,546.6 3,421.5 3,805.6 4,288.8 4,945.7 5,697.5 6,408.6 7,073.3 7,333.3 7,708.9
Revenues 30.0 37.9 48.6 47.3 63.5 61.3 58.3 71.8 67.5 102.8 113.9 115.5 122.6 185.8 200.6
Source:  Refinitiv
 EXHIBIT 43
SolarCity's Quarterly Altman's Z‐Score
3.00
Not likely to go bankrupty within 12 months

2.50

2.00

1.80
High risk of bankruptcy within 12 months
1.46  1.50 
1.50 1.42 
SolarCity Z‐score

1.00  1.03 
1.00
0.83 
0.78 
0.61 
0.49  0.51 
0.50
0.29  0.28 

0.02  0.00  (0.02)

0.00
Mar‐13 Jun‐13 Sep‐13 Dec‐13 Mar‐14 Jun‐14 Sep‐14 Dec‐14 Mar‐15 Jun‐15 Sep‐15 Dec‐15 Mar‐16 Jun‐16 Sep‐16

(0.50)

Not likely to go bankrupt Significant bankruptcy risk SolarCity Z‐score Source: Exhibit 42

 EXHIBIT 44
SolarCity Corporation
KPMG Cash‐Based Analysis of Financial Performance
For the Two Years Ended December 31, 2015
And the Six Months Ended June 30, 2015 and 2016 ($000)
2014 2015 YTD 6/15 YTD 6/16
Cash‐Based Operating Loss
Revenues:
Cash revenues (estimated) $336,922 366,181 147,698 299,416 a
Monetization of solar energy systems 992,799 1,758,648 641,368 1,075,778 b
1,329,721 2,124,829 789,066 1,375,194

Expenses:
Cash expenses (estimated) (554,771) (1,156,065) (459,614) (688,427) c
Lease and PPA solar energy system costs (1,162,963) (1,665,641) (665,079) (857,164) d
(1,717,734) (2,821,706) (1,124,693) (1,545,591)

Cash‐based operating loss (388,013) (696,877) (335,627) (170,397) e

Investing and Capital Expenditures (181,851) (61,093) (32,015) (46,825)

Free cash flow before financing (569,864) (757,970) (367,642) (217,222)

Financing cash flows, net:
Debt financing 544,321 565,209 279,736 (16,076)
Equity financing (47,154) 70,922 4,943 (3,532)
497,167 636,131 284,679 (19,608)

Net Change in Cash (72,697) (121,839) (82,963) (236,830)

Beginning cash and cash equivalents 577,080 504,383 504,383 382,544
Ending cash and cash equivalents $504,383 382,544 421,420 145,714

Cash vs Monetization Cash Flows
Cash‐based operations:
Cash revenues (estimated) $336,922 366,181 147,698 299,416 a
Cash expenses (estimated) (554,771) (1,156,065) (459,614) (688,427) c
(217,849) (789,884) (311,916) (389,011)
Monetization cash flows:
Monetization of solar energy systems 992,799 1,758,648 641,368 1,075,778 b
Lease and PPA solar energy system costs (1,162,963) (1,665,641) (665,079) (857,164) d
(170,164) 93,007 (23,711) 218,614

Cash‐based operating loss ($388,013) (696,877) (335,627) (170,397) e

Source:  KPMG Due Diligence Report dated August 27, 2016 prepared for Tesla, based on information provided to KPMG by 
SolarCity management, p. 23 (TESLA00302273)
Source:  Exhibit 44
 EXHIBIT 46
SolarCity Corporation
KPMG Gross Margin Analysis
For the Two Years Ended December 31, 2015
And the Six Months Ended June 30, 2015 and 2016
2014 2015 YTD 6/15 YTD 6/16
Revenues
Solar lease/PPA $167,844 277,451 127,498 184,409
MyPower 96 29,930 9,314 65,455
Cash Sales 81,299 76,145 24,914 47,697
SRECs 5,792 16,092 5,556 10,795
$255,031 399,619 167,282 308,356

Revenue Mix
Solar lease/PPA 65.8% 69.4% 76.2% 59.8%
MyPower 0.0% 7.5% 5.6% 21.2%
Cash Sales 31.9% 19.1% 14.9% 15.5%
SRECs 2.3% 4.0% 3.3% 3.5%
100.0% 100.0% 100.0% 100.0%

Gross Margin
Solar lease/PPA 43.8% 42.3% 44.7% 36.3%
MyPower ‐231.5% ‐16.1% 50.5% 55.4%
Cash Sales 2.3% ‐8.5% ‐1.5% ‐25.4%
SRECs 55.6% 75.5% 65.8% 94.9%
30.8% 29.7% 38.2% 32.8%

Source:  KPMG Due Diligence Report dated August 27, 2016 prepared for Tesla, based on information 
provided to KPMG by SolarCity management, p. 29 (TESLA00302279)
 EXHIBIT 47
SolarCity Corporation
Financial Viability Analysis Based on SEC Filings
For the Three Years Ended December 31, 2015
And the Six Months Ended June 30, 2015 and 2016 ($000)1
2013 2014 2015 YTD 9/15 YTD 9/16
Operating leases and solar energy incentives:
Revenues $82,856 173,636 293,543 236,498 403,688
Cost of revenues (32,745) (92,920) (165,546) (38,397) (59,996)
Estimated depreciation and amortization2 (82,309) (123,648)
Gross profit 50,111 80,716 127,997 115,792 220,044
Solar energy systems and components:
Revenues 80,981 81,395 106,076 47,641 105,219
Cost of revenues (91,723) (83,512) (115,245) (48,854) (108,851)
Gross profit (10,742) (2,117) (9,169) (1,213) (3,632)

Unallocated depr., amort., and warranty expense3 (24,208) (43,532)

Gross profit 39,369 78,599 118,828 90,371 172,880
Sales and marketing expense (97,426) (238,608) (457,185) (329,115) (345,369)
Research and development expense (1,520) (19,162) (64,925) (42,173) (42,423)
Operating profit to cover G&A expenses (59,577) (179,171) (403,282) (280,917) (214,912)
General & administrative expenses (89,801) (156,426) (244,508) (168,288) (260,446)
Pre‐production expense (55,107)
Restructuring and other expenses (63,241)
Loss from operations (149,378) (335,597) (647,790) (449,205) (593,706)
Interest and related debt expenses (25,738) (55,758) (91,939) (64,880) (111,762)
Other expenses, net (1,441) (10,611) (25,767) (21,723) (54,143)
Loss before income taxes (176,557) (401,966) (765,496) (535,808) (759,611)
Income tax benefit (provision) 24,799 26,736 (3,326) (1,128) 907
Net loss (151,758) (375,230) (768,822) (536,936) (758,704)
Depreciation and amortization 41,448 97,880 166,653 118,091 233,825
Other noncash items, net (26,033) 9,613 (3,949) 50,786 89,677
Changes in operating assets and liabilities, net 310,858 49,888 (183,766) (158,258) 9,382
Cash flow from operating activities 174,515 (217,849) (789,884) (526,317) (425,820)
Payments for solar energy systems (716,947) (1,162,963) (1,665,641) (1,134,929) (1,230,064)
Purchases of property, plant, and equipment (9,126) (22,892) (176,540) (147,784) (53,445)
Discretionary cash flow (551,558) (1,403,704) (2,632,065) (1,809,030) (1,709,329)
Other cash flows from investing activities, net (3,826) (158,959) 115,447 81,270 (15,124)
Cash flow before funds from financing activities (555,384) (1,562,663) (2,516,618) (1,727,760) (1,724,453)
Cash flow from financing activities:
Net change in debt 196,041 1,020,969 1,219,354 897,974 685,139
Proceeds from U.S. Treasury grants 127,476 342
Proceeds from noncontrolling interests 362,692 77,963 1,097,487 754,916 1,022,687
Distributions to noncontrolling interests (134,005) (117,125) (109,511) (67,154) (102,377)
552,204 982,149 2,207,330 1,585,736 1,605,449
Proceeds from issuance of convertible notes 222,518 552,765 112,780
Purchase of capped call options (65,203)
Proceeds from issuance of common stock 174,083
Tax benefit of stock option exercise 63,019 (7,738)
Proceeds from issuance of options and warrants 23,579 20,255 11,650 10,391 3,540
972,384 1,489,966 2,394,779 1,596,127 1,601,251
Net change in cash 417,000 (72,697) (121,839) (131,633) (123,202)
Beginning cash 160,080 577,080 504,383 504,383 382,544
Ending cash $577,080 504,383 382,544 372,750 259,342
1
Form 10‐K for the year ended 12/31/15, pp. 75, 77, 78, and 101; Form 10‐Q for the nine months ended September 30, 2015, p. 18; and Form 10‐Q 
for the nine months ended September 30, 2016, pp. 4 ‐ 6, and 19
2
Increase in accumulated depreciation and amortization of solar energy systems during the applicable period
3
Depreciation and amortization charged to cost of revenues, excluding allocation to operating leases and solar energy initiatives
 EXHIBIT 48
SolarCity Corporation
Financial Viability Analysis Based on SolarCity Cost Structure
For the Three Years Ended December 31, 2015
And the Six Months Ended June 30, 2015 and 2016 ($000)
2013 2014 2015 YTD 9/15 YTD 9/16
Income Summary ($000)
Revenues $163,837 255,031 399,619 284,139 508,907
Cost of revenues (124,468) (176,432) (280,791) (193,768) (336,027)
Gross profit 39,369 78,599 118,828 90,371 172,880
Sales and marketing expense (97,426) (238,608) (457,185) (329,115) (345,369)
Research and development expense (1,520) (19,162) (64,925) (42,173) (42,423)
(59,577) (179,171) (403,282) (280,917) (214,912)
General & administrative expenses (89,801) (156,426) (244,508) (168,288) (260,446)
Operating income before other operating costs ($149,378) (335,597) (647,790) (449,205) (475,358)

Solar Energy Systems and Components:
Revenues $80,981 81,395 106,076 47,641 105,219
Cost of revenues (91,723) (83,512) (115,245) (48,854) (108,851)
Gross profit ($10,742) (2,117) (9,169) (1,213) (3,632)

Interest and debt‐related expenses $25,738 55,758 91,939 64,880 111,762

Costs per Dollar of Revenues
Revenues $1.00 $1.00 $1.00 $1.00 $1.00
Cost of revenues ($0.76) ($0.69) ($0.70) ($0.68) ($0.66)
Gross profit $0.24 $0.31 $0.30 $0.32 $0.34
Sales and marketing expense ($0.59) ($0.94) ($1.14) ($1.16) ($0.68)
Research and development expense ($0.01) ($0.08) ($0.16) ($0.15) ($0.08)
Operating income to cover G&A expenses ($0.36) ($0.70) ($1.01) ($0.99) ($0.42)
General & administrative expenses ($0.55) ($0.61) ($0.61) ($0.59) ($0.51)
Operating income before other operating costs ($0.91) ($1.32) ($1.62) ($1.58) ($0.93)

Solar Energy Systems and Components:
Revenues $1.00 $1.00 $1.00 $1.00 $1.00
Cost of revenues ($1.13) ($1.03) ($1.09) ($1.03) ($1.03)
Gross profit ($0.13) ($0.03) ($0.09) ($0.03) ($0.03)

Interest and debt‐related expenses $0.16 $0.22 $0.23 $0.23 $0.22

Sources:  Form 10‐K for the year ended 12/31/15, p. 75 and Form 10‐Q for the nine months ended September 30, 2016, p. 4
 EXHIBIT 49
SolarCity Costs per Dollar of Revenues

Sources:  Forms 10‐K and 10‐Q and Exhibit 48 $2.85 $2.81

$0.23 
$0.23 
$2.53

$0.22 
$0.61  $0.59 
$2.15
$2.07
$0.22 
$0.16  $0.61 
$0.16  $0.15 

$0.08  $0.51 
$0.55 

$0.01  $0.08 
$1.14  $1.16 
$0.94 
$1.00 $0.59  $0.68 
Revenues

$0.76  $0.69  $0.70  $0.68  $0.66 

2013 2014 2015 YTD 9/15 YTD 9/16

Cost of revenues Sales and marketing Research and development General and administrative Interest and debt‐related expenses

 EXHIBIT 50
SolarCity Corporation
Net Value Created per Watt Deployed
For the Seven Quarters Ended September 30, 2016
Mar‐15 Jun‐15 Sep‐15 Dec‐15 Mar‐16 Jun‐16 Sep‐16
1
Percent of new US distributed solar capacity 22% 27% 32% 30% 20% 21% TBD
MW installed1 153 189 256 272 214 201 187
MW deployed1 143 177 205 253 245 211 189

Value per Watt deployed @ 6% discount rate:
Upfront cash rebates/prepayments2 $0.08 0.07 0.06 0.05
Contracted unlevered NPV2 1.76 1.55 1.54 1.24
NPV without renewal contract 1.84 1.62 1.60 1.29 a

Renewal unlevered NPV3 $0.33 0.34 0.34 0.32 0.33 0.37 0.36

 NPV with renewal contract4 2.16 1.95 1.97 1.65 b

Tax equity investment4 1.48 1.51 1.65 1.73 c

NPV with tax incentives5 $3.77 3.83 3.86 3.64 3.46 3.62 3.38

Value per Watt deployed) @ 8% discount rate:
NPV without renewal contract $1.55 1.38 1.36 1.10 d

Renewal unlevered NPV6 0.20 0.20 0.22 0.22

NPV with renewal contract 1.75 1.58 1.58 1.32 e

Tax equity investment4 1.48 1.51 1.65 1.73

NPV with tax incentives6 $3.23 3.09 3.23 3.05

Cost per Watt deployed:
Blended install7 $2.10 2.12 1.94 1.92 1.98 2.07 2.02
Implied sales cost7 0.57 0.52 0.59 0.54 0.97 0.71 0.58
General & administrative costs7 0.22 0.20 0.23 0.21 0.23 0.27 0.29
$2.89 2.84 2.76 2.67 3.18 3.05 2.89 f

Net value created per Watt:
At 6% discount rate:
Net value without renewal contract ($0.83) (1.56) (1.45) (1.60) a−f=g
Net value without renewal contract + incentives 0.65 (0.05) 0.20 0.13 g+c=i
Net value with renewal contract (0.51) (1.23) (1.08) (1.24) b−f=j
Net value with renewal contract + incentives 0.97 0.28 0.57 0.49 j+c

At 8% discount rate:
Net value without renewal contract (1.12) (1.80) (1.69) (1.79) d−f=k
Net value without renewal contract + incentives 0.36 (0.29) (0.04) (0.06) k+c=l
Net value with renewal contract (0.92) (1.60) (1.47) (1.57) e−f=m
Net value with renewal contract + incentives 0.56 (0.09) 0.18 0.16 m+c

1
TESLA00083897 (thru Q4 2015); TESLA00709901, p9 (2016)
2
TESLA00270502 (Q4 2105); TESLA00083892 (Q1 2016); LAZ_TES00044415 (Q2 2016); TESLA00709901 (Q3 2106)
3
TESLA00083897 (thru Q1 2016); LAZ_TES00044415 (Q2 2016); TESLA00709901 (Q3 2106)
4
TESLA00270502 (Q4 2105); TESLA00083892 (Q1 2016); LAZ_TES00044415 (Q2 2016); TESLA00709901 (Q3 2106)
5
TESLA00083897 (thru Q1 2016); LAZ_TES00044415 (Q2 2016); TESLA00709901 (Q3 2106)
6
TESLA00270502 (Q4 2105); TESLA00083892 (Q1 2016); LAZ_TES00044415 (Q2 2016); TESLA00709901 (Q3 2106)
7
Cost restated with Q1 2016 report (TESLA00115392);  TESLA00044465 (Q2 2019); TESLA00709889 (Q3 2016)
 EXHIBIT 51
SolarCity Corporation
Business Segment Viability Analysis Based on Transaction Price and Purchase Price Allocation ($000)
Asset Allocation Liability and Equity Allocation
PowerCo1 DevCo2 MyPower Fair Value
4
PowerCo1 DevCo2 MyPower3 Fair Value4
a b c a + b + c d e f d + e + f
Current assets: Liabilities
Cash and short‐term investments $45,679 167,844 213,523 Current liabilities:
Restricted cash 20,512 108,684 129,196 Accounts payable $14 230,065 230,078
Accounts and rebates receivable 30,765 53,873 84,637 Accrued liabilities 6,351 244,878 251,229
Inventories 192,303 192,303 Distributions payable to noncontrolling interests 27,632 27,632
Prepaid expenses and other current assets 3,766 71,134 74,900 Current portion of deferred revenue 28,836 28,836
100,722 593,838 0 694,559 Current portion of long‐term debt 151,745 133,762 285,507
Tangible assets and other assets: Current portion of solar bonds issued to related parties 165,100 165,100
Property, plant, and equipment, net 214,376 214,376 Current portion of solar bonds 16,984 16,984
Build‐to‐suit lease asset under construction 802,008 802,008 Current portion of asset‐backed notes 19,643 19,643
0 1,016,384 0 1,016,384 Current portion of financing obligation 48,492 48,492
Identifiable tangible and intangible assets: 284,215 655,523 133,762 1,073,500
Solar energy systems, leased and to be leased, net 5,785,279 5,785,279 Long term debt, net of current portion 1,427,758 1,427,758
Favorable power purchase agreements/leases 68,030 68,030 Convertible senior notes 766,777 766,777
Leasehold interest 1,530 Convertible senior notes issued to related parties 12,324 12,324
PBI intangible 69,650 69,650 Solar asset‐backed notes, net of current portion 561,567 561,567
FIT intangible 3,230 3,230 Solar bonds, net of current portion 48,717 48,717
Technology 243,900 243,900 Solar bonds issued to related parties, net of current portion 100,100 100,100
Trade names and trademarks 43,500 43,500 Build‐to‐suit lease liability 802,008 802,008
Goodwill (93,247) (93,247) Financing obligation, net of current portion 72,798 72,798
5,853,309 267,033 0 6,121,872 Deferred revenue, net of current portion 245,688 245,688
MyPower customer notes receivable, net of current 509,712 509,712 Power purchase agreements, unfavorable 27,524 27,524
Other assets 56,462 156,630 213,091 Other liabilities and deferred credits 1,723 207,073 208,795
Other accounting adjustments, net 971 971 3,303,501 1,910,292 133,762 5,347,555

$6,010,492 2,034,855 509,712 8,556,589 Redeemable and Non‐controlling Int. in Subsidiaries 315,943 315,943

1
Exhibit 41, KPMG Valuation of Certain Assets, Liabilities, and Non‐Controlling Interests of SolarCity Corporation as of November  Equity
21, 2016 , p. 15ff (PWC‐TES00000232), and review of composition of debt as of 12/31/16 (Exhibit 24) Shareholders'  equity 5 1,640,474 124,563 375,950 2,142,517
2
Any unallocated portions of fair value are allocated to DevCo Noncontrolling interests in subsidiaries 750,574 750,574
3
Allocated debt is based on Exhibit 24, footnote g 2,391,048 124,563 375,950 2,893,091
4
Exhibits 36 and 37
5
Residual value of assets − liabili es − non‐controlling interests in subsidiaries Total Liabilities and Equity $6,010,492 2,034,855 509,712 8,556,589
 EXHIBIT 52
Allocation of SolarCity Acquistion Price
Based on Fair Value Under the Acquisition Method of Accounting

MyPower3, $375,950 , 13%

PowerCo1, $2,391,048 , 83%

Source:  Exhibit 51
 EXHIBIT 53
SolarCity Corporation
Net Liquidation Value
As of November 21, 2016 ($000)
Description Minimum Maximum Average
1
Net assets $1,708,891 2,114,281
Liabilities2 (4,933,962) (4,933,962)
(3,225,070) (2,819,681)
Variable‐interest entites3 950,947 1,188,684
($2,274,123) (1,630,997) ($1,952,560)
Other liquidation costs See text of report

Conclusion:  It is likely that in a liquidation that liabilities and 
liquidation/wind‐down costs would exceed the net proceeds from 
liquidation by more than $2 billion.  Accordingly, the common stock of 
SolarCity would be worthless on a liquidation basis.

1
Exhibit 54
2
Exhbiit 55
3
Variable interest entities:
Assets $3,949,193 3,949,193 Exhibit 54
Liabilities (505,308) (505,308) Exhibit 55
Redeemable and noncontrolling int. (315,943) (315,943) Exhibit 55
Noncontrolling interests (750,574) (750,574) Exhibit 55
SolarCity's residual interest $2,377,369 2,377,369
x x
40.0% 50.0% See report
$950,947 1,188,684
 EXHIBIT 54
SolarCity Corporation
Liquidation Value of Assets as of November 21, 2016 ($000)
Adjusted Net Realizable
Acquisition VIE Appraised Realization Rate Value
Method1 Adjustments2 Adjustments3 NAV Minimum Maximum Minimum Maximum
a b c a + b + c = d e f d x e d x f
Current assets:
Cash and short‐term investments $213,523 (45,679) 167,844 100% 100% 167,844 167,844
Restricted cash 129,196 (20,512) 108,684 100% 100% 108,684 108,684
Accounts and rebates receivable 84,637 (10,018) 30,765 105,384 60% 70% 63,230 73,768
Inventories 192,303 (425) 191,878 20% 30% 38,376 57,563
Prepaid expenses and other current assets 74,900 (3,766) 71,134 50% 75% 35,567 53,351
694,559 (10,443) (39,193) 644,924 413,701 461,210
Tangible assets and other assets:
Property, plant, and equipment, net 214,376 214,376 30% 50% 64,313 107,188
Build‐to‐suit lease asset under construction 802,008 802,008 0% 0% 0 0
1,016,384 0 1,016,384 64,313 107,188
Identifiable tangible and intangible assets:
Solar energy systems, leased and to be leased, net 5,785,279 (3,853,539) 1,931,740 50% 60% 965,870 1,159,044
Favorable power purchase agreements/leases 68,030 68,030 0% 0% 0 0
Leasehold interest 1,530 1,530 0% 0% 0 0
PBI intangible 69,650 69,650 0% 0% 0 0
FIT intangible 3,230 3,230 0% 0% 0 0
Technology 243,900 243,900 0% 10% 0 24,390
Trade names and trademarks 43,500 43,500 0% 0% 0 0
Goodwill (93,247) 93,247 0 0% 0% 0 0
6,121,872 93,247 (3,853,539) 2,361,580 965,870 1,183,434
MyPower customer notes receivable, net of current 509,712 (11,571) (56,462) 441,680 60% 70% 265,008 309,176
Other assets 213,091 213,091 0% 25% 0 53,273
Other accounting adjustments, net 971 971 0% 0% 0 0
$8,556,589 71,233 (3,949,193) 4,678,629 1,708,891 2,114,281
1
KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non‐controlling Interests of SolarCity Corporation , p. 4 (PWC‐TESLA00000594)
2
Adjustments, other than negative goodwill, reflected post‐acquisition revisions to Merger Date balance sheet reported in Tesla 2017 Form 10‐K, p. 85.  Negative goodwill is an accounting provision that reduces 
net asset value, rather than an actual asset.  I have removed it from the liquidation analysis, thereby increasing net liquidation value.
3
Exhibit 41
 EXHIBIT 55
SolarCity Corporation
Impact of Liabilities and Non‐Controlling Interests on Liquidation Value
As of November 21, 2016 ($000)
11/21/16 VIE Used in Liq.
2
Book Value Fair Value2 Liabilities Adjustments Analysis
Liabilities
Current liabilities:
Accounts payable 230,078 230,078 (14) 230,065
Accrued liabilities 251,229 251,229 (6,351) 33,536 278,414
Distributions payable to noncontrolling interests 27,632 27,632 (27,632) 0
4
Current portion of deferred revenue 119,315 28,836 28,836
Current portion of deferred US Treasury grant income 14,348 0 0
5
Current portion of long‐term debt 285,507 285,507 285,507
Current portion of solar bonds issued to related parties 165,100 165,100 165,100
4
Current portion of solar bonds 16,984 16,984 16,984
4
Current portion of asset‐backed notes 19,643 19,643 19,643
4
Current portion of financing obligation 48,492 48,492 48,492
1,178,328 1,073,500 (33,997) 33,536 1,073,040
Long term debt, net of current portion 1,406,561 1,427,758 (469,589) 936,973
Convertible senior notes 885,910 766,777 885,910
4
Convertible senior notes issued to related parties 12,324 12,324 12,324
Solar asset‐backed notes, net of current portion 550,348 561,567 550,348
4
Solar bonds, net of current portion 50,186 48,717 50,186
5
Solar bonds issued to related parties, net of current portion 100,100 100,100 100,100
Build‐to‐suit lease liability 802,008 802,008 802,008
Financing obligation, net of current portion 70,314 72,798 70,314
4
Deferred revenue, net of current portion 1,084,828 245,688 245,688
2
Deferred U.S. Treasury grant income, net of current portion 344,859 0 0
Power purchase agreements, unfavorable 27,524 0
Other liabilities and deferred credits 208,795 208,795 (1,723) 207,073
6,694,559 5,347,555 (505,308) 33,536 4,933,962

Redeemable and Noncontrolling Int. in Subsidiaries 2 347,033 315,943 315,943

Equity
Shareholders'  equity 2,927 2,142,517
2
Noncontrolling interests in subsidiaries 1,817,065 750,574 750,574
1,819,992 2,893,091

Total Liabilities and Equity 8,861,584 8,556,589

1
SolarCity Form 10‐Q for the Quarter Ended September 30, 2016, pp. 3, 13. and 14
2
KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non‐controlling Interests of SolarCity Corporation , p. 4 (PWC‐TESLA00000594)
3
SolarCity Form 10‐K for the Year Ended December 31, 2016, pp. 39 and 62
4
Since KPMG fair value analysis only reflects the total amounts, assumptions were made to allocate total among current and noncurrent amounts
 Book value is assumed to be the average of 9/30/16 and 12/31/16
 Fair value is assumed to be same proportion of total as 9/30/16
 Residual that is not allocated to current portion is reflected as noncurrent
5
Since KPMG fair value analysis only reflects the total amounts, assumptions were made to allocate total among current and noncurrent amounts
 Current portion is assumed to be unchanged since 9/30/16; residual amount is assumed to be noncurrent
 EXHIBIT 56
SolarCity Corporation
Analysis of Variable Interest Entity Bad Debt History 1
Novogradac  Fiscal Year Total Cash Flow Bad Debt Bad Debt Exp. as % of
Variable Interest Entity Bates No.  Formed End Assets Revenues from Oper. Expense Revenues CFO
Castello Solar I, LLC NC000622329 6/16/14 12/31/15 $371,155 15,284 17,616 245 1.6% 1.4%
NC000627771 12/31/16 359,778 18,361 26,047 566 3.1% 2.2%
NC000202428 12/31/17 347,950 20,228 14,506 481 2.4% 3.3%
Castello Solar II, LLC NC000750461 5/14/15 12/31/15 372,938 428 1,011 3 0.7% 0.3%
NC000752096 12/31/16 338,527 13,586 22,675 451 3.3% 2.0%
NC000814677 12/31/17 327,877 16,828 12,341 308 1.8% 2.5%
Castello Solar III, LLC NC000752110 4/20/16 12/31/16 196,342 3,119 3,187 177 5.7% 5.6%
NC000199381 12/31/17 186,152 8,877 10,739 234 2.6% 2.2%
Presidio Solar I, LLC NC000750395 3/16/15 12/31/15 181,298 2,345 2,579 42 1.8% 1.6%
NC000770113 12/31/16 172,161 7,927 6,527 348 4.4% 5.3%
NC000832919 12/31/17 167,361 8,063 6,789 275 3.4% 4.0%
Presidio Solar II, LLC NC000770098 2/26/16 12/31/16 187,496 4,431 4,751 216 4.9% 4.6%
NC001139577 12/31/17 181,209 9,304 12,109 238 2.6% 2.0%
NC000126250 9/21/10 12/31/15 325,545 15,780 13,549 69 0.4% 0.5%
Sequoia Pacific Solar I, LLC NC000165364 12/31/16 314,193 15,143 11,881 659 4.4% 5.5%
NC000169291 12/31/17 304,362 12,438 9,977 (8) ‐0.1% ‐0.1%
Solar House I, LLC NC000369328 6/19/13 12/31/15 165,345 7,749 6,934 35 0.4% 0.5%
NC000385226 12/31/16 159,365 7,374 6,632 99 1.3% 1.5%
NC000390297 12/31/17 154,400 7,808 7,103 105 1.3% 1.5%
Solar House II, LLC NC000497933 7/30/14 12/31/15 356,323 14,966 15,626 171 1.1% 1.1%
NC000504254 12/31/16 345,859 16,198 13,265 442 2.7% 3.3%
NC000515390 12/31/17 335,138 15,951 13,102 298 1.9% 2.3%
Solar House III, LLC NC000837215 7/8/15 12/31/15 200,933 134 286 1 0.6% 0.3%
NC000842633 12/31/16 390,774 13,401 14,145 576 4.3% 4.1%
NC000855107 12/31/17 377,967 17,013 14,759 397 2.3% 2.7%
Solar House IV, LLC NC000752230 5/23/16 12/31/16 397,409 4,255 (2,462) 123 2.9% ‐5.0%
NC000199396 12/31/17 369,864 17,975 21,095 682 3.8% 3.2%
Solar Integrated Fund I,  NC000403434 12/4/13 12/31/15 118,864 5,503 4,805 52 0.9% 1.1%
LLC NC000406849 12/31/16 114,572 5,417 4,331 111 2.0% 2.6%
NC000410628 12/31/17 111,129 5,503 4,008 132 2.4% 3.3%
Solar Integrated Fund II,  NC000466793 4/29/14 12/31/15 120,531 5,445 5,101 71 1.3% 1.4%
LLC NC000484879 12/31/16 116,225 5,542 4,217 257 4.6% 6.1%
NC000490948 12/31/17 112,391 5,319 4,116 162 3.0% 3.9%
Solar Integrated Fund III,  NC000770157 12/8/14 12/31/15 814,548 12,292 19,374 221 1.8% 1.1%
LLC NC000770142 12/31/16 932,075 39,821 34,582 2,134 5.4% 6.2%
NC000913218 12/31/17 901,005 48,630 42,227 923 1.9% 2.2%
NC000393663 8/16/13 12/31/15 281,829 10,487 6,142 9 0.1% 0.2%
SolarCity LMC Series I, LLC NC000396650 12/31/16 272,455 10,809 5,845 368 3.4% 6.3%
NC000400630 12/31/17 262,959 10,636 6,307 100 0.9% 1.6%
NC000543647 2/21/14 12/31/15 273,999 10,555 5,858 87 0.8% 1.5%
SolarCity LMC Series II, LLC NC000547287 12/31/16 265,730 10,594 5,930 262 2.5% 4.4%
NC000554761 12/31/17 258,094 11,173 6,940 45 0.4% 0.7%
SolarCity LMC Series III,  NC000563949 6/4/14 12/31/15 815,208 66,863 13,514 0 0.0% 0.0%
LLC NC000569223 12/31/16 795,998 66,570 13,014 0 0.0% 0.0%
NC000575809 12/31/17 596,335 66,661 13,940 5 0.0% 0.0%
SolarCity LMC Series IV,  NC000921703 4/29/15 12/31/15 117,082 (2,447) (104,167) 0 0.0% 0.0%
LLC NC000923096 12/31/16 517,392 23,310 12,827 942 4.0% 7.3%
1
Source:  audited financial statements of applicable VIE; amounts 000, except for percentages
 EXHIBIT 57

SPECIAL FEATURE: LOAN LEVEL GSE CREDIT DATA

DEFAULT RATE BY VINTAGE
With cleaner books of business and the housing recovery underway, default rates for the GSEs are much lower than
they were just a few years ago. For Fannie Mae and Freddie Mac’s 1999-2003 vintages, cumulative defaults total
around 2 percent, while cumulate defaults for the 2007 vintage are around 13-14 percent. For both Fannie Mae and
Freddie Mac, cumulative defaults from post-2009 vintages are on pace to fall below pre-2003 levels. For Fannie
loans 70 months after origination, the cumulative default rate from 2009-10 and 2011-2015 are about 0.85 and
0.23 percent, respectively, compared to the cumulative default rate from 1999-2003 of 0.93 percent. For Freddie
loans 70 months after origination, the cumulative default rates total 0.85 percent from 2009-10 and 0.15 percent
from 2011-Q1 2016, compared to the rate from 1999-2003 of 0.94 percent.

Fannie Mae Cumulative Default Rate by Vintage Year

16%

14%
1999-2003
12%
2004
10%
2005
8%
2006
6% 2007
4% 2008

2% 2009-2010
2011-1Q16
0%
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

Sources: Fannie Mae and Urban Institute.

Freddie Mac Cumulative Default Rate by Vintage Year

16%

14% 1999-2003
12% 2004

10% 2005
2006
8%
2007
6%
2008
4%
2009-2010
2% 2011-2Q16
0%
0 1 2 3 4 5 6 7 8 9 1 1 1 1 1 1 1 1
0 1 2 3 4 5 6 7
Sources: Freddie Mac and Urban Institute.
Note: The Freddie Mac analysis included mortgages with original terms of 241-420 months, to be consistent with Fannie Mae data, which
contained only 30-year mortgages.
Published in Housing Finance at a Glance, Urban Institute, June 2017, p. 38 38
 EXHIBIT 58 
Global Transaction Value of Private Equity Portfolio Secondary Sales 
 

 
 
Published in The Private Equity Secondary Market, 2017, Coller Capital, p. 4
 EXHIBIT 59 
2016 Private Equity Portfolio Secondary Transaction Pricing 

 
Published in Preqin Special Report:  Secondary Fund Manager Outlook:  H1 2017, p. 5 
   
 EXHIBIT 60 
Historical Private Equity Portfolio Secondary Transaction Pricing 
 

 
Published in The Private Equity Secondary Market, 2017, Coller Capital, p. 12
Case 16-12098-BLS Doc 281-1 Filed 04/24/17 Page 115 of 122 EXHIBIT 61
 EXHIBIT 62 
Example:  Firm Value and Debt Grow on Parallel Path; Option & Stock Price Unchanged 
   
$ 

Option interpretation:  out‐of‐the‐money option 
lacking intrinsic value (i.e., firm value < debt) 
Time 
 EXHIBIT 63 
Example:  Firm Value + Option Price Grow More Rapidly Than Debt; Stock Price Appreciates 
   
$ 

Option interpretation:  in‐the‐money option with 
positive intrinsic value (i.e., firm value > debt) 
Time 
 EXHIBIT 64 
Example:  Firm Value + Option Price Grow Less Rapidly Than Debt; Stock Price Declines 
   
$ 

Option interpretation:  deeply out‐of‐the‐money option 
lacking intrinsic value (i.e., firm value < debt) 
Time 
 EXHIBIT 65
SCTY vs. 0.11 x TSLA Following Announcement of Merger Exchange Ratio
$30

$25

$20

$15

$10

$5

$0
8/1/16 8/8/16 8/15/16 8/22/16 8/29/16 9/5/16 9/12/16 9/19/16 9/26/16 10/3/16 10/10/16 10/17/16 10/24/16 10/31/16 11/7/16 11/14/16

SCTY TSLA x 0.11 Exchange Ratio Source:  Refinitiv

 EXHIBIT 66 
Leading U.S. Residential Installers 

 
 
https://www.woodmac.com/our‐expertise/focus/Power‐‐Renewables/U.S.‐PV‐Leaderboard/
 EXHIBIT 67
Comparison of SolarCity to the Guideline Public Companies
Amounts $000 Except for Capitalization Multiples
Sunrun1 Vivint Solar1 Combined Average SolarCity
2
MVEquity 11/21/16 $500,396 297,327 797,723 2,145,977
2
EV 11/21/16 $1,643,661 1,147,173 2,790,834 6,524,101
Price/revenues 1.16 2.72 1.94 3.83
EV/revenues 3.80 10.48 7.14 11.65

Revenues:
3
TTM 11/21/16 $432,953 109,424 542,377 560,207
4
2016 477,107 135,167 612,274 730,342
4
2015 304,606 64,182 368,788 399,619
4
2014 198,557 25,258 223,815 255,031
3
EBITDATTM (133,237) (133,607) (266,844) (509,904)
3
CFOTTM (105,266) (189,244) (294,510) (689,387)
2
Debt, 11/21/16 715,655 431,394 1,147,049 3,525,130

1
Source:  Refinitiv
2
Purchase price of SolarCity common stock $2,145,977
 Debt:
Debt and capital leases $3,403,840
Financing obligations 121,290
3,525,130
 Noncontrolling interests 1,066,517
 Cash and cash equivalents (213,523)
Enterprise value $6,524,101
 Source:  Tesla 2016 Form 10‐K, pp. 73 and 74
3
Trailing 12 months: YTT 9/16 Y/E 12/15 YTD 9/15 TTM 9/16
Revenues $347,952 399,619 187,364 560,207
EBITDA (359,881) (481,137) (331,114) (509,904)
CFO (425,820) (789,884) (526,317) (689,387)
 Sources:  Exhibits 13, 15, and 9/30/16 Form 10‐Q, pp. 4 and 5
4
Exhibit 13
 EXHIBIT 68
Comparative Revenues of Vivint Solar, Sunrun, and SolarCity ($000)

$560,207 
$542,377 

$432,953 

$399,619 

$368,788 

$304,606 

$255,031 

$223,815 
$198,557 

$109,424 

$64,182 

$25,258 

2014 2015 TTM 9/16

Vivint Solar Sunrun Combined SolarCity Source:  Exhibit 67

 EXHIBIT 69
Comparative TTM 9/16 EBITDA and Cash Flow from Operating Activities
of Vivint Solar, Sunrun, and SolarCity ($000)
EBITDA CASH FLOW FROM OPERATING ACTIVITIES

($105,266)
($133,607) ($133,237)

($189,244)

($266,844)
($294,510)

($509,904)

($689,387)

Vivint Solar Sunrun Combined SolarCity Source: Exhbit 67

 EXHIBIT 70
Comparative Funded Debt of Vivint Solar, Sunrun,
and SolarCity as of November 21, 2016 ($000)

$3,525,130 

$1,147,049 

$715,655 

$431,394 

Vivint Solar Sunrun Combined SolarCity Source:  Exhibit 67

 EXHIBIT 71
Market Value of Equity of Vivint Solar, Sunrun, Combined, and
SolarCity Equity Value Implied by the Merger Price at 11/21/16 ($000)

$2,145,977 

$797,723 

$500,396 

$297,327 

Vivint Solar Sunrun Combined SolarCity

Source:  Exhibit 67
 EXHIBIT 72
Enterprise Value of Vivint Solar, Sunrun, Combined, and
SolarCity Enterprise Value Implied by Merger Price at 11/21/16 ($000)

$6,524,101 

$2,790,834 

$1,643,661 

$1,147,173 

Vivint Solar Sunrun Combined SolarCity

Source:  Exhibit 67
 EXHIBIT 73
Capitalization Multiples of Vivint Solar, Sunrun, and
Implied by the SolarCity Merger Price as of November 21, 2016
11.65 

10.48 

7.14 

3.83  3.80 

2.72 

1.94 

1.16 

Price/Revenues Enterprise Value/Revenues

Vivint Solar Sunrun Combined SolarCity Source:  Exhibit 67

 EXHIBIT 74
SolarCity Corporation
Development of a Pro Forma Price per Share
Based on the Guideline Public Company Method
As of November 21, 20161
Description Amount
SolarCity trailing 12 months revenues $560,207

Revenue capitalization multiple:
x
Sunrun Inc. 3.80
Vivint Solar, Inc. 10.48
Average 7.14
Capitalized enterprise value $3,999,917
Cash 213,523
Funded debt (3,525,130)
Noncontrolling interests (1,066,517)
Equity value ($378,207)

Conclusion:  the common stock of SolarCity was worthless
as of the Merger Date based on the Guideline Public
Company Method

1
Amounts are $000, except for capitalization multiples.  See Exhibit 67 for underlying data.
 EXHIBIT 75
SolarCity Corporation
Summary of Net Asset Value Calculations1
Acquisition Adjusted Fair Net
Balance Appraised Saleable Liquidation
Sheet2 NAV3 Value3 Value4,5
Assets $8,556,589 7,327,507 6,464,421 1,911,586
Liabilities (5,347,555) (5,236,715) (5,236,715) (4,933,962)
Net assets of variable‐interest entities 1,069,816
Redeemable non‐controlling interests (315,943) (312,247) (315,943)
Non‐redeemable non‐controlling interests (750,574) (743,696) (750,574)
Other adjustments (92,187) 0 0
2,050,330 1,034,850 161,189 (1,952,560)
÷ ÷ ÷ ÷
SolarCity shares acquired6 101,132 101,132 101,132 101,132
$20.27 $10.23 $1.59 NM

1
All amounts are stated in thousands except for footnotes and per‐share amounts
2
Exhibits 25, 37, and Tesla 2016 Form 10‐K, p. 74
3
Exhibits 76 and 77
4
Exhibits 53 – 55
5
Excludes wind‐down costs, liquidation costs, professional fees, and other costs that would further increase the deficit net 
liquidation value
6
Common stock equivalents acquired by Tesla:
Tesla shares  11,124,497
÷
 Exchange ratio 0.11
SolarCity common share equivalents acquired by Tesla 101,131,791
Source:  2016 Tesla Form 10‐K, p. 73
 EXHIBIT 76
SolarCity Corporation
Calculation of Adjusted Appraised Net Asset Value
and Fair Saleable Net Asset Value as of November 21, 2016 ($000)
Adjusted Fair
2
Acquisition Adjustments Appraised Saleable
Method1 Post‐Closing Valuation NAV NAV
a b c a + b + c a + b + c
Current assets:
Cash and short‐term investments $213,523 213,523 213,523
Restricted cash 129,196 129,196 129,196
Accounts and rebates receivable 84,637 (10,018) 74,619 74,619
Inventories 192,303 (425) 191,878 191,878
Prepaid expenses and other current assets 74,900 74,900 74,900
694,559 684,116 684,116
Tangible assets and other assets:
Property, plant, and equipment, net 214,376 214,376 214,376
Build‐to‐suit lease asset under construction 802,008 802,008 802,008
1,016,384 1,016,384 1,016,384
Identifiable tangible and intangible assets:
Solar energy systems, leased and to be leased, net: 5,785,279 (5,785,279) 0 0
Adjusted net asset value3 4,914,804 4,914,804
Fair saleable value3 4,051,718 4,051,718
Favorable power purchase agreements/leases 68,030 (68,030) 0 0
Leasehold interest 1,530 (1,530) 0 0
PBI intangible 69,650 (69,650) 0 0
FIT intangible 3,230 (3,230) 0 0
Technology 243,900 (243,900) 0 0
Trade names and trademarks 43,500 (43,500) 0 0
Goodwill (93,247) 93,247 0 0
6,121,872 4,914,804 4,051,718
MyPower customer notes receivable, net of current 509,712 (11,571) 498,141 498,141
Other assets 213,091 213,091 213,091
Other accounting adjustments, net 971 971 971
$8,556,589 (11,571) 0 7,327,507 6,464,421
1
KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non‐controlling Interests of SolarCity Corporation , p. 4 (PWC‐TESLA00000594)
2
Adjustments, other than negative goodwill, reflected post‐acquisition revisions to Merger Date balance sheet reported in Tesla 2017 Form 10‐K, p. 85.  
Negative goodwill is an accounting provision that reduces net asset value, rather than an actual asset.  I have removed it from the liquidation analysis, 
thereby increasing net liquidation value.
3
Exhibit 78
 EXHIBIT 77
SolarCity Corporation
Calculation of Liabilities and Non‐Controlling Interests for Adjusted Appraised Net Asset Value
and Fair Saleable Net Asset Value as of November 21, 2016 ($000)
NAV Adjustments Adjusted Fair
Fair Appraised Saleable
Book Value1 Accounting1,2 Appraisal3 Saleable4 NAV NAV
a b c d a + b + c a + b + d
Liabilities
Current liabilities:
Accounts payable $230,078 230,078 230,078
Accrued liabilities 251,229 33,536 284,765 284,765
Distributions payable to noncontrolling interests 27,632 27,632 27,632
Current portion of deferred revenue5 119,315 (90,479) 28,836 28,836
Current portion of deferred US Treasury grant income 14,348 (14,348) 0 0
Current portion of long‐term debt5 285,507 285,507 285,507
Current portion of solar bonds issued to related parties 165,100 165,100 165,100
Current portion of solar bonds5 16,984 16,984 16,984
Current portion of asset‐backed notes5 19,643 19,643 19,643
Current portion of financing obligation5 48,492 48,492 48,492
1,178,328 876,959 876,959
Long term debt, net of current portion 1,406,561 1,406,561 1,406,561
Convertible senior notes 885,910 885,910 885,910
Convertible senior notes issued to related parties5 12,324 12,324 12,324
Solar asset‐backed notes, net of current portion 550,348 550,348 550,348
Solar bonds, net of current portion5 50,186 50,186 50,186
Solar bonds issued to related parties, net of current portion5 100,100 100,100 100,100
Build‐to‐suit lease liability 802,008 802,008 802,008
Financing obligation, net of current portion 70,314 70,314 70,314
Deferred revenue, net of current portion5 1,084,828 (839,140) 245,688 245,688
Deferred U.S. Treasury grant income, net of current portion 344,859 (344,859) 0 0
Power purchase agreements, unfavorable 27,524 27,524 27,524
Other liabilities and deferred credits 208,795 208,795 208,795
6,694,559 5,236,715 5,236,715

Redeemable and Noncontrolling Int. in Subsidiaries 347,033 (347,033) 312,247 315,943 312,247 315,943

Equity
Shareholders'  equity 2,927
Noncontrolling interests in subsidiaries2 1,817,065 (1,817,065) 743,696 750,574 743,696 750,574
1,819,992 (1,817,065)
Total Liabilities and Equity $8,861,584 (2,164,098)
1
KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non‐controlling Interests of SolarCity Corporation , p. 4 (PWC‐TESLA00000594)
2
2016 SolarCity Form 10K, p. 85
3
SolarCity Form 10‐K for the Year Ended December 31, 2016, pp. 39 and 62
4
Exhibit 37
5
Since KPMG fair value analysis only reflects the total amounts, assumptions were made to allocate total among current and noncurrent amounts
 Book value is assumed to be the average of 9/30/16 and 12/31/16 per SolarCity Forms 10‐Q and 10‐K
 Fair value is assumed to be same proportion of total as 9/30/16
 Residual that is not allocated to current portion is reflected as noncurrent
 EXHIBIT 78
SolarCity Corporation
Development of Adjusted Appraised Value and Fair Saleable Value
 of Solar Energy Systems Leased and to be Leased as of November 21, 20161
KPMG Percent of Adj. Appraised Value Fair Adjustments
Book Fair Value Category Calculated Calc. ÷ Saleable Adj. Appr. Saleable
2
(FV)2
4
Asset Value Total Value KPMG FV Value4 Value Value
a a x b = c b d c − a d − a
Residential Solar Assets $3,254,513 3,977,356 68.7% 3,448,368 86.70% 2,585,281 (528,988) (1,392,075)
Non‐Residential Solar Assets 1,160,354 785,693 13.6% 707,124 90.00% 707,124 (78,569) (78,569)
Reconciliation 9,706 0.2% 0 0.00% 0 (9,706) (9,706)
Initial direct costs 477,210 0 0.0% 0 0.00% 0 0 0
Held‐for‐lease assets 317,662 446,263 7.7% 317,662 71.18% 317,662 (128,601) (128,601)
Construction in progress 391,643 516,253 8.9% 391,643 75.86% 391,643 (124,610) (124,610)
Google capital lease asset 53,343 35,951 0.6% 35,951 100.00% 35,951 0 0
Systems held at corporate & other adj. 41,042 14,057 0.2% 14,057 100.00% 14,057 0 0
$5,695,768 5,785,279 100.0% 4,914,804 e                    f 4,051,718 (870,475) (1,733,561)
Adjustment for initial direct costs3 (477,210)
Book value, net of initial direct costs $5,218,558 d
Quintero valuation analyses:
Fair value ÷ adjusted book value 94.2% e ÷ d
Saleable value ÷ adjusted book value 77.6% f ÷ d
1
Amounts $000, except for percentages; see text of report for discussion
2
KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non‐controlling Interests of SolarCity Corporation , p. 6 (PWC‐TESLA00000596)
3
Deducted because capitalized costs because market participants would not attribute additional value to capitalized costs
4
Residential Solar Assets:  adjusted appraised value is based on footnote 5 calculation as a percent of KPMG appraised value
fair saleable value = 65% of KPMG fair saleable value based on PE secondary sales, as discussed in text of report
 Non‐Residential Solar Assets is based on footnote 5 calculation as a percent of appraised value, rounded up to 90%
 Held‐for‐lease asses and construction in progress have a maximum value of book value
 KPMG calculation of adjusted appraised value of Google capital lease asset and Systems held at corporate and other adjustments is used for both calculations
5
Verification of Residential Solar Asset appraisal calculations: KPMG Fair Value Quintero Calculations
Amount % of Category Amount % KPMG Reference
CA residential systems—2013 $209,110 5.3% $180,679 86.40% Exhibit 81
CA residential systems—2014 368,080 9.3% 318,017 86.40% Exhibit 81.1
CA residential systems—2015 575,790 14.5% 498,905 86.65% Exhibit 81.2
CA residential systems—2016 563,790 14.2% 487,074 86.39% Exhibit 81.3
MA residential systems—2016 149,370 3.8% 133,305 89.24% Exhibit 81.4
$1,866,140 46.9% $1,617,980 86.70%
÷
$3,977,356
46.9%
 EXHIBIT 79
SolarCity Corporation
Analysis of Discount Rates Used by KPMG
to Calculate the Fair Value of the
Residential Solar Energy Assets
As of November 21, 2016
KPMG Fair Value
Discount Rate Calculation
1 1
Reference KPMG Quintero $000 % of Total
PWC‐TESLA00000319 6.75% $75,960 1.91%
PWC‐TESLA00000324 6.75% 127,280 3.20%
PWC‐TESLA00000329 6.75% 156,670 3.94%
PWC‐TESLA00000334 6.75% 132,500 3.33%
PWC‐TESLA00000345 6.75% 8.47% 209,110 5.26%
PWC‐TESLA00000350 6.75% 8.47% 368,080 9.25%
PWC‐TESLA00000355 6.75% 8.47% 575,790 14.48%
PWC‐TESLA00000360 6.75% 8.47% 563,790 14.17%
PWC‐TESLA00000371 6.75% 21,570 0.54%
PWC‐TESLA00000376 6.75% 47,440 1.19%
PWC‐TESLA00000381 6.75% 29,960 0.75%
PWC‐TESLA00000386 6.75% 11,340 0.29%
PWC‐TESLA00000408 6.75% 4,670 0.12%
PWC‐TESLA00000413 6.75% 14,990 0.38%
PWC‐TESLA00000418 6.75% 43,450 1.09%
PWC‐TESLA00000423 6.75% 45,310 1.14%
PWC‐TESLA00000436 6.75% 850 0.02%
PWC‐TESLA00000441 6.75% 280 0.01%
PWC‐TESLA00000446 6.75% 790 0.02%
PWC‐TESLA00000451 6.75% 1,630 0.04%
PWC‐TESLA00000459 6.75% 510 0.01%
PWC‐TESLA00000464 6.75% 2,840 0.07%
PWC‐TESLA00000469 6.75% 8,480 0.21%
PWC‐TESLA00000474 6.75% 16,740 0.42%
PWC‐TESLA00000482 6.75% 13,600 0.34%
PWC‐TESLA00000487 6.75% 13,840 0.35%
PWC‐TESLA00000492 6.75% 10,400 0.26%
PWC‐TESLA00000497 6.75% 6,200 0.16%
PWC‐TESLA00000505 6.75% 9,790 0.25%
PWC‐TESLA00000510 6.75% 26,050 0.65%
PWC‐TESLA00000515 6.75% 79,080 1.99%
PWC‐TESLA00000520 6.75% 160,530 4.04%
PWC‐TESLA00000528 6.75% 10,630 0.27%
PWC‐TESLA00000533 6.75% 35,890 0.90%
PWC‐TESLA00000538 6.75% 130,520 3.28%
PWC‐TESLA00000543 6.75% 8.47% 149,370 3.76%

1 of 2
 EXHIBIT 79
SolarCity Corporation
Analysis of Discount Rates Used by KPMG
to Calculate the Fair Value of the
Residential Solar Energy Assets
As of November 21, 2016
KPMG Fair Value
Discount Rate Calculation
1 1
Reference KPMG Quintero $000 % of Total
PWC‐TESLA00000551 6.75% 770 0.02%
PWC‐TESLA00000556 6.75% 80,810 2.03%
PWC‐TESLA00000561 6.75% 59,530 1.50%
PWC‐TESLA00000569 6.75% 4,090 0.10%
PWC‐TESLA00000574 6.75% 11,660 0.29%
PWC‐TESLA00000582 6.75% 14,930 0.38%
PWC‐TESLA00000587 6.75% 25,140 0.63%
PWC‐TESLA00000592 6.75% 41,690 1.05%
PWC‐TESLA00000597 6.75% 66,000 1.66%
PWC‐TESLA00000605 6.75% 120 0.00%
PWC‐TESLA00000613 6.75% 8,640 0.22%
PWC‐TESLA00000618 6.75% 35,290 0.89%
PWC‐TESLA00000623 6.75% 79,870 2.01%
PWC‐TESLA00000628 6.75% 102,710 2.58%
PWC‐TESLA00000636 6.75% 3,900 0.10%
PWC‐TESLA00000641 6.75% 3,930 0.10%
PWC‐TESLA00000646 6.75% 4,200 0.11%
PWC‐TESLA00000651 6.75% 2,860 0.07%
PWC‐TESLA00000677 6.75% 1,070 0.03%
PWC‐TESLA00000682 6.75% 230 0.01%
PWC‐TESLA00000687 6.75% 1,020 0.03%
PWC‐TESLA00000692 6.75% 24,760 0.62%
PWC‐TESLA00000700 6.75% 2,950 0.07%
PWC‐TESLA00000705 6.75% 7,130 0.18%
PWC‐TESLA00000710 6.75% 11,920 0.30%
PWC‐TESLA00000715 6.75% 46,690 1.17%
PWC‐TESLA00000723 6.75% 10,680 0.27%
PWC‐TESLA00000312 Not available 3,988 0.10%
PWC‐TESLA00000312 Not available 15,140 0.38%
PWC‐TESLA00000312 Not available 23,311 0.59%
PWC‐TESLA00000312 Not available 59,098 1.49%
PWC‐TESLA00000312 Not available 117,299 2.95%
$3,977,356 100.00%

Source:  KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non‐Controlling 
Interests of SolarCity Corporation  as of November 21, 2016

2 of 2
 EXHIBIT 80
SolarCity Corporation
Analysis of Discount Rates Used by KPMG
to Calculate the Fair Value of the
Non‐Residential Solar Energy Assets
As of November 21, 2016
KPMG KPMG Fair Value
Discount Calculation
Installation Type Reference Rate $000 % of Total
Regular Commercial PWC‐TESLA00000737 6.75% $5,340 0.46%
Regular Commercial PWC‐TESLA00000740 6.75% 12,190 1.05%
Regular Commercial PWC‐TESLA00000743 7.50% 44,920 3.87%
Regular Commercial PWC‐TESLA00000746 7.50% 67,690 5.83%
Regular Commercial PWC‐TESLA00000749 7.50% 27,460 2.37%
Regular Commercial PWC‐TESLA00000755 6.75% 46,420 4.00%
Regular Commercial PWC‐TESLA00000758 7.50% 39,460 3.40%
Regular Commercial PWC‐TESLA00000761 7.50% 53,170 4.58%
Regular Government PWC‐TESLA00000799 6.75% 440 0.04%
Regular Government PWC‐TESLA00000802 6.75% 290 0.02%
Regular Government PWC‐TESLA00000805 6.75% 12,660 1.09%
Regular Government PWC‐TESLA00000808 6.75% 37,280 3.21%
Regular Government PWC‐TESLA00000811 6.75% 26,010 2.24%
Regular Government PWC‐TESLA00000814 6.75% 40,660 3.50%
Regular Government PWC‐TESLA00000820 6.75% 49,010 4.22%
Regular Government PWC‐TESLA00000823 6.75% 62,050 5.35%
Large Ground Mounted Systems PWC‐TESLA00000 6.75% 2,910 0.25%
Large Ground Mounted Systems PWC‐TESLA00000817 6.75% 16,411 1.41%
Government held for Lease PWC‐TESLA00000 11,775 1.01%
Government held for Lease PWC‐TESLA00000 8,775 0.76%
Government held for Lease PWC‐TESLA00000 121,798 10.50%
Military Housing: 6.75% PWC‐TESLA00000 6.75% 20,350 1.75%
Military Housing PWC‐TESLA00000 37,950 3.27%
Military Housing PWC‐TESLA00000 33,950 2.93%
Military Housing PWC‐TESLA00000 29,180 2.51%
Other 352,205 30.35%
$1,160,354 100.00%

Source:  KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non‐Controlling Interests of SolarCity Corporation 
as of November 21, 2016
 EXHIBIT 81
SolarCity Corporation
Verification of Fair Value of California Residential Systems Placed in Service in 2013
As of November 21, 2016 ($000)
Fair Value at Adjusted Appraised Value at
1 1
Cash Flow Assumptions KPMG Discount Rate Adjusted Discount Rates Cumulative
Partial Present Present Cash Flow
Period Discounting Cash Discount Discount Value of Discount Discount Value of Percent
2 3 4
Year Factor Periods Flow Rate Factor Cash Flow Rate Factor Cash Flow Amount of Total
a b c d 1/(1+d)b = e a x c x e f 1/(1+d)b = g c x g = h ∑h % of Total
2016 0.1096 0.1096 $164,284 6.75% 0.9929 $17,875 8.47% 0.9911$17,844 $17,844 9.9%
2017 1.0000 0.6096 35,790 6.75% 0.9610 34,393 8.47% 0.9516 34,059 51,903 28.7%
2018 1.0000 1.6096 25,051 6.75% 0.9002 22,551 8.47% 0.8773 21,977 73,880 40.9%
2019 1.0000 2.6096 18,679 6.75% 0.8433 15,752 8.47% 0.8088 15,107 88,987 49.3%
2020 1.0000 3.6096 18,854 6.75% 0.7900 14,894 8.47% 0.7456 14,058 103,045 57.0%
2021 1.0000 4.6096 14,127 6.75% 0.7400 10,454 8.47% 0.6874 9,710 112,755 62.4%
2022 1.0000 5.6096 9,403 6.75% 0.6932 6,518 8.47% 0.6337 5,958 118,714 65.7%
2023 1.0000 6.6096 3,997 6.75% 0.6494 2,596 8.47% 0.5842 2,335 121,049 67.0%
2024 1.0000 7.6096 9,786 6.75% 0.6083 5,953 8.47% 0.5386 5,270 126,319 69.9%
2025 1.0000 8.6096 9,984 6.75% 0.5699 5,689 8.47% 0.4965 4,957 131,276 72.7%
2026 1.0000 9.6096 10,188 6.75% 0.5338 5,439 8.47% 0.4577 4,663 135,939 75.2%
2027 1.0000 10.6096 10,396 6.75% 0.5001 5,199 8.47% 0.4220 4,387 140,326 77.7%
2028 1.0000 11.6096 10,609 6.75% 0.4684 4,970 8.47% 0.3890 4,127 144,453 79.9%
2029 1.0000 12.6096 10,828 6.75% 0.4388 4,752 8.47% 0.3586 3,883 148,336 82.1%
2030 1.0000 13.6096 11,052 6.75% 0.4111 4,543 8.47% 0.3306 3,654 151,990 84.1%
2031 1.0000 14.6096 11,281 6.75% 0.3851 4,344 8.47% 0.3048 3,438 155,428 86.0%
2032 1.0000 15.6096 11,516 6.75% 0.3607 4,154 8.47% 0.2810 3,236 158,664 87.8%
2033 1.0000 16.6096 7,413 6.75% 0.3379 2,505 9.47% 0.2224 1,649 160,312 88.7%
2034 1.0000 17.6096 12,003 6.75% 0.3166 3,800 9.47% 0.2032 2,439 162,751 90.1%
2035 1.0000 18.6096 12,255 6.75% 0.2965 3,634 9.47% 0.1856 2,274 165,025 91.3%
2036 1.0000 19.6096 12,339 6.75% 0.2778 3,428 9.47% 0.1695 2,092 167,117 92.5%
2037 1.0000 20.6096 10,953 6.75% 0.2602 2,850 9.47% 0.1549 1,696 168,813 93.4%
2038 1.0000 21.6096 11,070 6.75% 0.2438 2,699 9.47% 0.1415 1,566 170,379 94.3%
2039 1.0000 22.6096 11,164 6.75% 0.2284 2,549 9.47% 0.1292 1,443 171,822 95.1%
2040 1.0000 23.6096 11,277 6.75% 0.2139 2,412 9.47% 0.1180 1,331 173,153 95.8%
2041 1.0000 24.6096 11,387 6.75% 0.2004 2,282 9.47% 0.1078 1,228 174,381 96.5%
2042 1.0000 25.6096 11,496 6.75% 0.1877 2,158 9.47% 0.0985 1,132 175,513 97.1%
2043 1.0000 26.6096 11,607 6.75% 0.1758 2,041 9.47% 0.0900 1,044 176,557 97.7%
2044 1.0000 27.6096 11,718 6.75% 0.1647 1,930 9.47% 0.0822 963 177,520 98.3%
2045 1.0000 28.6096 11,830 6.75% 0.1543 1,826 9.47% 0.0751 888 178,408 98.7%
2046 1.0000 29.6096 11,943 6.75% 0.1446 1,726 9.47% 0.0686 819 179,227 99.2%
2047 1.0000 30.6096 12,056 6.75% 0.1354 1,633 9.47% 0.0626 755 179,982 99.6%
2048 1.0000 31.6096 12,170 6.75% 0.1269 1,544 9.47% 0.0572 696 180,679 100.0%
$209,092 $180,679
KPMG calculation $209,110 $209,110
Difference $18 % of KPMG FV est. 86.4%
1
Based on KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non‐controlling Interests of SolarCity Corporation as of November 21, 2016, pp. 55 ‐ 57 
(PWC‐TESLA00000345 ‐ 7)
2
Portion of annual cash flows assumed to be realized in applicable year
3
Number of years until valuation date that the cash flow is assumed to be collected, reflecting mid‐year convention
4
Exhibit 82; discount rate increases by 1% at the end of the term of the 20‐year contractual term, to provide for risk that renewal rate may be less than 100%, as is 
assumed I KPMG valuation analysis
 EXHIBIT 81A
SolarCity Corporation
Verification of KPMG Fair Value of California Residential Systems Placed in Service in 2013
Using KPMG Discount Rates, with Provisions for Bad Debts and Non‐Renewals
As of November 21, 2016 ($000)
Fair Value at KPMG Discount Rate
1
Cash Flow Assumptions Adjusted for Bad Debts & Non‐Renewals Cumulative
Partial Pro Forma Adjustments Adj. Present Cash Flow
4
Period Discounting Cash Bad Debts Cash Discount Discount Value of Percent
2 3 4
Year Factor Periods Flow Annual Cum. Renewal Flow Rate Factor Cash Flow Amount of Total
a b c d Cum d = e f a x c x e x f = g h 1/(1+h)b = i g x i = j ∑j % of Total
2016 0.1096 0.1096 $164,284 2.000% 0.9800 100.00% $17,644 6.75% 0.9929 $17,518 $17,518 9.6%
2017 1.0000 0.6096 35,790 1.975% 0.9606 100.00% 34,381 6.75% 0.9610 33,039 50,557 27.8%
2018 1.0000 1.6096 25,051 1.950% 0.9694 100.00% 24,284 6.75% 0.9002 21,861 72,418 39.8%
2019 1.0000 2.6096 18,679 1.925% 0.9515 100.00% 17,772 6.75% 0.8433 14,987 87,405 48.0%
2020 1.0000 3.6096 18,854 1.900% 0.9343 100.00% 17,616 6.75% 0.7900 13,916 101,321 55.7%
2021 1.0000 4.6096 14,127 1.875% 0.9179 100.00% 12,968 6.75% 0.7400 9,596 110,917 61.0%
2022 1.0000 5.6096 9,403 1.850% 0.9023 100.00% 8,484 6.75% 0.6932 5,881 116,798 64.2%
2023 1.0000 6.6096 3,997 1.825% 0.8873 100.00% 3,547 6.75% 0.6494 2,303 119,101 65.5%
2024 1.0000 7.6096 9,786 1.800% 0.8731 100.00% 8,544 6.75% 0.6083 5,197 124,298 68.3%
2025 1.0000 8.6096 9,984 1.775% 0.8594 100.00% 8,581 6.75% 0.5699 4,890 129,188 71.0%
2026 1.0000 9.6096 10,188 1.750% 0.8464 100.00% 8,624 6.75% 0.5338 4,603 133,792 73.5%
2027 1.0000 10.6096 10,396 1.725% 0.8341 100.00% 8,671 6.75% 0.5001 4,336 138,128 75.9%
2028 1.0000 11.6096 10,609 1.700% 0.8223 100.00% 8,723 6.75% 0.4684 4,086 142,214 78.2%
2029 1.0000 12.6096 10,828 1.675% 0.8110 100.00% 8,782 6.75% 0.4388 3,854 146,068 80.3%
2030 1.0000 13.6096 11,052 1.650% 0.8003 100.00% 8,845 6.75% 0.4111 3,636 149,704 82.3%
2031 1.0000 14.6096 11,281 1.625% 0.7902 100.00% 8,914 6.75% 0.3851 3,433 153,136 84.2%
2032 1.0000 15.6096 11,516 1.600% 0.7805 100.00% 8,989 6.75% 0.3607 3,243 156,379 85.9%
2033 1.0000 16.6096 7,413 1.575% 0.7714 90.00% 5,146 6.75% 0.3379 1,739 158,118 86.9%
2034 1.0000 17.6096 12,003 1.550% 0.7627 90.00% 8,240 6.75% 0.3166 2,608 160,726 88.3%
2035 1.0000 18.6096 12,255 1.525% 0.7545 90.00% 8,322 6.75% 0.2965 2,468 163,194 89.7%
2036 1.0000 19.6096 12,339 1.500% 0.7468 90.00% 8,293 6.75% 0.2778 2,304 165,498 91.0%
2037 1.0000 20.6096 10,953 1.475% 0.7395 90.00% 7,290 6.75% 0.2602 1,897 167,395 92.0%
2038 1.0000 21.6096 11,070 1.450% 0.7326 90.00% 7,299 6.75% 0.2438 1,779 169,174 93.0%
2039 1.0000 22.6096 11,164 1.425% 0.7262 90.00% 7,297 6.75% 0.2284 1,666 170,841 93.9%
2040 1.0000 23.6096 11,277 1.400% 0.7202 90.00% 7,309 6.75% 0.2139 1,564 172,404 94.8%
2041 1.0000 24.6096 11,387 1.375% 0.7146 90.00% 7,323 6.75% 0.2004 1,467 173,872 95.6%
2042 1.0000 25.6096 11,496 1.350% 0.7093 90.00% 7,339 6.75% 0.1877 1,378 175,249 96.3%
2043 1.0000 26.6096 11,607 1.325% 0.7045 90.00% 7,359 6.75% 0.1758 1,294 176,544 97.0%
2044 1.0000 27.6096 11,718 1.300% 0.7000 90.00% 7,383 6.75% 0.1647 1,216 177,760 97.7%
2045 1.0000 28.6096 11,830 1.275% 0.6960 90.00% 7,410 6.75% 0.1543 1,143 178,903 98.3%
2046 1.0000 29.6096 11,943 1.250% 0.6922 90.00% 7,441 6.75% 0.1446 1,076 179,979 98.9%
2047 1.0000 30.6096 12,056 1.225% 0.6889 90.00% 7,475 6.75% 0.1354 1,012 180,991 99.5%
2048 1.0000 31.6096 12,170 1.200% 0.6859 90.00% 7,512 6.75% 0.1269 953 181,944 100.0%
$181,944
KPMG calculation $209,110
% of KPMG FV est. 87.0%
Quintero calculation $180,679
% Quintero calc. 99.3%
1
Based on KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non‐controlling Interests of SolarCity Corporation as of November 21, 2016, pp. 55 ‐ 57 (PWC‐TESLA00000345 
‐ 7)
2
Portion of annual cash flows assumed to be realized in applicable year
3
Number of years until valuation date that the cash flow is assumed to be collected, reflecting mid‐year convention
4
Exhibit 81B
 EXHIBI 81B
SolarCity Corporation
Development of a Basis for a Residential Solar Asset Bad Debt Provision ($000)1
Novogradac  Fiscal Year Cash Flow Bad Debt Bad Debt Exp. as % of
Variable Interest Entity Bates No.  Formed End Revenues from Oper. Expense Revenues CFO
Castello Solar I, LLC NC000627771 6/16/14 12/31/16 $18,361 26,047 566 3.1% 2.2%
Castello Solar II, LLC NC000752096 5/14/15 12/31/16 13,586 22,675 451 3.3% 2.0%
Castello Solar III, LLC NC000752110 4/20/16 12/31/16 3,119 3,187 177 5.7% 5.6%
Presidio Solar I, LLC NC000770113 3/16/15 12/31/16 7,927 6,527 348 4.4% 5.3%
Presidio Solar II, LLC NC000770098 2/26/16 12/31/16 4,431 4,751 216 4.9% 4.6%
Sequoia Pacific Solar I, LLC NC000165364 9/21/10 12/31/16 15,143 11,881 659 4.4% 5.5%
Solar House I, LLC NC000385226 6/19/13 12/31/16 7,374 6,632 99 1.3% 1.5%
Solar House II, LLC NC000504254 7/30/14 12/31/16 16,198 13,265 442 2.7% 3.3%
Solar House III, LLC NC000842633 7/8/15 12/31/16 13,401 14,145 576 4.3% 4.1%
Solar House IV, LLC NC000752230 5/23/16 12/31/16 4,255 (2,462) 123 2.9% ‐5.0%
Solar Integrated Fund I, LLC NC000406849 12/4/13 12/31/16 5,417 4,331 111 2.0% 2.6%
Solar Integrated Fund II, LLC NC000484879 4/29/14 12/31/16 5,542 4,217 257 4.6% 6.1%
Solar Integrated Fund III, LLC NC000770142 12/8/14 12/31/16 39,821 34,582 2,134 5.4% 6.2%
SolarCity LMC Series I, LLC NC000396650 8/16/13 12/31/16 10,809 5,845 368 3.4% 6.3%
SolarCity LMC Series II, LLC NC000547287 2/21/14 12/31/16 10,594 5,930 262 2.5% 4.4%
SolarCity LMC Series III, LLC NC000569223 6/4/14 12/31/16 66,570 13,014 0 0.0% 0.0%
SolarCity LMC Series IV, LLC NC000923096 4/29/15 12/31/16 23,310 12,827 942 4.0% 7.3%
Total (a) $265,859 187,393 7,731 2.9% 4.1%
Median 3.4% 4.4%
Weighted average expense provision, net of 40% tax benefit ((a) x 60%) 1.7% 2.5%
Provision applied to projected cash flow in 2016 (and reduced in subsequent years) 2.0%

1
Source:  audited financial statements of applicable VIE and Exhibit 56
 EXHIBIT 81.1
SolarCity Corporation
Verification of Fair Value of California Residential Systems Placed in Service in 2014
As of November 21, 2016 ($000)
Fair Value at Adjusted Appraised Value at
1 1
Cash Flow Assumptions KPMG Discount Rate Adjusted Discount Rates Cumulative
Partial Present Present Cash Flow
Period Discounting Cash Discount Discount Value of Discount Discount Value of Percent
2 3 4
Year Factor Periods Flow Rate Factor Cash Flow Rate Factor Cash Flow Amount of Total
a b c d 1/(1+d)b = e a x c x e f 1/(1+d)b = g c x g = h ∑h % of Total
2016 0.1096 0.1096 $288,958 6.75% 0.9929 $31,441 8.47% 0.9911 $31,386 $31,386 9.9%
2017 1.0000 0.6096 62,775 6.75% 0.9610 60,325 8.47% 0.9516 59,739 91,124 28.7%
2018 1.0000 1.6096 43,868 6.75% 0.9002 39,490 8.47% 0.8773 38,485 129,610 40.8%
2019 1.0000 2.6096 32,647 6.75% 0.8433 27,531 8.47% 0.8088 26,404 156,014 49.1%
2020 1.0000 3.6096 32,952 6.75% 0.7900 26,031 8.47% 0.7456 24,569 180,583 56.8%
2021 1.0000 4.6096 24,626 6.75% 0.7400 18,223 8.47% 0.6874 16,927 197,510 62.1%
2022 1.0000 5.6096 16,307 6.75% 0.6932 11,304 8.47% 0.6337 10,333 207,844 65.4%
2023 1.0000 6.6096 16,635 6.75% 0.6494 10,802 8.47% 0.5842 9,718 217,562 68.4%
2024 1.0000 7.6096 7,633 6.75% 0.6083 4,643 8.47% 0.5386 4,111 221,672 69.7%
2025 1.0000 8.6096 17,315 6.75% 0.5699 9,867 8.47% 0.4965 8,597 230,269 72.4%
2026 1.0000 9.6096 17,667 6.75% 0.5338 9,431 8.47% 0.4577 8,086 238,355 75.0%
2027 1.0000 10.6096 18,029 6.75% 0.5001 9,016 8.47% 0.4220 7,607 245,963 77.3%
2028 1.0000 11.6096 18,399 6.75% 0.4684 8,619 8.47% 0.3890 7,157 253,120 79.6%
2029 1.0000 12.6096 18,778 6.75% 0.4388 8,240 8.47% 0.3586 6,734 259,854 81.7%
2030 1.0000 13.6096 19,166 6.75% 0.4111 7,879 8.47% 0.3306 6,336 266,190 83.7%
2031 1.0000 14.6096 19,564 6.75% 0.3851 7,534 8.47% 0.3048 5,963 272,153 85.6%
2032 1.0000 15.6096 19,971 6.75% 0.3607 7,204 8.47% 0.2810 5,611 277,765 87.3%
2033 1.0000 16.6096 20,389 6.75% 0.3379 6,890 8.47% 0.2590 5,281 283,046 89.0%
2034 1.0000 17.6096 13,567 6.75% 0.3166 4,295 9.47% 0.2032 2,756 285,802 89.9%
2035 1.0000 18.6096 21,254 6.75% 0.2965 6,303 9.47% 0.1856 3,944 289,747 91.1%
2036 1.0000 19.6096 21,399 6.75% 0.2778 5,944 9.47% 0.1695 3,628 293,374 92.3%
2037 1.0000 20.6096 19,000 6.75% 0.2602 4,944 9.47% 0.1549 2,942 296,317 93.2%
2038 1.0000 21.6096 19,204 6.75% 0.2438 4,681 9.47% 0.1415 2,717 299,033 94.0%
2039 1.0000 22.6096 19,366 6.75% 0.2284 4,422 9.47% 0.1292 2,502 301,535 94.8%
2040 1.0000 23.6096 19,564 6.75% 0.2139 4,185 9.47% 0.1180 2,309 303,845 95.5%
2041 1.0000 24.6096 19,754 6.75% 0.2004 3,959 9.47% 0.1078 2,130 305,975 96.2%
2042 1.0000 25.6096 19,945 6.75% 0.1877 3,744 9.47% 0.0985 1,964 307,939 96.8%
2043 1.0000 26.6096 20,137 6.75% 0.1758 3,541 9.47% 0.0900 1,812 309,751 97.4%
2044 1.0000 27.6096 20,331 6.75% 0.1647 3,349 9.47% 0.0822 1,671 311,422 97.9%
2045 1.0000 28.6096 20,526 6.75% 0.1543 3,167 9.47% 0.0751 1,541 312,963 98.4%
2046 1.0000 29.6096 20,722 6.75% 0.1446 2,996 9.47% 0.0686 1,421 314,384 98.9%
2047 1.0000 30.6096 20,919 6.75% 0.1354 2,833 9.47% 0.0626 1,310 315,694 99.3%
2048 1.0000 31.6096 21,117 6.75% 0.1269 2,679 9.47% 0.0572 1,208 316,903 99.6%
2049 1.0000 32.6096 21,317 6.75% 0.1188 2,533 9.47% 0.0523 1,114 318,017 100.0%
$368,045 $318,017
KPMG calculation $368,080 $368,080
Difference $35 % of KPMG FV est. 86.4%
1
Based on KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non‐controlling Interests of SolarCity Corporation as of November 21, 2016, pp. 60 ‐ 62 (PWC‐
TESLA00000350 ‐ 2)
2
Portion of annual cash flows assumed to be realized in applicable year
3
Number of years until valuation date that the cash flow is assumed to be collected, reflecting mid‐year convention
4
Exhibit 82; discount rate increases by 1% at the end of the term of the 20‐year contractual term, to provide for risk that renewal rate may be less than 100%, as is 
assumed I KPMG valuation analysis
 EXHIBIT 81.2
SolarCity Corporation
Verification of Fair Value of California Residential Systems Placed in Service in 2015
As of November 21, 2016 ($000)
Fair Value at Adjusted Appraised Value at
1 1
Cash Flow Assumptions KPMG Discount Rate Adjusted Discount Rates Cumulative
Partial Present Present Cash Flow
Period Discounting Cash Discount Discount Value of Discount Discount Value of Percent
2
Year Factor Periods3 Flow Rate Factor Cash Flow Rate4 Factor Cash Flow Amount of Total
b 
a b c d 1/(1+d) = e a x c x e f 1/(1+d)b = g c x g = h ∑h % of Total
2016 0.1096 0.1096 $451,737 6.75% 0.9929 $49,152 8.47% 0.9911 $49,066 $49,066 9.8%
2017 1.0000 0.6096 97,911 6.75% 0.9610 94,089 8.47% 0.9516 93,175 142,241 28.5%
2018 1.0000 1.6096 68,329 6.75% 0.9002 61,510 8.47% 0.8773 59,945 202,187 40.5%
2019 1.0000 2.6096 50,771 6.75% 0.8433 42,814 8.47% 0.8088 41,062 243,249 48.8%
2020 1.0000 3.6096 51,241 6.75% 0.7900 40,478 8.47% 0.7456 38,206 281,455 56.4%
2021 1.0000 4.6096 38,210 6.75% 0.7400 28,276 8.47% 0.6874 26,264 307,719 61.7%
2022 1.0000 5.6096 25,190 6.75% 0.6932 17,462 8.47% 0.6337 15,962 323,681 64.9%
2023 1.0000 6.6096 25,697 6.75% 0.6494 16,687 8.47% 0.5842 15,012 338,693 67.9%
2024 1.0000 7.6096 26,215 6.75% 0.6083 15,947 8.47% 0.5386 14,118 352,811 70.7%
2025 1.0000 8.6096 12,443 6.75% 0.5699 7,091 8.47% 0.4965 6,178 358,989 72.0%
2026 1.0000 9.6096 27,291 6.75% 0.5338 14,569 8.47% 0.4577 12,491 371,480 74.5%
2027 1.0000 10.6096 27,849 6.75% 0.5001 13,926 8.47% 0.4220 11,751 383,231 76.8%
2028 1.0000 11.6096 28,420 6.75% 0.4684 13,313 8.47% 0.3890 11,055 394,287 79.0%
2029 1.0000 12.6096 29,006 6.75% 0.4388 12,729 8.47% 0.3586 10,402 404,689 81.1%
2030 1.0000 13.6096 29,605 6.75% 0.4111 12,170 8.47% 0.3306 9,788 414,476 83.1%
2031 1.0000 14.6096 30,220 6.75% 0.3851 11,637 8.47% 0.3048 9,210 423,687 84.9%
2032 1.0000 15.6096 30,849 6.75% 0.3607 11,128 8.47% 0.2810 8,668 432,354 86.7%
2033 1.0000 16.6096 31,493 6.75% 0.3379 10,642 8.47% 0.2590 8,158 440,512 88.3%
2034 1.0000 17.6096 32,154 6.75% 0.3166 10,179 8.47% 0.2388 7,678 448,190 89.8%
2035 1.0000 18.6096 21,725 6.75% 0.2965 6,442 9.47% 0.1856 4,032 452,222 90.6%
2036 1.0000 19.6096 33,053 6.75% 0.2778 9,182 9.47% 0.1695 5,603 457,825 91.8%
2037 1.0000 20.6096 29,339 6.75% 0.2602 7,635 9.47% 0.1549 4,543 462,369 92.7%
2038 1.0000 21.6096 29,652 6.75% 0.2438 7,228 9.47% 0.1415 4,194 466,563 93.5%
2039 1.0000 22.6096 29,902 6.75% 0.2284 6,828 9.47% 0.1292 3,864 470,427 94.3%
2040 1.0000 23.6096 30,207 6.75% 0.2139 6,462 9.47% 0.1180 3,566 473,993 95.0%
2041 1.0000 24.6096 30,499 6.75% 0.2004 6,112 9.47% 0.1078 3,288 477,281 95.7%
2042 1.0000 25.6096 30,793 6.75% 0.1877 5,780 9.47% 0.0985 3,033 480,314 96.3%
2043 1.0000 26.6096 31,089 6.75% 0.1758 5,467 9.47% 0.0900 2,797 483,111 96.8%
2044 1.0000 27.6096 31,387 6.75% 0.1647 5,170 9.47% 0.0822 2,580 485,691 97.4%
2045 1.0000 28.6096 31,686 6.75% 0.1543 4,890 9.47% 0.0751 2,379 488,069 97.8%
2046 1.0000 29.6096 31,988 6.75% 0.1446 4,624 9.47% 0.0686 2,194 490,263 98.3%
2047 1.0000 30.6096 32,291 6.75% 0.1354 4,373 9.47% 0.0626 2,023 492,286 98.7%
2048 1.0000 31.6096 32,596 6.75% 0.1269 4,135 9.47% 0.0572 1,865 494,151 99.0%
2049 1.0000 32.6096 32,903 6.75% 0.1188 3,910 9.47% 0.0523 1,720 495,871 99.4%
2050 1.0000 33.6096 33,211 6.75% 0.1113 3,697 9.47% 0.0477 1,586 497,457 99.7%
2051 1.0000 34.6096 33,211
, 6.75% 0.1043 3,463 9.47% 0.0436 1,449 498,905 100.0%
$579,198 $498,905
KPMG calculation $575,790 $575,790
Difference ($3,408) % of KPMG FV est. 86.6%
1
Based on KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non‐controlling Interests of SolarCity Corporation as of November 21, 2016, pp. 65 ‐ 67 (PWC‐
TESLA00000355 ‐ 7)
2
Portion of annual cash flows assumed to be realized in applicable year
3
Number of years until valuation date that the cash flow is assumed to be collected, reflecting mid‐year convention
4
Exhibit 82; discount rate increases by 1% at the end of the term of the 20‐year contractual term, to provide for risk that renewal rate may be less than 100%, as is 
assumed I KPMG valuation analysis
 EXHIBIT 81.3
SolarCity Corporation
Verification of Fair Value of California Residential Systems Placed in Service in 2016
As of November 21, 2016 ($000)
Fair Value at Adjusted Appraised Value at
Cash Flow Assumptions1 KPMG Discount Rate1 Adjusted Discount Rates Cumulative
Partial Present Present Cash Flow
Period Discounting Cash Discount Discount Value of Discount Discount Value of Percent
Year Factor2 Periods3 Flow Rate Factor Cash Flow Rate
4
Factor Cash Flow Amount of Total
a b c d 1/(1+d)b = e a x c x e f b 
1/(1+d) = g c x g = h ∑h % of Total
2016 0.1096 0.1096 $442,069 6.75% 0.9929 $48,100 8.47% 0.9911 $48,016 $48,016 9.9%
2017 1.0000 0.6096 95,612 6.75% 0.9610 91,880 8.47% 0.9516 90,987 139,004 28.5%
2018 1.0000 1.6096 66,641 6.75% 0.9002 59,990 8.47% 0.8773 58,464 197,468 40.5%
2019 1.0000 2.6096 49,443 6.75% 0.8433 41,694 8.47% 0.8088 39,988 237,456 48.8%
2020 1.0000 3.6096 49,899 6.75% 0.7900 39,418 8.47% 0.7456 37,205 274,661 56.4%
2021 1.0000 4.6096 37,133 6.75% 0.7400 27,479 8.47% 0.6874 25,524 300,185 61.6%
2022 1.0000 5.6096 24,379 6.75% 0.6932 16,900 8.47% 0.6337 15,448 315,634 64.8%
2023 1.0000 6.6096 24,869 6.75% 0.6494 16,149 8.47% 0.5842 14,528 330,162 67.8%
2024 1.0000 7.6096 25,371 6.75% 0.6083 15,434 8.47% 0.5386 13,664 343,825 70.6%
2025 1.0000 8.6096 25,885 6.75% 0.5699 14,751 8.47% 0.4965 12,852 356,677 73.2%
2026 1.0000 9.6096 12,686 6.75% 0.5338 6,772 8.47% 0.4577 5,806 362,483 74.4%
2027 1.0000 10.6096 26,951 6.75% 0.5001 13,477 8.47% 0.4220 11,372 373,855 76.8%
2028 1.0000 11.6096 27,504 6.75% 0.4684 12,884 8.47% 0.3890 10,699 384,555 79.0%
2029 1.0000 12.6096 28,070 6.75% 0.4388 12,318 8.47% 0.3586 10,066 394,621 81.0%
2030 1.0000 13.6096 28,650 6.75% 0.4111 11,777 8.47% 0.3306 9,472 404,093 83.0%
2031 1.0000 14.6096 29,244 6.75% 0.3851 11,261 8.47% 0.3048 8,913 413,006 84.8%
2032 1.0000 15.6096 29,853 6.75% 0.3607 10,769 8.47% 0.2810 8,388 421,394 86.5%
2033 1.0000 16.6096 30,477 6.75% 0.3379 10,299 8.47% 0.2590 7,894 429,288 88.1%
2034 1.0000 17.6096 31,115 6.75% 0.3166 9,850 8.47% 0.2388 7,430 436,718 89.7%
2035 1.0000 18.6096 31,769 6.75% 0.2965 9,421 8.47% 0.2201 6,994 443,712 91.1%
2036 1.0000 19.6096 21,329 6.75% 0.2778 5,925 9.47% 0.1695 3,616 447,328 91.8%
2037 1.0000 20.6096 28,382 6.75% 0.2602 7,386 9.47% 0.1549 4,395 451,723 92.7%
2038 1.0000 21.6096 28,685 6.75% 0.2438 6,993 9.47% 0.1415 4,058 455,781 93.6%
2039 1.0000 22.6096 28,925 6.75% 0.2284 6,605 9.47% 0.1292 3,738 459,518 94.3%
2040 1.0000 23.6096 29,219 6.75% 0.2139 6,250 9.47% 0.1180 3,449 462,967 95.1%
2041 1.0000 24.6096 29,501 6.75% 0.2004 5,912 9.47% 0.1078 3,181 466,148 95.7%
2042 1.0000 25.6096 29,784 6.75% 0.1877 5,591 9.47% 0.0985 2,933 469,081 96.3%
2043 1.0000 26.6096 30,069 6.75% 0.1758 5,288 9.47% 0.0900 2,705 471,787 96.9%
2044 1.0000 27.6096 30,356 6.75% 0.1647 5,001 9.47% 0.0822 2,495 474,281 97.4%
2045 1.0000 28.6096 30,645 6.75% 0.1543 4,729 9.47% 0.0751 2,301 476,582 97.8%
2046 1.0000 29.6096 30,935 6.75% 0.1446 4,472 9.47% 0.0686 2,121 478,704 98.3%
2047 1.0000 30.6096 31,227 6.75% 0.1354 4,229 9.47% 0.0626 1,956 480,660 98.7%
2048 1.0000 31.6096 31,521 6.75% 0.1269 3,999 9.47% 0.0572 1,804 482,463 99.1%
2049 1.0000 32.6096 31,816 6.75% 0.1188 3,781 9.47% 0.0523 1,663 484,127 99.4%
2050 1.0000 33.6096 32,114 6.75% 0.1113 3,575 9.47% 0.0477 1,533 485,660 99.7%
2051 1.0000 34.6096 32,412
, 6.75% 0.1043 3,380 9.47% 0.0436 1,414 487,074 100.0%
$563,737 $487,074
KPMG calculation $563,790 $563,790
Difference $53 % of KPMG FV est. 86.4%
1
Based on KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non‐controlling Interests of SolarCity Corporation as of November 21, 2016, pp. 70 ‐ 72 
(PWC‐TESLA00000360 ‐ 2)
2
Portion of annual cash flows assumed to be realized in applicable year
3
Number of years until valuation date that the cash flow is assumed to be collected, reflecting mid‐year convention
4
Exhibit 82; discount rate increases by 1% at the end of the term of the 20‐year contractual term, to provide for risk that renewal rate may be less than 100%, as is 
assumed I KPMG valuation analysis
 EXHIBIT 81.4
SolarCity Corporation
Verification of Fair Value of Massachusetts Residential Systems Placed in Service in 2016
As of November 21, 2016 ($000)
Fair Value at Adjusted Appraised Value at
Cash Flow Assumptions1 KPMG Discount Rate1 Adjusted Discount Rates Cumulative
Partial Present Present Cash Flow
Period Discounting Cash Discount Discount Value of Discount Discount Value of Percent
Year Factor2 Periods3 Flow Rate Factor Cash Flow Rate
4
Factor Cash Flow Amount of Total
a b c d 1/(1+d)b = e a x c x e f b 
1/(1+d) = g c x g = h ∑h % of Total
2016 0.1096 0.1096 $121,380 6.75% 0.9929 $13,207 8.47% 0.9911 $13,184 $13,184 9.9%
2017 1.0000 0.6096 31,058 6.75% 0.9610 29,846 8.47% 0.9516 29,556 42,740 32.1%
2018 1.0000 1.6096 23,396 6.75% 0.9002 21,061 8.47% 0.8773 20,525 63,265 47.5%
2019 1.0000 2.6096 17,844 6.75% 0.8433 15,047 8.47% 0.8088 14,432 77,697 58.3%
2020 1.0000 3.6096 16,434 6.75% 0.7900 12,982 8.47% 0.7456 12,253 89,950 67.5%
2021 1.0000 4.6096 12,059 6.75% 0.7400 8,924 8.47% 0.6874 8,289 98,239 73.7%
2022 1.0000 5.6096 5,380 6.75% 0.6932 3,729 8.47% 0.6337 3,409 101,648 76.3%
2023 1.0000 6.6096 5,383 6.75% 0.6494 3,496 8.47% 0.5842 3,145 104,793 78.6%
2024 1.0000 7.6096 5,389 6.75% 0.6083 3,278 8.47% 0.5386 2,902 107,695 80.8%
2025 1.0000 8.6096 5,397 6.75% 0.5699 3,076 8.47% 0.4965 2,680 110,375 82.8%
2026 1.0000 9.6096 1,650 6.75% 0.5338 881 8.47% 0.4577 755 111,130 83.4%
2027 1.0000 10.6096 4,431 6.75% 0.5001 2,216 8.47% 0.4220 1,870 113,000 84.8%
2028 1.0000 11.6096 4,513 6.75% 0.4684 2,114 8.47% 0.3890 1,756 114,755 86.1%
2029 1.0000 12.6096 4,598 6.75% 0.4388 2,018 8.47% 0.3586 1,649 116,404 87.3%
2030 1.0000 13.6096 4,685 6.75% 0.4111 1,926 8.47% 0.3306 1,549 117,953 88.5%
2031 1.0000 14.6096 4,773 6.75% 0.3851 1,838 8.47% 0.3048 1,455 119,408 89.6%
2032 1.0000 15.6096 4,864 6.75% 0.3607 1,755 8.47% 0.2810 1,367 120,774 90.6%
2033 1.0000 16.6096 4,958 6.75% 0.3379 1,675 8.47% 0.2590 1,284 122,059 91.6%
2034 1.0000 17.6096 5,053 6.75% 0.3166 1,600 8.47% 0.2388 1,207 123,265 92.5%
2035 1.0000 18.6096 5,151 6.75% 0.2965 1,527 8.47% 0.2201 1,134 124,399 93.3%
2036 1.0000 19.6096 2,468 6.75% 0.2778 686 9.47% 0.1695 418 124,818 93.6%
2037 1.0000 20.6096 6,122 6.75% 0.2602 1,593 9.47% 0.1549 948 125,766 94.3%
2038 1.0000 21.6096 6,135 6.75% 0.2438 1,496 9.47% 0.1415 868 126,634 95.0%
2039 1.0000 22.6096 6,208 6.75% 0.2284 1,418 9.47% 0.1292 802 127,436 95.6%
2040 1.0000 23.6096 6,245 6.75% 0.2139 1,336 9.47% 0.1180 737 128,173 96.1%
2041 1.0000 24.6096 6,300 6.75% 0.2004 1,262 9.47% 0.1078 679 128,852 96.7%
2042 1.0000 25.6096 6,356 6.75% 0.1877 1,193 9.47% 0.0985 626 129,478 97.1%
2043 1.0000 26.6096 6,413 6.75% 0.1758 1,128 9.47% 0.0900 577 130,055 97.6%
2044 1.0000 27.6096 6,469 6.75% 0.1647 1,066 9.47% 0.0822 532 130,587 98.0%
2045 1.0000 28.6096 6,526 6.75% 0.1543 1,007 9.47% 0.0751 490 131,077 98.3%
2046 1.0000 29.6096 6,583 6.75% 0.1446 952 9.47% 0.0686 451 131,528 98.7%
2047 1.0000 30.6096 6,640 6.75% 0.1354 899 9.47% 0.0626 416 131,944 99.0%
2048 1.0000 31.6096 6,697 6.75% 0.1269 850 9.47% 0.0572 383 132,327 99.3%
2049 1.0000 32.6096 6,754 6.75% 0.1188 803 9.47% 0.0523 353 132,680 99.5%
2050 1.0000 33.6096 6,812 6.75% 0.1113 758 9.47% 0.0477 325 133,006 99.8%
2051 1.0000 34.6096 6,870
, 6.75% 0.1043 716 9.47% 0.0436 300 133,305 100.0%
$149,357 $133,305
KPMG calculation $149,370 $149,370
Difference $13 % of KPMG FV est. 89.2%
1
Based on KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non‐controlling Interests of SolarCity Corporation as of November 21, 2016, pp. 253 ‐ 255 
(PWC‐TESLA00000543 ‐ 5)
2
Portion of annual cash flows assumed to be realized in applicable year
3
Number of years until valuation date that the cash flow is assumed to be collected, reflecting mid‐year convention
4
Exhibit 82; discount rate increases by 1% at the end of the term of the 20‐year contractual term, to provide for risk that renewal rate may be less than 100%, as is 
assumed I KPMG valuation analysis
 EXHIBIT 82
SolarCity Corporation
Development of the Weighted Average Cost
of Capital as of November 21, 2016
Component Pre‐Tax Interest After‐Tax Wtd. Ave.
of Capital Cost of Tax Cost of Cost of
Structure Weight1 Capital
2
Shield
3
Capital Capital
a b c b + c = d a x d
Debt 46.7% 5.10% ‐2.04% 3.06% 1.43%
Equity 53.3% 13.22% 13.22% 7.04%
100.0% 8.47%

1
PowerCo SRECs Total %
Non‐recourse financing $2,006 36 2,042 46.7%
Equity (NPV) 2,239 92 2,331 53.3%
$4,245 128 4,373 100.0%
Amounts $000
Source:  SolarCity Q3 2016 Review , November 9, 2016, p. 9
2
Blended cost of debt:   SolarCity Q3 2016 Review , November 9, 2016, p. 7
 Cost of Equity:  Exhibit 83
3
Pre‐tax cost of debt x 40% effective tax rate per KPMG Preliminary Valuation of 
Certain Assets, Liabilities, and Non‐Controlling Interests of SolarCity Corporation as of 
November 21, 2016 , p. 16 (PWC‐TESLA00000305)
 EXHIBIT 83
SolarCity Corporation
Cost of Equity Capital Based on Alternative Assumptions1
Calculation Summary
# of Calc‐ Standard 25th 75th
ulations Median Mean Deviation Minimum Maximum Percentile Percentile Basis
26 13.22% 13.76% 2.12% 10.58% 17.78% 12.42% 14.71% All
9 13.38% 14.09% 1.75% 11.96% 17.27% 12.87% 14.70% CAPM
17 13.15% 13.58% 2.28% 10.58% 17.78% 11.96% 14.71% Build‐Up
Capital Asset Pricing Model—CRSP Size Premia
Equity
Risk‐Free Risk Size Cost of
Rate Beta Premium Premium Equity
a b c d a+(bxc)+d=e
Components of calculation 3.50% 1.56 4.47% 1.49% 11.96%
Build‐Up Method—CRSP Size Premia
Equity Industry
Risk‐Free Risk Risk Size Cost of
Rate Premium Premium Premium Equity
a b c d a+b+c+d=e
Components of calculation 3.50% 4.47% 2.50% 1.49% 11.96%
Capital Asset Pricing Model—Risk Premium Report Size Premia
Equity
Risk‐Free Risk Size Cost of
Rate Beta Premium Premium Equity
Adjustment factors: a b c d a+(bxc)+d=e
Market value of common equity 3.50% 1.56 4.47% 3.53% 13.99%
Book value of equity 3.50% 1.56 4.47% 2.68% 13.14%
5‐year average net income 3.50% 1.56 4.47% 6.38% 16.84%
Market value of invested capital 3.50% 1.56 4.47% 2.22% 12.68%
Total assets 3.50% 1.56 4.47% 2.41% 12.87%
5‐year average EBITDA 3.50% 1.56 4.47% 6.81% 17.27%
Net sales 3.50% 1.56 4.47% 4.24% 14.70%
Number of employees 3.50% 1.56 4.47% 2.92% 13.38%
Median 13.68%
Build‐Up:  Risk Premium Over Risk‐Free Rate Using Risk Premium Report
Risk‐Free Risk ERP Cost of
Rate Premium Adj. Equity
Adjustment factors: a b c a + b + c
Market value of common equity 3.50% 9.29% ‐0.46% 12.33%
Book value of equity 3.50% 8.05% ‐0.46% 11.09%
5‐year average net income 3.50% 13.80% ‐0.46% 16.84%
Market value of invested capital 3.50% 7.54% ‐0.46% 10.58%
Total assets 3.50% 7.55% ‐0.46% 10.59%
5‐year average EBITDA 3.50% 14.74% ‐0.46% 17.78%
Net sales 3.50% 10.24% ‐0.46% 13.28%
Number of employees 3.50% 8.48% ‐0.46% 11.52%
Median 11.93%
1 of 2
 EXHIBIT 83
SolarCity Corporation
Cost of Equity Capital Based on Alternative Assumptions1
Build‐Up:  Equity, Industry Risk, and Size Premium Using Risk Premium Report
Risk‐Free Industry Size Cost of
Rate ERP Risk Pr. Premium Equity
Adjustment factors: a b c d a + b + c + d
Market value of common equity 3.50% 4.47% 2.50% 3.53% 14.00%
Book value of equity 3.50% 4.47% 2.50% 2.68% 13.15%
5‐year average net income 3.50% 4.47% 2.50% 6.38% 16.85%
Market value of invested capital 3.50% 4.47% 2.50% 2.22% 12.69%
Total assets 3.50% 4.47% 2.50% 2.41% 12.88%
5‐year average EBITDA 3.50% 4.47% 2.50% 6.81% 17.28%
Net sales 3.50% 4.47% 2.50% 4.24% 14.71%
Number of employees 3.50% 4.47% 2.50% 2.92% 13.39%
Median 13.70%
1
See Exhibit 84, 85, and Appendix 1

2 of 2
 EXHIBIT 83A
Cost of Equity Capital Supplemental Calculation

For informational purposes I have provided supplemental cost of equity

calculations based on the approach recently used by the Court of the Chancery of
the State of Delaware (the “Court”) in re: Appraisal of Jarden Corporation.1 In
that matter, the Court developed a cost of equity calculation based on the Capital
Asset Pricing Model (“CAPM”). The components of CAPM are:

k = rRisk-free + (β x ERP) + size premium

I know that the Court understands these concepts well so I will limit this
supplement to the inputs adapted to measuring the cost of equity capital for
SolarCity, in a manner patterned after what has done in the Jarden case.

k = cost of equity capital

rRisk-free = yield on 20-year U.S. Treasury bond = 2.69% on the Merger Date
(Exhibit 84)

β2-year adjusted = 1.78 (Exhibit 85). The raw beta is the unadjusted slope of
the regression line derived from dividing the covariance of the returns of the
subject company and the stock market index by the variance of the stock market
index. I calculated the 2-year raw beta of SolarCity, calculated based on weekly
stock price fluctuations until the week preceding the announcement of the
Proposed Merger. The Raw Beta of SolarCity though June 17, 2016, was 2.36.2
Adjusted beta is widely used by investment professionals, including valuation,
because it takes into consideration the mean-reverting tendency of beta, since it is
calculated from historical data to perform prospectively oriented analyses. My
calculation of adjusted beta is based on the weighting used by Bloomberg and
commonly used by other financial data sources and analysts. I have applied a ⅔
weight to raw beta and a ⅓ weight to 1.0 (mean-reverting market beta).

β3-year adjusted = 1.91 (Exhibit 85). I calculated the 3-year adjusted beta by
applying a ⅔ weight to the 3-year raw beta through June 17, 2016, or 2.16, and a ⅓
weight to 1.0.

1
In re: Appraisal of Jarden Corporation, Consolidated C.A. No. 12456–VCS
(Court of Chancery of State of Delaware, July 19, 2019), ¶ 99ff.
2
Calculations including prices for subsequent dates would not be indicative of
SolarCity’s beta, as its stock began to trade as a Tesla proxy, as discussed in my
report.

1
 EXHIBIT 83A
Cost of Equity Capital Supplemental Calculation

Equity risk premium (ERP) = 6.03%, based on the arithmetic mean of the
long-term Supply Side ERP.

Size premium = 1.49% if the determination of a size premium is limited to

using the CRSP decile size premia based solely on market capitalization of equity.
If I were to use the Merger consideration as the basis for measuring size, the size
decile relevant to measuring the size premium would be the 5th decline, which
would result in a1.49% size premium.3

Based on the above inputs, the pro forma cost of equity capital of SolarCity
that is relevant to the Merger Date would be:

kminimum = 2.69% + (1.78 x 6.03%) + 1.49% = 14.91%

kmaximum = 2.69% + (1.91 x 6.03%) + 1.49% = 15.70%

I have calculated the SolarCity cost of equity capital as 13.22%

(Exhibit 83). Had I used the above costs of equity capital, they would have
increased the WACC in Exhibit 82, and reduced my calculations of the adjusted
appraised value of the Residential Solar Assets and Non-Residential Solar Assets
in Exhibit 78, thereby reducing may calculations of net asset value in Exhibits 75
and 76. If adjusted appraised net asset value were used as the means for
quantifying damages alleged by the plaintiffs, such and adjustment of the cost of
equity capital would increase the amount of computed damages. Using the higher
pro forma costs of equity capital resulting from the pro forma costs of equity
capital from Exhibit 83A as the discount rate for my DCF analysis in Exhibit 90
would also reduce the pro forma value resulting from DCF analysis and, if it were
a basis for measuring alleged damages, would increase the amount of computed
damages.

3 2016 Valuation Handbook: Guide to Cost of Capital, Duff & Phelps,

(Chicago: John Wiley & Sons, Inc., 2016), Chapter 3, p. 32.

2
 EXHIBIT 84
Risk‐Free Rate and Equity Risk Premium Benchmarks
7.97%

7.21%

5.50%

4.76%
4.56% 4.47%
4.38% 4.27%
4.04%
3.71%
3.50% 3.38%

2.84%
2.69%
20‐year UST, 11/21/16

Normalized 20‐year UST

1996 ‐ 2015

1986 ‐ 2015

1976 ‐ 2015

1966 ‐ 2015

1926 ‐ 2015

1900 ‐ 2015

1926 ‐ 2015 "Supply‐side"

D&P recommended

25th  percentile

75th  percentile

RFR + ERP 25th pctl.

RFR + ERP 75th pctl.
Risk‐Free Rate Equity Risk Premium Implied Large‐Cap
Sources:  2016 Valuation Handbook, pp. 27 and 32, 2017 Valuation Handbook p. 53, and Federal Reserve Bank of St. Louis Cost of Equity
 EXHIBIT 85
SCTY 2‐Year and 3‐Year Raw and Adjusted Weekly Beta
3.50

3.00

2.50
3‐year adjusted 
beta 6/17/16
1.91

2.00

2‐year adjusted 
1.50 beta 6/17/16
1.78

1.00

2‐Year Raw Beta 2‐Year Adjusted Beta 3‐Year Raw Beta 3‐Year Adjusted Beta Source:  Refinitiv

 EXHIBIT 86
SolarCity Corporation
KPMG Fair Value and Adjusted Appraised Value of Redeemable Non‐Controlling Interests as of November 21, 2016 ($000)1
Financial Commit‐ Book KPMG Adjusted Appraised Value
SW Code Year Close Date Fund Name Investor ment2 Transaction Type Value2 Fair Value2 Calculated3 Attributed Amount % KPMG3
a b a x 98.83% = c b or c = d d ÷ a
MAT2 2012 4/10/14 Eiger      Credit Suisse $100,000 Partnership    $34,461 17,000 16,801 16,801 98.83%
DOM1 2015 1/6/15 DOM Solar I (Credit Suisse)  Credit Suisse 500,000 Partnership Lease Pass Through 4,921 31,000 30,830 30,830 99.45%
FIRE1 2016 10/26/16 Firehorn Solar     Credit Suisse 250,000 Partnership Flip   99,836 101,643 100,454 100,454 98.83%
COMP1 2013 12/20/13 Solar Integrated (Intel)    Intel 50,000 Backlevered Partnership Flip  4,858 4,100 4,052 4,052 98.83%
COMP2 2014 5/6/14 Solar Integrated II (Intel)   Intel 50,000 Backlevered Partnership Flip  5,994 4,300 4,250 4,250 98.83%
COMP3 2014 12/24/14 Solar Integrated Ill (Intel)   Intel 120,000 Partnership Flip   49,629 46,400 45,735 45,735 98.57%
COMP4A 2016 2/23/16 Solar Integrated Fund IV‐A (Intel)  Intel 90,000 Partnership Flip   1,319 25,200 24,834 24,834 98.55%
LOU1 2014 10/14/14 Louis Solar I    Orix/Firststar 38,000 Partnership Lease Pass Through 16,146 4,200 4,151 4,151 98.83%
LOU2 2015 10/30/15 Louis Solar II Symestra /Firststar 30,000 Partnership Flip   415 1,600 1,581 1,581 98.83%
USB4 2011 5/27/11 USBIV      U.S. Bank 60,000 Partnership Lease Pass Through 3,000 1,900 1,878 1,878 98.83%
SRS1 2012 2/27/12 Clydesdale      U.S. Bank 20,000 Levered Partnership Flip (Equity) 1,173 1,000 988 988 98.83%
USB5 2012 4/17/12 USBV      U.S. Bank 30,000 Partnership Lease Pass Through 2,829 8,900 8,796 8,796 98.83%
USB6 2012 12/21/12 USBVI      U.S. Bank 35,000 Partnership Lease Pass Through 4,225 6,800 6,720 6,720 98.83%
POP1 2013 5/3/13 Paramount Energy     U.S. Bank 16,558 Lease Pass Through  2,713 1,800 1,779 1,779 98.83%
USB7 2013 7/31/13 USBVII      U.S. Bank 80,000 Partnership Lease Pass Through 13,423 9,600 9,488 9,488 98.83%
USB8 2013 12/9/13 USBVIII      U.S. Bank 40,000 Partnership Lease Pass Through 12,202 8,700 8,598 8,598 98.83%
USB9 2014 5/5/14 USBIX      U.S. Bank 90,000 Partnership Lease Pass Through 26,692 16,100 15,912 15,912 98.83%
USB10 2015 4/16/15 USBX      U.S. Bank 100,000 Partnership Flip   50,446 5,200 5,139 5,139 98.83%
USB11 2016 3/21/16 USBXI      U.S. Bank 50,000 Partnership Flip   1,262 17,600 17,394 17,394 98.83%
LOU3 2016 6/30/16 Louis Solar Ill    U.S. Bank 15,000 Partnership Flip   10,248 2,900 2,866 2,866 98.83%
$1,764,558 $345,792 315,943 101,400 210,847 312,247 98.83%
1
Amounts $000 except for percentages; see text of report for discussion
2
KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non‐controlling Interests of SolarCity Corporation , p. 827ff (PWC‐TESLA00001117)
3
Verification of Redeemable Non‐Controlling Interests: KPMG Calculations Quintero Calculations
Fund Name Amount % of Category Amount % of KPMG Reference
DOM Solar I (Credit Suisse)  $31,000 9.8% $30,830 99.45% Exhibit 88
Solar Integrated Ill (Intel)   46,400 14.7% 45,735 98.57% Exhibit 88.1
Solar Integrated Fund IV‐A (Intel)  25,200 8.0% 24,834 98.55% Exhibit 88.2
$102,600 32.5% $101,400 98.83%
 EXHIBIT 87
SolarCity Corporation
KPMG Fair Value and Adjusted Appraised Value of Non‐Redeemable Non‐Controlling Interests as of November 21, 2016 ($000)
Financial Commit‐ Book KPMG Adjusted Appraised Value
SW Code Year Close Date Fund Name Investor ment2 Transaction Type Value2 Fair Value2 Calculated3 Attributed Amount % KPMG3
a b a x 98.08% = c b or c = d d ÷ a
BANC1 2016 7/1/16 The Big Green Solar I (BANC) BANC $100,000 Partnership Flip   $17,635 14,800 14,664 14,664 99.08%
BAML1 2013 5/10/13 Solar Energy of America (BAML)  Bank of America Merrill Lynch 100,000 Backlevered Partnership Flip  14,024 7,300 7,233 7,233 99.08%
CAST1 2014 10/8/14 Castello Solar I (BAML)   Bank of America Merrill Lynch 75,000 Partnership Flip   45,058 40,100 39,249 39,249 97.88%
CAST2 2015 6/29/15 Castello Solar 11 (BAML)   Bank of America Merrill Lynch 135,000 Partnership Flip   42,698 55,000 54,337 54,337 98.79%
CAST3 2016 6/15/16 Castello Solar Ill (BAML)   Bank of America Merrill Lynch 80,000 Partnership Flip   8,349 54,800 54,258 54,258 99.01%
PRES1 2015 4/14/15 Presidio Solar I (BAML)   Bank of America ML/Cathay Bank 75,000 Partnership Flip   16,615 16,000 15,853 15,853 99.08%
PRES2 2016 3/26/16 PresIdio Solar II (BAML)   Bank of America ML/Cathay Bank 75,000 Partnership Flip   31,617 40,900 40,610 40,610 99.29%
VIS1 2014 4/23/14 Visigoth Solar (Capital One)   Capital One 100,000 Partnership Flip   8,637 12,700 12,584 12,584 99.08%
ANCON1 2016 8/16/16 Ancon Solar I (Citi)   Citi Bank 25,000 Partnership Flip   410 500 495 495 99.08%
ANCON2 2016 9/21/16 Ancon Solar II (Citi)   Citi Bank 100,000 Lease Pass Through  71,552 74,000 73,972 73,972 99.96%
DEB1 2013 9/4/13 Three Rivers Solar I (Direct Energy) Direct Energy 50,000 Partnership Flip   2,517 2,400 2,378 2,378 99.08%
DEB2 2015 4/20/15 Three Rivers Solar II (Direct Energy) Direct Energy 30,000 Partnership Flip   5,950 7,600 7,530 7,530 99.08%
DEB3 2015 12/11/15 Allegheny Solar I (Direct Energy)  Direct Energy 30,000 Partnership Flip   3,997 3,000 2,973 2,973 99.08%
CHOMP1 2016 11/14/16 Chompie Solar     Discovery 150,000 Back levered Partnership Flip 20,773 21,634 21,436 21,436 99.08%
HAWK1 2015 1/13/15 Sparrowhawk Solar I (Google)   Google 300,000 Partnership Flip   42,979 46,500 45,701 45,701 98.28%
HON1 2013 2/6/13 Blue Skies Solar I (Honda)  Honda 25,000 Partnership Flip   1,249 1,900 1,883 1,883 99.08%
HON2 2014 7/22/14 Blue Skies Solar II (Honda)  Honda 20,000 Partnership Flip   3,265 3,000 2,973 2,973 99.08%
HARP 2016 5/2/16 Harpoon Solar I    John Hancock 227,407 Cash Equity   83,971 94,800 94,764 94,764 99.96%
JPM1 2013 6/27/13 Solar House I (JPM)   JPMorgan 75,000 Backlevered Partnership Flip  11,934 11,400 11,296 11,296 99.08%
JPM2 2014 8/19/14 Solar House II (JPM)   JPMorgan 75,000 Backlevered Partnership Flip  25,924 26,200 25,960 25,960 99.08%
JPM3 2015 8/27/15 Solar House Ill (JPM)   JPMorgan 150,000 Partnership Flip   57,485 34,000 33,688 33,688 99.08%
JPM4 2016 7/12/16 Solar House IV (JPM)   JPMorgan 150,000 Partnership Flip   51,827 37,500 37,156 37,156 99.08%
PGE3 2010 9/21/10 PGEIII      PG&E Corporation 201,750 Partnership Flip   0 40,000 39,121 39,121 97.80%
ARPAD1 2016 9/8/16 Arpad Solar I    Quantum Strategic Partners 305,230 Cash Equity   86,622 91,040 90,206 90,206 99.08%
MS1 2008 3/14/08 MSSC      SRS1 35,000 Partnership Flip   14,376 5,600 5,549 5,549 99.08%
STT1 2012 9/14/12 Haymarket      State Street 50,000 Partnership Flip   6,179 7,800 7,729 7,729 99.08%
ULU1 2012 8/13/12 Ulupono      The Ulupono Initiative 15,000 Partnership Flip   733 100 99 99 99.08%
$2,754,387 $676,376 750,574 442,012 301,684 743,696 99.08%
1
Amounts $000 except for percentages; see text of report for discussion
2
KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non‐controlling Interests of SolarCity Corporation, p. 827ff (PWC‐TESLA00001117)
3
Verification of Redeemable Non‐Controlling Interests: KPMG Calculations Quintero Calculations
Fund Name Amount % of Category Amount % of KPMG Reference
Castello Solar I $40,100 9.0% $39,249 97.88% Exhibit 89
Castello Solar II 55,000 12.3% 54,337 98.79% Exhibit 89.1
Castello Solar III 54,800 12.3% 54,258 99.01% Exhibit 89.2
Presidio Solar II 40,900 9.2% 40,610 99.29% Exhibit 89.3
Sparrowhawk Solar I 74,000 16.6% 73,972 99.96% Exhibit 89.4
Harpoon Solar I 46,500 10.4% 45,701 98.28% Exhibit 89.5
Ancon Solar I 94,800 21.3% 94,764 99.96% Exhibit 89.6
PGE III 40,000 9.0% 39,121 97.80% Exhibit 89.7
$446,100 100.0% $442,012 99.08%
 EXHIBIT 88
SolarCity Corporation
Verification of Fair Value of Redeemable Non‐Controlling Interest:  DOM Solar I
As of November 21, 2016 ($000)
Fair Value at Adjusted Appraised Value at Cumulative PV
Cash Flow Assumptions1 KPMG Discount Rate1 Adjusted Discount Rates of Cash Flow and
Partial Cash Flow Present Present Tax Benefits
Period Discounting and Tax Discount Discount Value CF & Discount Discount Value CF & Percent
Year Factor2 Periods3 Benefits Rate Factor Tax Ben. Rate4 Factor Tax Ben. Amount of Total
a b c d 1/(1+d)b = e a x c x e f b 
1/(1+d) = g c x g = h ∑h % of Total
2016 1.0000 0.1096 $2,156 8.00% 0.9916 $2,138 8.47% 0.9911 $2,137 $2,137 6.9%
2017 1.0000 0.6096 4,803 8.00% 0.9542 4,583 8.47% 0.9516 4,571 6,708 21.8%
2018 1.0000 1.6096 8,770 8.00% 0.8835 7,748 8.47% 0.8773 7,694 14,401 46.7%
2019 1.0000 2.6096 17,367 8.00% 0.8180 14,207 8.47% 0.8088 14,046 28,448 92.3%
2020 1.0000 3.6096 14,768 8.00% 0.7575 11,186 8.47% 0.7456 11,011 39,459 128.0%
2021 1.0000 4.6096 8,404 8.00% 0.7013 5,894 8.47% 0.6874 5,777 45,235 146.7%
2022 1.0000 5.6096 (4,379) 8.00% 0.6494 (2,844) 8.47% 0.6337 (2,775) 42,460 137.7%
2023 1.0000 6.6096 (4,587) 8.00% 0.6013 (2,758) 8.47% 0.5842 (2,680) 39,781 129.0%
2024 1.0000 7.6096 (4,798) 8.00% 0.5567 (2,671) 8.47% 0.5386 (2,584) 37,197 120.7%
2025 1.0000 8.6096 (4,251) 8.00% 0.5155 (2,191) 8.47% 0.4965 (2,111) 35,086 113.8%
2026 1.0000 9.6096 (3,903) 8.00% 0.4773 (1,863) 8.47% 0.4577 (1,786) 33,300 108.0%
2027 1.0000 10.6096 (2,378) 8.00% 0.4420 (1,051) 8.47% 0.4220 (1,003) 32,296 104.8%
2028 1.0000 11.6096 (1,533) 8.00% 0.4092 (627) 8.47% 0.3890 (596) 31,700 102.8%
2029 1.0000 12.6096 (1,562) 8.00% 0.3789 (592) 8.47% 0.3586 (560) 31,140 101.0%
2030 1.0000 13.6096 (1,591) 8.00% 0.3508 (558) 8.47% 0.3306 (526) 30,614 99.3%
2031 1.0000 14.6096 (1,654) 8.00% 0.3249 (537) 8.47% 0.3048 (504) 30,110 97.7%
2032 1.0000 15.6096 (1,557) 8.00% 0.3008 (468) 8.47% 0.2810 (437) 29,672 96.2%
2033 1.0000 16.6096 (1,572) 8.00% 0.2785 (438) 8.47% 0.2590 (407) 29,265 94.9%
2034 1.0000 17.6096 (1,585) 8.00% 0.2579 (409) 8.47% 0.2388 (378) 28,887 93.7%
2035 1.0000 18.6096 (1,419) 8.00% 0.2388 (339) 8.47% 0.2201 (312) 28,574 92.7%
2036 1.0000 19.6096 (130) 8.00% 0.2211 (29) 8.47% 0.2029 (26) 28,548 92.6%
2037 1.0000 20.6096 1,206 8.00% 0.2047 247 8.47% 0.1871 226 28,773 93.3%
2038 1.0000 21.6096 1,156 8.00% 0.1896 219 8.47% 0.1725 199 28,973 94.0%
2039 1.0000 22.6096 1,074 8.00% 0.1755 188 8.47% 0.1590 171 29,144 94.5%
2040 1.0000 23.6096 1,100 8.00% 0.1625 179 8.47% 0.1466 161 29,305 95.1%
2041 1.0000 24.6096 1,158 8.00% 0.1505 174 8.47% 0.1351 156 29,461 95.6%
2042 1.0000 25.6096 1,228 8.00% 0.1393 171 8.47% 0.1246 153 29,614 96.1%
2043 1.0000 26.6096 1,261 8.00% 0.1290 163 8.47% 0.1149 145 29,759 96.5%
2044 1.0000 27.6096 1,294 8.00% 0.1194 155 8.47% 0.1059 137 29,896 97.0%
2045 1.0000 28.6096 1,329 8.00% 0.1106 147 8.47% 0.0976 130 30,026 97.4%
2046 1.0000 29.6096 1,364 8.00% 0.1024 140 8.47% 0.0900 123 30,149 97.8%
2047 1.0000 30.6096 1,384 8.00% 0.0948 131 8.47% 0.0830 115 30,264 98.2%
2048 1.0000 31.6096 1,107 8.00% 0.0878 97 8.47% 0.0765 85 30,348 98.4%
2049 1.0000 32.6096 28 8.00% 0.0813 2 8.47% 0.0705 2 30,350 98.4%
2050 1.0000 33.6096 7,377 8.00% 0.0753 555 8.47% 0.0650 479 30,830 100.0%
2051 1.0000 34.6096 , 8.00% 0.0697 0 8.47% 0.0599 0 30,830 100.0%
$30,949 $30,830
KPMG calculation $30,960 $30,960
Difference $11 % of KPMG FV est. 99.6%
1
Based on KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non‐controlling Interests of SolarCity Corporation as of November 21, 2016, pp. 253 ‐ 255 
(PWC‐TESLA00000543 ‐ 5)
2
Portion of annual cash flows assumed to be realized in applicable year
3
Number of years until valuation date that the cash flow is assumed to be collected, reflecting mid‐year convention
4
Exhibit 82
 EXHIBIT 88.1
SolarCity Corporation
Verification of Fair Value of Redeemable Non‐Controlling Interest:  Solar Integrated III
As of November 21, 2016 ($000)
Fair Value at Adjusted Appraised Value at Cumulative PV
Cash Flow Assumptions1 KPMG Discount Rate1 Adjusted Discount Rates of Cash Flow and
Partial Cash Flow Present Present Tax Benefits
Period Discounting and Tax Discount Discount Value CF & Discount Discount Value CF & Percent
Year Factor2 Periods3 Benefits Rate Factor Tax Ben. Rate4 Factor Tax Ben. Amount of Total
a b c d 1/(1+d)b = e a x c x e f b 
1/(1+d) = g c x g = h ∑h % of Total
2016 1.0000 0.1096 $5,757 8.00% 0.9916 $5,709 8.47% 0.9911 $5,706 $5,706 12.5%
2017 1.0000 0.6096 20,431 8.00% 0.9542 19,495 8.47% 0.9516 19,443 25,149 55.0%
2018 1.0000 1.6096 5,271 8.00% 0.8835 4,657 8.47% 0.8773 4,624 29,773 65.1%
2019 1.0000 2.6096 5,271 8.00% 0.8180 4,312 8.47% 0.8088 4,263 34,036 74.4%
2020 1.0000 3.6096 5,271 8.00% 0.7575 3,993 8.47% 0.7456 3,930 37,966 83.0%
2021 1.0000 4.6096 2,669 8.00% 0.7013 1,872 8.47% 0.6874 1,835 39,801 87.0%
2022 1.0000 5.6096 1,038 8.00% 0.6494 674 8.47% 0.6337 658 40,458 88.5%
2023 1.0000 6.6096 (101) 8.00% 0.6013 (61) 8.47% 0.5842 (59) 40,399 88.3%
2024 1.0000 7.6096 981 8.00% 0.5567 546 8.47% 0.5386 528 40,928 89.5%
2025 1.0000 8.6096 1,011 8.00% 0.5155 521 8.47% 0.4965 502 41,430 90.6%
2026 1.0000 9.6096 1,007 8.00% 0.4773 481 8.47% 0.4577 461 41,891 91.6%
2027 1.0000 10.6096 997 8.00% 0.4420 441 8.47% 0.4220 421 42,311 92.5%
2028 1.0000 11.6096 986 8.00% 0.4092 403 8.47% 0.3890 384 42,695 93.4%
2029 1.0000 12.6096 976 8.00% 0.3789 370 8.47% 0.3586 350 43,045 94.1%
2030 1.0000 13.6096 973 8.00% 0.3508 341 8.47% 0.3306 322 43,367 94.8%
2031 1.0000 14.6096 962 8.00% 0.3249 313 8.47% 0.3048 293 43,660 95.5%
2032 1.0000 15.6096 950 8.00% 0.3008 286 8.47% 0.2810 267 43,927 96.0%
2033 1.0000 16.6096 935 8.00% 0.2785 260 8.47% 0.2590 242 44,169 96.6%
2034 1.0000 17.6096 914 8.00% 0.2579 236 8.47% 0.2388 218 44,387 97.1%
2035 1.0000 18.6096 775 8.00% 0.2388 185 8.47% 0.2201 171 44,558 97.4%
2036 1.0000 19.6096 568 8.00% 0.2211 126 8.47% 0.2029 115 44,673 97.7%
2037 1.0000 20.6096 532 8.00% 0.2047 109 8.47% 0.1871 100 44,773 97.9%
2038 1.0000 21.6096 503 8.00% 0.1896 95 8.47% 0.1725 87 44,859 98.1%
2039 1.0000 22.6096 474 8.00% 0.1755 83 8.47% 0.1590 75 44,935 98.2%
2040 1.0000 23.6096 563 8.00% 0.1625 91 8.47% 0.1466 83 45,017 98.4%
2041 1.0000 24.6096 662 8.00% 0.1505 100 8.47% 0.1351 89 45,107 98.6%
2042 1.0000 25.6096 755 8.00% 0.1393 105 8.47% 0.1246 94 45,201 98.8%
2043 1.0000 26.6096 844 8.00% 0.1290 109 8.47% 0.1149 97 45,298 99.0%
2044 1.0000 27.6096 885 8.00% 0.1194 106 8.47% 0.1059 94 45,391 99.2%
2045 1.0000 28.6096 897 8.00% 0.1106 99 8.47% 0.0976 88 45,479 99.4%
2046 1.0000 29.6096 912 8.00% 0.1024 93 8.47% 0.0900 82 45,561 99.6%
2047 1.0000 30.6096 1,182 8.00% 0.0948 112 8.47% 0.0830 98 45,659 99.8%
2048 1.0000 31.6096 999 8.00% 0.0878 88 8.47% 0.0765 76 45,735 100.0%
2049 1.0000 32.6096 8.00% 0.0813 0 8.47% 0.0705 0 45,735 100.0%
2050 1.0000 33.6096 8.00% 0.0753 0 8.47% 0.0650 0 45,735 100.0%
2051 1.0000 34.6096 , 8.00% 0.0697 0 8.47% 0.0599 0 45,735 100.0%
$46,349 $45,735
KPMG calculation $46,375 $46,375
Difference $26 % of KPMG FV est. 98.6%
1
Based on KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non‐controlling Interests of SolarCity Corporation as of November 21, 2016, pp. 253 ‐ 255 
(PWC‐TESLA00000543 ‐ 5)
2
Portion of annual cash flows assumed to be realized in applicable year
3
Number of years until valuation date that the cash flow is assumed to be collected, reflecting mid‐year convention
4
Exhibit 82
 EXHIBIT 88.2
SolarCity Corporation
Verification of Fair Value of Redeemable Non‐Controlling Int.:  Solar Integrated Fund IV‐A
As of November 21, 2016 ($000)
Fair Value at Adjusted Appraised Value at Cumulative PV
Cash Flow Assumptions1 KPMG Discount Rate1 Adjusted Discount Rates of Cash Flow and
Partial Cash Flow Present Present Tax Benefits
Period Discounting and Tax Discount Discount Value CF & Discount Discount Value CF & Percent
Year Factor2 Periods3 Benefits Rate Factor Tax Ben. Rate4 Factor Tax Ben. Amount of Total
a b c d 1/(1+d)b = e a x c x e f b 
1/(1+d) = g c x g = h ∑h % of Total
2016 1.0000 0.0548 $7,813 8.00% 0.9958 $7,780 8.47% 0.9956 $7,778 $7,778 31.3%
2017 1.0000 0.6096 5,763 8.00% 0.9542 5,499 8.47% 0.9516 5,484 13,263 53.4%
2018 1.0000 1.6096 2,607 8.00% 0.8835 2,303 8.47% 0.8773 2,287 15,550 62.6%
2019 1.0000 2.6096 2,106 8.00% 0.8180 1,723 8.47% 0.8088 1,703 17,253 69.5%
2020 1.0000 3.6096 2,607 8.00% 0.7575 1,975 8.47% 0.7456 1,944 19,197 77.3%
2021 1.0000 4.6096 2,607 8.00% 0.7013 1,828 8.47% 0.6874 1,792 20,989 84.5%
2022 1.0000 5.6096 1,302 8.00% 0.6494 846 8.47% 0.6337 825 21,814 87.8%
2023 1.0000 6.6096 514 8.00% 0.6013 309 8.47% 0.5842 300 22,114 89.0%
2024 1.0000 7.6096 441 8.00% 0.5567 246 8.47% 0.5386 238 22,352 90.0%
2025 1.0000 8.6096 481 8.00% 0.5155 248 8.47% 0.4965 239 22,590 91.0%
2026 1.0000 9.6096 484 8.00% 0.4773 231 8.47% 0.4577 222 22,812 91.9%
2027 1.0000 10.6096 492 8.00% 0.4420 217 8.47% 0.4220 208 23,019 92.7%
2028 1.0000 11.6096 487 8.00% 0.4092 199 8.47% 0.3890 189 23,209 93.5%
2029 1.0000 12.6096 482 8.00% 0.3789 183 8.47% 0.3586 173 23,382 94.2%
2030 1.0000 13.6096 476 8.00% 0.3508 167 8.47% 0.3306 157 23,539 94.8%
2031 1.0000 14.6096 475 8.00% 0.3249 154 8.47% 0.3048 145 23,684 95.4%
2032 1.0000 15.6096 473 8.00% 0.3008 142 8.47% 0.2810 133 23,817 95.9%
2033 1.0000 16.6096 678 8.00% 0.2785 189 8.47% 0.2590 176 23,992 96.6%
2034 1.0000 17.6096 572 8.00% 0.2579 148 8.47% 0.2388 137 24,129 97.2%
2035 1.0000 18.6096 485 8.00% 0.2388 116 8.47% 0.2201 107 24,236 97.6%
2036 1.0000 19.6096 402 8.00% 0.2211 89 8.47% 0.2029 82 24,317 97.9%
2037 1.0000 20.6096 308 8.00% 0.2047 63 8.47% 0.1871 58 24,375 98.1%
2038 1.0000 21.6096 312 8.00% 0.1896 59 8.47% 0.1725 54 24,429 98.4%
2039 1.0000 22.6096 315 8.00% 0.1755 55 8.47% 0.1590 50 24,479 98.6%
2040 1.0000 23.6096 317 8.00% 0.1625 52 8.47% 0.1466 46 24,525 98.8%
2041 1.0000 24.6096 321 8.00% 0.1505 48 8.47% 0.1351 43 24,569 98.9%
2042 1.0000 25.6096 324 8.00% 0.1393 45 8.47% 0.1246 40 24,609 99.1%
2043 1.0000 26.6096 329 8.00% 0.1290 42 8.47% 0.1149 38 24,647 99.2%
2044 1.0000 27.6096 334 8.00% 0.1194 40 8.47% 0.1059 35 24,682 99.4%
2045 1.0000 28.6096 340 8.00% 0.1106 38 8.47% 0.0976 33 24,715 99.5%
2046 1.0000 29.6096 347 8.00% 0.1024 36 8.47% 0.0900 31 24,747 99.6%
2047 1.0000 30.6096 354 8.00% 0.0948 34 8.47% 0.0830 29 24,776 99.8%
2048 1.0000 31.6096 566 8.00% 0.0878 50 8.47% 0.0765 43 24,819 99.9%
2049 1.0000 32.6096 215 8.00% 0.0813 17 8.47% 0.0705 15 24,834 100.0%
2050 1.0000 33.6096 8.00% 0.0753 0 8.47% 0.0650 0 24,834 100.0%
2051 1.0000 34.6096 , 8.00% 0.0697 0 8.47% 0.0599 0 24,834 100.0%
$25,170 $24,834
KPMG calculation $25,171 $25,171
Difference $1 % of KPMG FV est. 98.7%
1
Based on KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non‐controlling Interests of SolarCity Corporation as of November 21, 2016, pp. 253 ‐ 255 
(PWC‐TESLA00000543 ‐ 5)
2
Portion of annual cash flows assumed to be realized in applicable year
3
Number of years until valuation date that the cash flow is assumed to be collected, reflecting mid‐year convention
4
Exhibit 82
 EXHIBIT 89
SolarCity Corporation
Verification of Fair Value of Non‐Redeemable Non‐Controlling Interest:  Castello Solar I
As of November 21, 2016 ($000)
Fair Value at Adjusted Appraised Value at Cumulative PV
Cash Flow Assumptions1 KPMG Discount Rate1 Adjusted Discount Rates of Cash Flow and
Partial Cash Flow Present Present Tax Benefits
Period Discounting and Tax Discount Discount Value CF & Discount Discount Value CF & Percent
Year Factor2 Periods3 Benefits Rate Factor Tax Ben. Rate4 Factor Tax Ben. Amount of Total
a b c d 1/(1+d)b = e a x c x e f b 
1/(1+d) = g c x g = h ∑h % of Total
2016 0.1096 0.1096 $18,238 8.00% 0.9916 $1,982 8.47% 0.9911 $1,981 $1,981 5.0%
2017 1.0000 0.6096 13,017 8.00% 0.9542 12,420 8.47% 0.9516 12,387 14,368 36.6%
2018 1.0000 1.6096 10,389 8.00% 0.8835 9,179 8.47% 0.8773 9,114 23,483 59.8%
2019 1.0000 2.6096 7,623 8.00% 0.8180 6,236 8.47% 0.8088 6,165 29,648 75.5%
2020 1.0000 3.6096 5,247 8.00% 0.7575 3,974 8.47% 0.7456 3,912 33,560 85.5%
2021 1.0000 4.6096 2,543 8.00% 0.7013 1,784 8.47% 0.6874 1,748 35,308 90.0%
2022 1.0000 5.6096 482 8.00% 0.6494 313 8.47% 0.6337 305 35,614 90.7%
2023 1.0000 6.6096 481 8.00% 0.6013 289 8.47% 0.5842 281 35,895 91.5%
2024 1.0000 7.6096 487 8.00% 0.5567 271 8.47% 0.5386 262 36,157 92.1%
2025 1.0000 8.6096 493 8.00% 0.5155 254 8.47% 0.4965 245 36,402 92.7%
2026 1.0000 9.6096 499 8.00% 0.4773 238 8.47% 0.4577 228 36,630 93.3%
2027 1.0000 10.6096 505 8.00% 0.4420 223 8.47% 0.4220 213 36,843 93.9%
2028 1.0000 11.6096 12 8.00% 0.4092 5 8.47% 0.3890 5 36,848 93.9%
2029 1.0000 12.6096 219 8.00% 0.3789 83 8.47% 0.3586 79 36,926 94.1%
2030 1.0000 13.6096 525 8.00% 0.3508 184 8.47% 0.3306 174 37,100 94.5%
2031 1.0000 14.6096 532 8.00% 0.3249 173 8.47% 0.3048 162 37,262 94.9%
2032 1.0000 15.6096 539 8.00% 0.3008 162 8.47% 0.2810 151 37,413 95.3%
2033 1.0000 16.6096 546 8.00% 0.2785 152 8.47% 0.2590 141 37,555 95.7%
2034 1.0000 17.6096 553 8.00% 0.2579 143 8.47% 0.2388 132 37,687 96.0%
2035 1.0000 18.6096 760 8.00% 0.2388 181 8.47% 0.2201 167 37,854 96.4%
2036 1.0000 19.6096 799 8.00% 0.2211 177 8.47% 0.2029 162 38,016 96.9%
2037 1.0000 20.6096 821 8.00% 0.2047 168 8.47% 0.1871 154 38,170 97.2%
2038 1.0000 21.6096 844 8.00% 0.1896 160 8.47% 0.1725 146 38,316 97.6%
2039 1.0000 22.6096 867 8.00% 0.1755 152 8.47% 0.1590 138 38,453 98.0%
2040 1.0000 23.6096 891 8.00% 0.1625 145 8.47% 0.1466 131 38,584 98.3%
2041 1.0000 24.6096 915 8.00% 0.1505 138 8.47% 0.1351 124 38,708 98.6%
2042 1.0000 25.6096 940 8.00% 0.1393 131 8.47% 0.1246 117 38,825 98.9%
2043 1.0000 26.6096 966 8.00% 0.1290 125 8.47% 0.1149 111 38,936 99.2%
2044 1.0000 27.6096 993 8.00% 0.1194 119 8.47% 0.1059 105 39,041 99.5%
2045 1.0000 28.6096 1,019 8.00% 0.1106 113 8.47% 0.0976 99 39,140 99.7%
2046 1.0000 29.6096 1,059 8.00% 0.1024 108 8.47% 0.0900 95 39,236 100.0%
2047 1.0000 30.6096 183 8.00% 0.0948 17 8.47% 0.0830 15 39,251 100.0%
2048 1.0000 31.6096 (18) 8.00% 0.0878 (2) 8.47% 0.0765 (1) 39,249 100.0%
2049 1.0000 32.6096 8.00% 0.0813 0 8.47% 0.0705 0 39,249 100.0%
2050 1.0000 33.6096 8.00% 0.0753 0 8.47% 0.0650 0 39,249 100.0%
2051 1.0000 34.6096 , 8.00% 0.0697 0 8.47% 0.0599 0 39,249 100.0%
$39,797 $39,249
KPMG calculation $40,120 $40,120
Difference $323 % of KPMG FV est. 97.8%
1
Based on KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non‐controlling Interests of SolarCity Corporation as of November 21, 2016, pp. 253 ‐ 255 
(PWC‐TESLA00000543 ‐ 5)
2
Portion of annual cash flows assumed to be realized in applicable year
3
Number of years until valuation date that the cash flow is assumed to be collected, reflecting mid‐year convention
4
Exhibit 82
 EXHIBIT 89.1
SolarCity Corporation
Verification of Fair Value of Non‐Redeemable Non‐Controlling Interest:  Castello Solar II
As of November 21, 2016 ($000)
Fair Value at Adjusted Appraised Value at Cumulative PV
Cash Flow Assumptions1 KPMG Discount Rate1 Adjusted Discount Rates of Cash Flow and
Partial Cash Flow Present Present Tax Benefits
Period Discounting and Tax Discount Discount Value CF & Discount Discount Value CF & Percent
Year Factor2 Periods3 Benefits Rate Factor Tax Ben. Rate4 Factor Tax Ben. Amount of Total
a b c d 1/(1+d)b = e a x c x e f b 
1/(1+d) = g c x g = h ∑h % of Total
2016 1.0000 0.1096 $17,404 8.00% 0.9916 $17,258 8.47% 0.9911 $17,250 $17,250 31.7%
2017 1.0000 0.6096 20,430 8.00% 0.9542 19,494 8.47% 0.9516 19,442 36,691 67.5%
2018 1.0000 1.6096 4,316 8.00% 0.8835 3,813 8.47% 0.8773 3,786 40,478 74.5%
2019 1.0000 2.6096 4,380 8.00% 0.8180 3,583 8.47% 0.8088 3,542 44,020 81.0%
2020 1.0000 3.6096 4,446 8.00% 0.7575 3,368 8.47% 0.7456 3,315 47,335 87.1%
2021 1.0000 4.6096 4,512 8.00% 0.7013 3,164 8.47% 0.6874 3,101 50,437 92.8%
2022 1.0000 5.6096 578 8.00% 0.6494 375 8.47% 0.6337 366 50,803 93.5%
2023 1.0000 6.6096 582 8.00% 0.6013 350 8.47% 0.5842 340 51,143 94.1%
2024 1.0000 7.6096 591 8.00% 0.5567 329 8.47% 0.5386 318 51,461 94.7%
2025 1.0000 8.6096 376 8.00% 0.5155 194 8.47% 0.4965 187 51,648 95.1%
2026 1.0000 9.6096 (2,073) 8.00% 0.4773 (989) 8.47% 0.4577 (949) 50,699 93.3%
2027 1.0000 10.6096 619 8.00% 0.4420 274 8.47% 0.4220 261 50,960 93.8%
2028 1.0000 11.6096 629 8.00% 0.4092 257 8.47% 0.3890 245 51,205 94.2%
2029 1.0000 12.6096 639 8.00% 0.3789 242 8.47% 0.3586 229 51,434 94.7%
2030 1.0000 13.6096 649 8.00% 0.3508 228 8.47% 0.3306 215 51,649 95.1%
2031 1.0000 14.6096 659 8.00% 0.3249 214 8.47% 0.3048 201 51,850 95.4%
2032 1.0000 15.6096 669 8.00% 0.3008 201 8.47% 0.2810 188 52,037 95.8%
2033 1.0000 16.6096 725 8.00% 0.2785 202 8.47% 0.2590 188 52,225 96.1%
2034 1.0000 17.6096 737 8.00% 0.2579 190 8.47% 0.2388 176 52,401 96.4%
2035 1.0000 18.6096 739 8.00% 0.2388 176 8.47% 0.2201 163 52,564 96.7%
2036 1.0000 19.6096 956 8.00% 0.2211 211 8.47% 0.2029 194 52,758 97.1%
2037 1.0000 20.6096 984 8.00% 0.2047 201 8.47% 0.1871 184 52,942 97.4%
2038 1.0000 21.6096 1,010 8.00% 0.1896 191 8.47% 0.1725 174 53,116 97.8%
2039 1.0000 22.6096 1,038 8.00% 0.1755 182 8.47% 0.1590 165 53,281 98.1%
2040 1.0000 23.6096 1,066 8.00% 0.1625 173 8.47% 0.1466 156 53,438 98.3%
2041 1.0000 24.6096 1,095 8.00% 0.1505 165 8.47% 0.1351 148 53,586 98.6%
2042 1.0000 25.6096 1,124 8.00% 0.1393 157 8.47% 0.1246 140 53,726 98.9%
2043 1.0000 26.6096 1,155 8.00% 0.1290 149 8.47% 0.1149 133 53,858 99.1%
2044 1.0000 27.6096 1,186 8.00% 0.1194 142 8.47% 0.1059 126 53,984 99.4%
2045 1.0000 28.6096 1,218 8.00% 0.1106 135 8.47% 0.0976 119 54,103 99.6%
2046 1.0000 29.6096 1,251 8.00% 0.1024 128 8.47% 0.0900 113 54,215 99.8%
2047 1.0000 30.6096 1,294 8.00% 0.0948 123 8.47% 0.0830 107 54,323 100.0%
2048 1.0000 31.6096 183 8.00% 0.0878 16 8.47% 0.0765 14 54,337 100.0%
2049 1.0000 32.6096 8.00% 0.0813 0 8.47% 0.0705 0 54,337 100.0%
2050 1.0000 33.6096 8.00% 0.0753 0 8.47% 0.0650 0 54,337 100.0%
2051 1.0000 34.6096 , 8.00% 0.0697 0 8.47% 0.0599 0 54,337 100.0%
$54,896 $54,337
KPMG calculation $54,969 $54,969
Difference $73 % of KPMG FV est. 98.8%
1
Based on KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non‐controlling Interests of SolarCity Corporation as of November 21, 2016, pp. 253 ‐ 255 
(PWC‐TESLA00000543 ‐ 5)
2
Portion of annual cash flows assumed to be realized in applicable year
3
Number of years until valuation date that the cash flow is assumed to be collected, reflecting mid‐year convention
4
Exhibit 82
 EXHIBIT 89.2
SolarCity Corporation
Verification of Fair Value of Non‐Redeemable Non‐Controlling Interest:  Castello Solar III
As of November 21, 2016 ($000)
Fair Value at Adjusted Appraised Value at Cumulative PV
Cash Flow Assumptions1 KPMG Discount Rate1 Adjusted Discount Rates of Cash Flow and
Partial Cash Flow Present Present Tax Benefits
Period Discounting and Tax Discount Discount Value CF & Discount Discount Value CF & Percent
Year Factor2 Periods3 Benefits Rate Factor Tax Ben. Rate4 Factor Tax Ben. Amount of Total
a b c d 1/(1+d)b = e a x c x e f b 
1/(1+d) = g c x g = h ∑h % of Total
2016 1.0000 0.1096 $31,891 8.00% 0.9916 $31,623 8.47% 0.9911 $31,608 $31,608 58.3%
2017 1.0000 0.6096 13,435 8.00% 0.9542 12,819 8.47% 0.9516 12,785 44,393 81.8%
2018 1.0000 1.6096 2,615 8.00% 0.8835 2,310 8.47% 0.8773 2,294 46,687 86.0%
2019 1.0000 2.6096 1,521 8.00% 0.8180 1,244 8.47% 0.8088 1,230 47,918 88.3%
2020 1.0000 3.6096 1,545 8.00% 0.7575 1,170 8.47% 0.7456 1,152 49,069 90.4%
2021 1.0000 4.6096 1,571 8.00% 0.7013 1,102 8.47% 0.6874 1,080 50,149 92.4%
2022 1.0000 5.6096 1,586 8.00% 0.6494 1,030 8.47% 0.6337 1,005 51,154 94.3%
2023 1.0000 6.6096 342 8.00% 0.6013 206 8.47% 0.5842 200 51,354 94.6%
2024 1.0000 7.6096 (239) 8.00% 0.5567 (133) 8.47% 0.5386 (129) 51,225 94.4%
2025 1.0000 8.6096 39 8.00% 0.5155 20 8.47% 0.4965 19 51,245 94.4%
2026 1.0000 9.6096 359 8.00% 0.4773 171 8.47% 0.4577 164 51,409 94.7%
2027 1.0000 10.6096 366 8.00% 0.4420 162 8.47% 0.4220 154 51,564 95.0%
2028 1.0000 11.6096 372 8.00% 0.4092 152 8.47% 0.3890 145 51,708 95.3%
2029 1.0000 12.6096 378 8.00% 0.3789 143 8.47% 0.3586 136 51,844 95.6%
2030 1.0000 13.6096 385 8.00% 0.3508 135 8.47% 0.3306 127 51,971 95.8%
2031 1.0000 14.6096 391 8.00% 0.3249 127 8.47% 0.3048 119 52,090 96.0%
2032 1.0000 15.6096 398 8.00% 0.3008 120 8.47% 0.2810 112 52,202 96.2%
2033 1.0000 16.6096 405 8.00% 0.2785 113 8.47% 0.2590 105 52,307 96.4%
2034 1.0000 17.6096 419 8.00% 0.2579 108 8.47% 0.2388 100 52,407 96.6%
2035 1.0000 18.6096 427 8.00% 0.2388 102 8.47% 0.2201 94 52,501 96.8%
2036 1.0000 19.6096 475 8.00% 0.2211 105 8.47% 0.2029 96 52,597 96.9%
2037 1.0000 20.6096 320 8.00% 0.2047 66 8.47% 0.1871 60 52,657 97.1%
2038 1.0000 21.6096 329 8.00% 0.1896 62 8.47% 0.1725 57 52,714 97.2%
2039 1.0000 22.6096 338 8.00% 0.1755 59 8.47% 0.1590 54 52,768 97.3%
2040 1.0000 23.6096 1,527 8.00% 0.1625 248 8.47% 0.1466 224 52,992 97.7%
2041 1.0000 24.6096 1,568 8.00% 0.1505 236 8.47% 0.1351 212 53,204 98.1%
2042 1.0000 25.6096 1,610 8.00% 0.1393 224 8.47% 0.1246 201 53,404 98.4%
2043 1.0000 26.6096 1,653 8.00% 0.1290 213 8.47% 0.1149 190 53,594 98.8%
2044 1.0000 27.6096 1,697 8.00% 0.1194 203 8.47% 0.1059 180 53,774 99.1%
2045 1.0000 28.6096 1,742 8.00% 0.1106 193 8.47% 0.0976 170 53,944 99.4%
2046 1.0000 29.6096 1,788 8.00% 0.1024 183 8.47% 0.0900 161 54,105 99.7%
2047 1.0000 30.6096 1,820 8.00% 0.0948 173 8.47% 0.0830 151 54,256 100.0%
2048 1.0000 31.6096 29 8.00% 0.0878 3 8.47% 0.0765 2 54,258 100.0%
2049 1.0000 32.6096 8.00% 0.0813 0 8.47% 0.0705 0 54,258 100.0%
2050 1.0000 33.6096 8.00% 0.0753 0 8.47% 0.0650 0 54,258 100.0%
2051 1.0000 34.6096 , 8.00% 0.0697 0 8.47% 0.0599 0 54,258 100.0%
$54,692 $54,258
KPMG calculation $54,826 $54,826
Difference $134 % of KPMG FV est. 99.0%
1
Based on KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non‐controlling Interests of SolarCity Corporation as of November 21, 2016, pp. 253 ‐ 255 
(PWC‐TESLA00000543 ‐ 5)
2
Portion of annual cash flows assumed to be realized in applicable year
3
Number of years until valuation date that the cash flow is assumed to be collected, reflecting mid‐year convention
4
Exhibit 82
 EXHIBIT 89.3
SolarCity Corporation
Verification of Fair Value of Non‐Redeemable Non‐Controlling Interest:  Presidio Solar II
As of November 21, 2016 ($000)
Fair Value at Adjusted Appraised Value at Cumulative PV
Cash Flow Assumptions1 KPMG Discount Rate1 Adjusted Discount Rates of Cash Flow and
Partial Cash Flow Present Present Tax Benefits
Period Discounting and Tax Discount Discount Value CF & Discount Discount Value CF & Percent
Year Factor2 Periods3 Benefits Rate Factor Tax Ben. Rate4 Factor Tax Ben. Amount of Total
a b c d 1/(1+d)b = e a x c x e f b 
1/(1+d) = g c x g = h ∑h % of Total
2016 1.0000 0.1096 $20,661 8.00% 0.9916 $20,487 8.47% 0.9911 $20,478 $20,478 50.4%
2017 1.0000 0.6096 14,219 8.00% 0.9542 13,567 8.47% 0.9516 13,531 34,009 83.7%
2018 1.0000 1.6096 1,551 8.00% 0.8835 1,370 8.47% 0.8773 1,361 35,370 87.1%
2019 1.0000 2.6096 1,430 8.00% 0.8180 1,170 8.47% 0.8088 1,157 36,526 89.9%
2020 1.0000 3.6096 1,452 8.00% 0.7575 1,100 8.47% 0.7456 1,083 37,609 92.6%
2021 1.0000 4.6096 1,475 8.00% 0.7013 1,034 8.47% 0.6874 1,014 38,623 95.1%
2022 1.0000 5.6096 502 8.00% 0.6494 326 8.47% 0.6337 318 38,941 95.9%
2023 1.0000 6.6096 323 8.00% 0.6013 194 8.47% 0.5842 189 39,129 96.4%
2024 1.0000 7.6096 325 8.00% 0.5567 181 8.47% 0.5386 175 39,304 96.8%
2025 1.0000 8.6096 (891) 8.00% 0.5155 (459) 8.47% 0.4965 (442) 38,862 95.7%
2026 1.0000 9.6096 336 8.00% 0.4773 160 8.47% 0.4577 154 39,016 96.1%
2027 1.0000 10.6096 341 8.00% 0.4420 151 8.47% 0.4220 144 39,160 96.4%
2028 1.0000 11.6096 347 8.00% 0.4092 142 8.47% 0.3890 135 39,295 96.8%
2029 1.0000 12.6096 353 8.00% 0.3789 134 8.47% 0.3586 127 39,421 97.1%
2030 1.0000 13.6096 358 8.00% 0.3508 126 8.47% 0.3306 118 39,540 97.4%
2031 1.0000 14.6096 364 8.00% 0.3249 118 8.47% 0.3048 111 39,651 97.6%
2032 1.0000 15.6096 370 8.00% 0.3008 111 8.47% 0.2810 104 39,755 97.9%
2033 1.0000 16.6096 391 8.00% 0.2785 109 8.47% 0.2590 101 39,856 98.1%
2034 1.0000 17.6096 401 8.00% 0.2579 103 8.47% 0.2388 96 39,952 98.4%
2035 1.0000 18.6096 403 8.00% 0.2388 96 8.47% 0.2201 89 40,040 98.6%
2036 1.0000 19.6096 308 8.00% 0.2211 68 8.47% 0.2029 63 40,103 98.8%
2037 1.0000 20.6096 311 8.00% 0.2047 64 8.47% 0.1871 58 40,161 98.9%
2038 1.0000 21.6096 319 8.00% 0.1896 60 8.47% 0.1725 55 40,216 99.0%
2039 1.0000 22.6096 328 8.00% 0.1755 58 8.47% 0.1590 52 40,268 99.2%
2040 1.0000 23.6096 337 8.00% 0.1625 55 8.47% 0.1466 49 40,318 99.3%
2041 1.0000 24.6096 346 8.00% 0.1505 52 8.47% 0.1351 47 40,364 99.4%
2042 1.0000 25.6096 355 8.00% 0.1393 49 8.47% 0.1246 44 40,409 99.5%
2043 1.0000 26.6096 365 8.00% 0.1290 47 8.47% 0.1149 42 40,451 99.6%
2044 1.0000 27.6096 374 8.00% 0.1194 45 8.47% 0.1059 40 40,490 99.7%
2045 1.0000 28.6096 384 8.00% 0.1106 42 8.47% 0.0976 37 40,528 99.8%
2046 1.0000 29.6096 395 8.00% 0.1024 40 8.47% 0.0900 36 40,563 99.9%
2047 1.0000 30.6096 405 8.00% 0.0948 38 8.47% 0.0830 34 40,597 100.0%
2048 1.0000 31.6096 177 8.00% 0.0878 16 8.47% 0.0765 14 40,610 100.0%
2049 1.0000 32.6096 8.00% 0.0813 0 8.47% 0.0705 0 40,610 100.0%
2050 1.0000 33.6096 8.00% 0.0753 0 8.47% 0.0650 0 40,610 100.0%
2051 1.0000 34.6096 , 8.00% 0.0697 0 8.47% 0.0599 0 40,610 100.0%
$40,856 $40,610
KPMG calculation $40,943 $40,943
Difference $87 % of KPMG FV est. 99.2%
1
Based on KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non‐controlling Interests of SolarCity Corporation as of November 21, 2016, pp. 253 ‐ 255 
(PWC‐TESLA00000543 ‐ 5)
2
Portion of annual cash flows assumed to be realized in applicable year
3
Number of years until valuation date that the cash flow is assumed to be collected, reflecting mid‐year convention
4
Exhibit 82
 EXHIBIT 89.4
SolarCity Corporation
Verification of Fair Value of Non‐Redeemable Non‐Controlling Int.:  Sparrowhawk Solar I
As of November 21, 2016 ($000)
Fair Value at Adjusted Appraised Value at Cumulative PV
Cash Flow Assumptions1 KPMG Discount Rate1 Adjusted Discount Rates of Cash Flow and
Partial Cash Flow Present Present Tax Benefits
Period Discounting and Tax Discount Discount Value CF & Discount Discount Value CF & Percent
Year Factor2 Periods3 Benefits Rate Factor Tax Ben. Rate4 Factor Tax Ben. Amount of Total
a b c d 1/(1+d)b = e a x c x e f b 
1/(1+d) = g c x g = h ∑h % of Total
2016 0.1096 0.1096 $32,892 8.00% 0.9916 $3,574 8.47% 0.9911 $3,573 $3,573 7.8%
2017 1.0000 0.6096 19,600 8.00% 0.9542 18,702 8.47% 0.9516 18,652 22,225 48.6%
2018 1.0000 1.6096 6,831 8.00% 0.8835 6,035 8.47% 0.8773 5,993 28,217 61.7%
2019 1.0000 2.6096 4,748 8.00% 0.8180 3,884 8.47% 0.8088 3,840 32,058 70.1%
2020 1.0000 3.6096 4,811 8.00% 0.7575 3,644 8.47% 0.7456 3,587 35,645 78.0%
2021 1.0000 4.6096 2,308 8.00% 0.7013 1,619 8.47% 0.6874 1,586 37,231 81.5%
2022 1.0000 5.6096 1,027 8.00% 0.6494 667 8.47% 0.6337 651 37,882 82.9%
2023 1.0000 6.6096 1,045 8.00% 0.6013 628 8.47% 0.5842 610 38,492 84.2%
2024 1.0000 7.6096 1,081 8.00% 0.5567 602 8.47% 0.5386 582 39,075 85.5%
2025 1.0000 8.6096 1,114 8.00% 0.5155 574 8.47% 0.4965 553 39,628 86.7%
2026 1.0000 9.6096 1,172 8.00% 0.4773 559 8.47% 0.4577 536 40,164 87.9%
2027 1.0000 10.6096 1,190 8.00% 0.4420 526 8.47% 0.4220 502 40,666 89.0%
2028 1.0000 11.6096 1,208 8.00% 0.4092 494 8.47% 0.3890 470 41,136 90.0%
2029 1.0000 12.6096 1,227 8.00% 0.3789 465 8.47% 0.3586 440 41,576 91.0%
2030 1.0000 13.6096 1,249 8.00% 0.3508 438 8.47% 0.3306 413 41,989 91.9%
2031 1.0000 14.6096 1,277 8.00% 0.3249 415 8.47% 0.3048 389 42,378 92.7%
2032 1.0000 15.6096 1,299 8.00% 0.3008 391 8.47% 0.2810 365 42,743 93.5%
2033 1.0000 16.6096 1,318 8.00% 0.2785 367 8.47% 0.2590 341 43,085 94.3%
2034 1.0000 17.6096 1,330 8.00% 0.2579 343 8.47% 0.2388 318 43,402 95.0%
2035 1.0000 18.6096 844 8.00% 0.2388 202 8.47% 0.2201 186 43,588 95.4%
2036 1.0000 19.6096 1,141 8.00% 0.2211 252 8.47% 0.2029 232 43,820 95.9%
2037 1.0000 20.6096 1,171 8.00% 0.2047 240 8.47% 0.1871 219 44,039 96.4%
2038 1.0000 21.6096 1,205 8.00% 0.1896 228 8.47% 0.1725 208 44,247 96.8%
2039 1.0000 22.6096 1,240 8.00% 0.1755 218 8.47% 0.1590 197 44,444 97.2%
2040 1.0000 23.6096 1,275 8.00% 0.1625 207 8.47% 0.1466 187 44,631 97.7%
2041 1.0000 24.6096 1,312 8.00% 0.1505 197 8.47% 0.1351 177 44,808 98.0%
2042 1.0000 25.6096 1,349 8.00% 0.1393 188 8.47% 0.1246 168 44,976 98.4%
2043 1.0000 26.6096 1,387 8.00% 0.1290 179 8.47% 0.1149 159 45,135 98.8%
2044 1.0000 27.6096 1,426 8.00% 0.1194 170 8.47% 0.1059 151 45,286 99.1%
2045 1.0000 28.6096 1,466 8.00% 0.1106 162 8.47% 0.0976 143 45,429 99.4%
2046 1.0000 29.6096 1,506 8.00% 0.1024 154 8.47% 0.0900 136 45,565 99.7%
2047 1.0000 30.6096 1,635 8.00% 0.0948 155 8.47% 0.0830 136 45,701 100.0%
2048 1.0000 31.6096 9 8.00% 0.0878 1 8.47% 0.0765 1 45,701 100.0%
2049 1.0000 32.6096 8.00% 0.0813 0 8.47% 0.0705 0 45,701 100.0%
2050 1.0000 33.6096 8.00% 0.0753 0 8.47% 0.0650 0 45,701 100.0%
2051 1.0000 34.6096 , 8.00% 0.0697 0 8.47% 0.0599 0 45,701 100.0%
$46,481 $45,701
KPMG calculation $46,488 $46,488
Difference $7 % of KPMG FV est. 98.3%
1
Based on KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non‐controlling Interests of SolarCity Corporation as of November 21, 2016, pp. 253 ‐ 255 
(PWC‐TESLA00000543 ‐ 5)
2
Portion of annual cash flows assumed to be realized in applicable year
3
Number of years until valuation date that the cash flow is assumed to be collected, reflecting mid‐year convention
4
Exhibit 82
 EXHIBIT 89.5
SolarCity Corporation
Verification of Fair Value of Non‐Redeemable Non‐Controlling Interest:  Harpoon Solar I
As of November 21, 2016 ($000)
Fair Value at Adjusted Appraised Value at Cumulative PV
Cash Flow Assumptions1 KPMG Discount Rate1 Adjusted Discount Rates of Cash Flow and
Partial Cash Flow Present Present Tax Benefits
Period Discounting and Tax Discount Discount Value CF & Discount Discount Value CF & Percent
Year Factor2 Periods3 Benefits Rate Factor Tax Ben. Rate4 Factor Tax Ben. Amount of Total
a b c d 1/(1+d)b = e a x c x e f b 
1/(1+d) = g c x g = h ∑h % of Total
2016 1.0000 0.0548 $1,608 10.50% 0.9945 $1,599 10.50% 0.9945 $1,599 $1,599 1.7%
2017 1.0000 0.6096 9,090 10.50% 0.9410 8,553 10.50% 0.9410 8,553 10,152 10.7%
2018 1.0000 1.6096 12,200 10.50% 0.8515 10,389 10.50% 0.8515 10,389 20,541 21.7%
2019 1.0000 2.6096 18,152 10.50% 0.7706 13,988 10.50% 0.7706 13,988 34,530 36.4%
2020 1.0000 3.6096 18,527 10.50% 0.6974 12,921 10.50% 0.6974 12,921 47,450 50.1%
2021 1.0000 4.6096 19,105 10.50% 0.6311 12,058 10.50% 0.6311 12,058 59,508 62.8%
2022 1.0000 5.6096 16,955 10.50% 0.5712 9,684 10.50% 0.5712 9,684 69,192 73.0%
2023 1.0000 6.6096 12,869 10.50% 0.5169 6,652 10.50% 0.5169 6,652 75,844 80.0%
2024 1.0000 7.6096 13,711 10.50% 0.4678 6,414 10.50% 0.4678 6,414 82,257 86.8%
2025 1.0000 8.6096 10,474 10.50% 0.4233 4,434 10.50% 0.4233 4,434 86,691 91.5%
2026 1.0000 9.6096 10,049 10.50% 0.3831 3,850 10.50% 0.3831 3,850 90,541 95.5%
2027 1.0000 10.6096 6,224 10.50% 0.3467 2,158 10.50% 0.3467 2,158 92,699 97.8%
2028 1.0000 11.6096 (591) 10.50% 0.3137 (185) 10.50% 0.3137 (185) 92,513 97.6%
2029 1.0000 12.6096 (867) 10.50% 0.2839 (246) 10.50% 0.2839 (246) 92,267 97.4%
2030 1.0000 13.6096 (1,213) 10.50% 0.2570 (312) 10.50% 0.2570 (312) 91,955 97.0%
2031 1.0000 14.6096 (1,549) 10.50% 0.2325 (360) 10.50% 0.2325 (360) 91,595 96.7%
2032 1.0000 15.6096 (1,786) 10.50% 0.2104 (376) 10.50% 0.2104 (376) 91,219 96.3%
2033 1.0000 16.6096 16,080 10.50% 0.1904 3,062 10.50% 0.1904 3,062 94,282 99.5%
2034 1.0000 17.6096 (827) 10.50% 0.1723 (143) 10.50% 0.1723 (143) 94,139 99.3%
2035 1.0000 18.6096 1,448 10.50% 0.1560 226 10.50% 0.1560 226 94,365 99.6%
2036 1.0000 19.6096 567 10.50% 0.1412 80 10.50% 0.1412 80 94,445 99.7%
2037 1.0000 20.6096 323 10.50% 0.1277 41 10.50% 0.1277 41 94,486 99.7%
2038 1.0000 21.6096 330 10.50% 0.1156 38 10.50% 0.1156 38 94,524 99.7%
2039 1.0000 22.6096 339 10.50% 0.1046 35 10.50% 0.1046 35 94,560 99.8%
2040 1.0000 23.6096 348 10.50% 0.0947 33 10.50% 0.0947 33 94,593 99.8%
2041 1.0000 24.6096 358 10.50% 0.0857 31 10.50% 0.0857 31 94,624 99.9%
2042 1.0000 25.6096 367 10.50% 0.0775 28 10.50% 0.0775 28 94,652 99.9%
2043 1.0000 26.6096 377 10.50% 0.0702 26 10.50% 0.0702 26 94,678 99.9%
2044 1.0000 27.6096 401 10.50% 0.0635 25 10.50% 0.0635 25 94,704 99.9%
2045 1.0000 28.6096 431 10.50% 0.0575 25 10.50% 0.0575 25 94,729 100.0%
2046 1.0000 29.6096 400 10.50% 0.0520 21 10.50% 0.0520 21 94,749 100.0%
2047 1.0000 30.6096 321 10.50% 0.0471 15 10.50% 0.0471 15 94,765 100.0%
2048 1.0000 31.6096 (7) 10.50% 0.0426 (0) 10.50% 0.0426 (0) 94,764 100.0%
2049 1.0000 32.6096 0 10.50% 0.0385 0 10.50% 0.0385 0 94,764 100.0%
2050 1.0000 33.6096 10.50% 0.0349 0 10.50% 0.0349 0 94,764 100.0%
2051 1.0000 34.6096 , 10.50% 0.0316 0 10.50% 0.0316 0 94,764 100.0%
$94,764 $94,764
KPMG calculation $94,784 $94,784
Difference $20 % of KPMG FV est. 100.0%
1
Based on KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non‐controlling Interests of SolarCity Corporation as of November 21, 2016, pp. 253 ‐ 255 
(PWC‐TESLA00000543 ‐ 5)
2
Portion of annual cash flows assumed to be realized in applicable year
3
Number of years until valuation date that the cash flow is assumed to be collected, reflecting mid‐year convention
4
Exhibit 82
 EXHIBIT 89.6
SolarCity Corporation
Verification of Fair Value of Non‐Redeemable Non‐Controlling Interest:  Ancon Solar I
As of November 21, 2016 ($000)
Fair Value at Adjusted Appraised Value at Cumulative PV
Cash Flow Assumptions1 KPMG Discount Rate1 Adjusted Discount Rates of Cash Flow and
Partial Cash Flow Present Present Tax Benefits
Period Discounting and Tax Discount Discount Value CF & Discount Discount Value CF & Percent
Year Factor2 Periods3 Benefits Rate Factor Tax Ben. Rate4 Factor Tax Ben. Amount of Total
a b c d 1/(1+d)b = e a x c x e f b 
1/(1+d) = g c x g = h ∑h % of Total
2016 1.0000 0.0548 $289 11.00% 0.9943 $287 11.00% 0.9943 $287 $287 0.4%
2017 1.0000 0.6096 63,059 11.00% 0.9384 59,172 11.00% 0.9384 59,172 59,460 80.4%
2018 1.0000 1.6096 2,986 11.00% 0.8454 2,524 11.00% 0.8454 2,524 61,984 83.8%
2019 1.0000 2.6096 3,014 11.00% 0.7616 2,295 11.00% 0.7616 2,295 64,279 86.9%
2020 1.0000 3.6096 2,577 11.00% 0.6861 1,768 11.00% 0.6861 1,768 66,048 89.3%
2021 1.0000 4.6096 2,626 11.00% 0.6181 1,623 11.00% 0.6181 1,623 67,671 91.5%
2022 1.0000 5.6096 4,453 11.00% 0.5569 2,480 11.00% 0.5569 2,480 70,151 94.8%
2023 1.0000 6.6096 4,482 11.00% 0.5017 2,249 11.00% 0.5017 2,249 72,399 97.9%
2024 1.0000 7.6096 3,431 11.00% 0.4520 1,551 11.00% 0.4520 1,551 73,950 100.0%
2025 1.0000 8.6096 57 11.00% 0.4072 23 11.00% 0.4072 23 73,973 100.0%
2026 1.0000 9.6096 14 11.00% 0.3668 5 11.00% 0.3668 5 73,978 100.0%
2027 1.0000 10.6096 (28) 11.00% 0.3305 (9) 11.00% 0.3305 (9) 73,969 100.0%
2028 1.0000 11.6096 14 11.00% 0.2977 4 11.00% 0.2977 4 73,973 100.0%
2029 1.0000 12.6096 14 11.00% 0.2682 4 11.00% 0.2682 4 73,977 100.0%
2030 1.0000 13.6096 (28) 11.00% 0.2416 (7) 11.00% 0.2416 (7) 73,970 100.0%
2031 1.0000 14.6096 14 11.00% 0.2177 3 11.00% 0.2177 3 73,973 100.0%
2032 1.0000 15.6096 14 11.00% 0.1961 3 11.00% 0.1961 3 73,976 100.0%
2033 1.0000 16.6096 (28) 11.00% 0.1767 (5) 11.00% 0.1767 (5) 73,971 100.0%
2034 1.0000 17.6096 14 11.00% 0.1592 2 11.00% 0.1592 2 73,973 100.0%
2035 1.0000 18.6096 14 11.00% 0.1434 2 11.00% 0.1434 2 73,975 100.0%
2036 1.0000 19.6096 (28) 11.00% 0.1292 (4) 11.00% 0.1292 (4) 73,972 100.0%
2037 1.0000 20.6096 11.00% 0.1164 0 11.00% 0.1164 0 73,972 100.0%
2038 1.0000 21.6096 11.00% 0.1049 0 11.00% 0.1049 0 73,972 100.0%
2039 1.0000 22.6096 11.00% 0.0945 0 11.00% 0.0945 0 73,972 100.0%
2040 1.0000 23.6096 11.00% 0.0851 0 11.00% 0.0851 0 73,972 100.0%
2041 1.0000 24.6096 11.00% 0.0767 0 11.00% 0.0767 0 73,972 100.0%
2042 1.0000 25.6096 11.00% 0.0691 0 11.00% 0.0691 0 73,972 100.0%
2043 1.0000 26.6096 11.00% 0.0622 0 11.00% 0.0622 0 73,972 100.0%
2044 1.0000 27.6096 11.00% 0.0561 0 11.00% 0.0561 0 73,972 100.0%
2045 1.0000 28.6096 11.00% 0.0505 0 11.00% 0.0505 0 73,972 100.0%
2046 1.0000 29.6096 11.00% 0.0455 0 11.00% 0.0455 0 73,972 100.0%
2047 1.0000 30.6096 11.00% 0.0410 0 11.00% 0.0410 0 73,972 100.0%
2048 1.0000 31.6096 11.00% 0.0369 0 11.00% 0.0369 0 73,972 100.0%
2049 1.0000 32.6096 11.00% 0.0333 0 11.00% 0.0333 0 73,972 100.0%
2050 1.0000 33.6096 11.00% 0.0300 0 11.00% 0.0300 0 73,972 100.0%
2051 1.0000 34.6096 , 11.00% 0.0270 0 11.00% 0.0270 0 73,972 100.0%
$73,972 $73,972
KPMG calculation $73,973 $73,973
Difference $1 % of KPMG FV est. 100.0%
1
Based on KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non‐controlling Interests of SolarCity Corporation as of November 21, 2016, pp. 253 ‐ 255 
(PWC‐TESLA00000543 ‐ 5)
2
Portion of annual cash flows assumed to be realized in applicable year
3
Number of years until valuation date that the cash flow is assumed to be collected, reflecting mid‐year convention
4
Exhibit 82
 EXHIBIT 89.7
SolarCity Corporation
Verification of Fair Value of Non‐Redeemable Non‐Controlling Interest:  PGE III
As of November 21, 2016 ($000)
Fair Value at Adjusted Appraised Value at Cumulative PV
Cash Flow Assumptions1 KPMG Discount Rate1 Adjusted Discount Rates of Cash Flow and
Partial Cash Flow Present Present Tax Benefits
Period Discounting and Tax Discount Discount Value CF & Discount Discount Value CF & Percent
Year Factor2 Periods3 Benefits Rate Factor Tax Ben. Rate4 Factor Tax Ben. Amount of Total
a b c d 1/(1+d)b = e a x c x e f b 
1/(1+d) = g c x g = h ∑h % of Total
2016 0.1096 0.0548 $10,083 8.00% 0.9958 $1,100 8.47% 0.9956 $1,100 $1,100 2.8%
2017 1.0000 0.6096 7,669 8.00% 0.9542 7,318 8.47% 0.9516 7,298 8,398 21.5%
2018 1.0000 1.6096 6,082 8.00% 0.8835 5,373 8.47% 0.8773 5,336 13,734 35.1%
2019 1.0000 2.6096 6,025 8.00% 0.8180 4,929 8.47% 0.8088 4,873 18,607 47.6%
2020 1.0000 3.6096 6,059 8.00% 0.7575 4,589 8.47% 0.7456 4,518 23,124 59.1%
2021 1.0000 4.6096 6,097 8.00% 0.7013 4,276 8.47% 0.6874 4,191 27,315 69.8%
2022 1.0000 5.6096 6,198 8.00% 0.6494 4,025 8.47% 0.6337 3,928 31,243 79.9%
2023 1.0000 6.6096 3,088 8.00% 0.6013 1,857 8.47% 0.5842 1,804 33,047 84.5%
2024 1.0000 7.6096 942 8.00% 0.5567 524 8.47% 0.5386 507 33,554 85.8%
2025 1.0000 8.6096 955 8.00% 0.5155 492 8.47% 0.4965 474 34,028 87.0%
2026 1.0000 9.6096 968 8.00% 0.4773 462 8.47% 0.4577 443 34,471 88.1%
2027 1.0000 10.6096 987 8.00% 0.4420 436 8.47% 0.4220 416 34,888 89.2%
2028 1.0000 11.6096 955 8.00% 0.4092 391 8.47% 0.3890 371 35,259 90.1%
2029 1.0000 12.6096 967 8.00% 0.3789 366 8.47% 0.3586 347 35,606 91.0%
2030 1.0000 13.6096 974 8.00% 0.3508 342 8.47% 0.3306 322 35,928 91.8%
2031 1.0000 14.6096 924 8.00% 0.3249 300 8.47% 0.3048 282 36,210 92.6%
2032 1.0000 15.6096 982 8.00% 0.3008 295 8.47% 0.2810 276 36,486 93.3%
2033 1.0000 16.6096 1,042 8.00% 0.2785 290 8.47% 0.2590 270 36,755 94.0%
2034 1.0000 17.6096 1,075 8.00% 0.2579 277 8.47% 0.2388 257 37,012 94.6%
2035 1.0000 18.6096 1,098 8.00% 0.2388 262 8.47% 0.2201 242 37,254 95.2%
2036 1.0000 19.6096 1,124 8.00% 0.2211 249 8.47% 0.2029 228 37,482 95.8%
2037 1.0000 20.6096 1,274 8.00% 0.2047 261 8.47% 0.1871 238 37,720 96.4%
2038 1.0000 21.6096 1,308 8.00% 0.1896 248 8.47% 0.1725 226 37,946 97.0%
2039 1.0000 22.6096 1,336 8.00% 0.1755 234 8.47% 0.1590 212 38,158 97.5%
2040 1.0000 23.6096 1,365 8.00% 0.1625 222 8.47% 0.1466 200 38,359 98.1%
2041 1.0000 24.6096 1,394 8.00% 0.1505 210 8.47% 0.1351 188 38,547 98.5%
2042 1.0000 25.6096 1,424 8.00% 0.1393 198 8.47% 0.1246 177 38,724 99.0%
2043 1.0000 26.6096 1,454 8.00% 0.1290 188 8.47% 0.1149 167 38,891 99.4%
2044 1.0000 27.6096 1,513 8.00% 0.1194 181 8.47% 0.1059 160 39,052 99.8%
2045 1.0000 28.6096 707 8.00% 0.1106 78 8.47% 0.0976 69 39,121 100.0%
2046 1.0000 29.6096 8.00% 0.1024 0 8.47% 0.0900 0 39,121 100.0%
2047 1.0000 30.6096 8.00% 0.0948 0 8.47% 0.0830 0 39,121 100.0%
2048 1.0000 31.6096 8.00% 0.0878 0 8.47% 0.0765 0 39,121 100.0%
2049 1.0000 32.6096 8.00% 0.0813 0 8.47% 0.0705 0 39,121 100.0%
2050 1.0000 33.6096 8.00% 0.0753 0 8.47% 0.0650 0 39,121 100.0%
2051 1.0000 34.6096 , 8.00% 0.0697 0 8.47% 0.0599 0 39,121 100.0%
$39,974 $39,121
KPMG calculation $39,973 $39,973
Difference ($1) % of KPMG FV est. 97.9%
1
Based on KPMG Preliminary Valuation of Certain Assets, Liabilities, and Non‐controlling Interests of SolarCity Corporation as of November 21, 2016, pp. 253 ‐ 255 
(PWC‐TESLA00000543 ‐ 5)
2
Portion of annual cash flows assumed to be realized in applicable year
3
Number of years until valuation date that the cash flow is assumed to be collected, reflecting mid‐year convention
4
Exhibit 82
 EXHIBIT 90
SolarCity Corporation
Discounted Cash Flow Analysis Based on Revised Sensitivity Projections
With a Normalized Terminal Value  and Tax Equity Adjustment
As of November 21, 20161
Terminal
2016 2017 2018 2019 2020 2021 Cash Flow Value Total
Total MW Inspected2
Residential  592 579 766 975 1,268 1,268
Other 190 251 311 371 426 426
International 6 11 18 24 30 30
788 MW 841 MW 1095 MW 1370 MW 1724 MW 1724 MW
Net change 6.7% 30.2% 25.1% 25.8%
Source of Cash2
PowerCo Available Cash $88 81 88 99 130 130
Tax Equity 1,112 1,060 1,306 1,534 1,835 1,425
Aggregation Facility 652 521 674 853 1,092 1,092
Cash Equity 141 285 300 156 149 149
Loan Products 105 310 451 551 715 715
Net Silevo Financing 0 268 (113) (155) 0 0
Other DevCo Funding 258 129 168 200 247 247
$2,356 2,654 2,875 3,239 4,168 3,758
Use of Cash2
Residential Installation ($1,145) (1,034) (1,344) (1,628) (2,041) (2,041)
Other Installation (339) (397) (450) (475) (520) (520)
International Installation (5) (11) (18) (24) (30) (30)
Installation Cost ($1,489) (1,442) (1,812) (2,127) (2,591) (2,591)
Selling and Marketing (496) (420) (458) (547) (686) (686)
DevCo Manufacturing (203) (241) (152) 35 75 75
DevCo Corp (268) (463) (350) (408) (395) (395)
Other (127) (135) (104) (121) (134) (134)
($2,583) (2,701) (2,875) (3,168) (3,731) (3,731)

Net Generation (Use) of Cash ($227) (48) 0 71 437 27

Tax Equity Adjustment3 246
Terminal value4 327
Amount to be discounted5 ($48) 0 71 437 246 327
x x x x x x
Discount factor6 0.9268 0.8186 0.7231 0.6387 0.5641 0.6002
Present value of future amounts ($44) 0 51 279 139 196 $621
÷
Common stock equivalents acquired by Tesla7 101.132
Pro forma value per SolarCity common stock equivalent $6.14

See footnotes on the following page
 EXHIBIT 90
SolarCity Corporation
Footnotes to Discounted Cash Flow Analysis
Based on Revised Sensitivity Projections With a Normalized Terminal Value
and Tax Equity Adjustment  as of November 21, 20161
1
Based on Revised Sensitivity Case prepared by SolarCity management (Merger Proxy, p. 103) that was used by 
Evercore to advise the Tesla Board and support its fairness opinion, with an adjustment of terminal value and the 
impact upon fair value of the phase out of the tax credits for solar investment, as discussed in the Expert Report of 
Juergen Moessner dated August 12, 2019
2
Tax equity2020P:
Residential installation costs2020P $2,041 See above
Other installation costs2020P 520 See above
$2,561
22% tax credit for 2021, reduced by 10% benefit in 
x .12  subsequent years that may be available for sale to third 
$307 Provision for potential post‐2021 solar investment tax credits
x .80  Monetization rate
$246
3
Terminal value, based on Gordon Growth Model:
Normalized net generation of cash2020P $27 See above
Midpoint of 3 ‐ 5% assumed by Evercore (Merger 
(1 + gLT) x 1.04 Proxy, p. 77)
$28
Capitalization rate:
Cost of equity capital (k) 13.22% Exhibit 82
Midpoint of 3 ‐ 5% assumed by Evercore (Merger 
Less:  gLT ‐4.00% Proxy, p. 77)
9.22%
$307
Adjustment for mid‐year convention ((1+k).5 x 1.0640
$327
4
Since 2016 was largely complete by the Merger Date, and projected cash flows are not broken out by month, for 
purposes of conservatism, I have not reflected in my analysis projected 2016 deficit cash flows.  Had I done so, the 
resulting value would have been reduced.  Normalized terminal cash flows are used solely for the purpose of projecting 
terminal value.
5
Discount factor: Terminal
2017 2018 2019 2020 2021 Value
Number of periods (years) after 11/21/16 = k 0.6123 1.6123 2.6123 3.6123 4.6123 4.1123
Assumes the midyear convention for realizing projected cash flows, except for terminal value 
Discount rate (cost of equity capital per Exhibit 78) 13.22%
Discount factor [1 ÷ (1 + k)n 0.9268 0.8186 0.7231 0.6387 0.5641 0.6002
6
Common stock equivalents acquired by Tesla:
Tesla shares  11,124,497
÷
 Exchange ratio 0.11
SolarCity common share equivalents acquired by Tesla 101,131,791
Source:  2016 Tesla Form 10‐K, p. 73
 EXHIBIT 91 
SolarCity Rooftop Solar Megawatts Deployed 

https://www.bloomberg.com/news/articles/2019‐07‐25/tesla‐s‐blindingly‐obvious‐solar‐bet‐fades‐as‐installs‐plummet 
 EXHIBIT 92
SolarCity Projected vs. Actual MW Deployed

1370

1095

841

522

326

152
YTD 6/12
Annualized

2017 2018 2019

Sources: Exhibit 90 and
Projected Actual https://ir.tesla.com/press‐releases
 EXHIBIT 93
CHARTERED CAPITAL ADVISERS, INC.
375 PARK AVENUE • SUITE 2607
NEW YORK, NEW YORK 10152
(212) 327-0200 • (212) 327-0225 FAX
WWW.CHARTEREDCAPITAL.COM

A DESCRIPTION OF CHARTERED CAPITAL ADVISERS, INC.

Chartered Capital Advisers, Inc. provides merger & acquisition, valuation, and corporate
financial advisory services on behalf of corporate clients, investors, financial institutions,
attorneys, accountants, and participants in employee benefit plans. The Firm has a unique
blend of seasoned professionals with extensive financial advisory and operational experience.
All of the professionals at Chartered Capital Advisers have occupied senior positions at Big Four
accounting firms, investment banks, commercial banks, valuation and appraisal firms, or in
private industry.

Key services provided by Chartered Capital Advisers include:

 Valuations and fairness opinions

 Financial and operational due diligence

 Financial restructuring or recapitalization

 Negotiating assistance

 Expert testimony

 Acquisition searches

 Market and industry analyses

 Preparing information memoranda

 Developing business plans and financial projections, and

 Representing buyers and sellers of businesses

Each project is custom tailored to the unique requirements of the client and situation.
The degree of involvement by Chartered Capital Advisers professionals can range from
consultation on specific issues to comprehensive merger & acquisition, valuation or other
special projects. A more detailed list of the range of services provided by Chartered Capital
Advisers is contained in the accompanying exhibit.

Prior to initiating an engagement, it is the practice of Chartered Capital Advisers to

clearly establish the scope of professional services to be rendered, time requirements, expected
results, and anticipated fees. Throughout the course of an engagement our professionals
remain in close communication with our client to ensure that the client is apprised of all
significant developments on a timely basis. The professionals of Chartered Capital Advisers
welcome your inquiries.
EXHIBIT 93, continued CHARTERED CAPITAL ADVISERS, INC.

EXAMPLES OF SERVICES PROVIDED BY

CHARTERED CAPITAL ADVISERS, INC.

MERGERS & ACQUISITIONS VALUATIONS AND FAIRNESS OPINIONS

 Developing acquisition criteria  Mergers & acquisitions
 Industry analyses  Sales and divestitures
 Identifying & screening acquisition candidates  Solvency opinions
 Initiating contacts with target companies  Insolvency opinions
 Due diligence  Buy/sell agreements
 Operational reviews  Recapitalizations
 Financial reviews
 Shareholder transactions
 Financial projections
 Capital infusions
 Pro forma analyses
 Pricing and valuation  Employee Stock Ownership Plans
 Structuring the transaction  Expert testimony
 Negotiating the transaction  Estate planning and taxation
 Obtaining financing  Gift taxes
 Integrating the acquired entity  Collateral valuations
 Patents, copyrights, trademarks, and other
SALES AND DIVESTITURES intellectual property
 Preparing selling memoranda  Employment and noncompete agreements
 Identifying prospective buyers  Venture capital investments
 Initiating buyer contacts  ASC 805 purchase price allocations
 Pricing and valuation  ASC 350 goodwill and other intangible
 Orchestrating buyer due diligence asset impairment analyses
 Fulfilling buyer information requests  ASC 718 share-based compensation
 Structuring the transaction  ASC 820/825 fair value analyses
 Minimizing income taxes paid  Restricted stock
 Negotiating the transaction  Investment company and private equity
LITIGATION SUPPORT portfolios
 Expert affidavits and reports  Loans, notes payable, fixed-income
securities, and other debt instruments
 Expert testimony
 Convertible debt and preferred stock
 Mediation and arbitration
 Junior and senior equity
 Third-party neutral
 Stock options and warrants
 Securities litigation
 Real options
 Shareholder disputes
 Complex capital structures
 Class action cases
 Structured securities and other derivative
 Business dissolution
financial instruments
 Equitable distribution
 Liquidation analyses
 Insolvency litigation
 Antitrust consulting and litigation
 Investment suitability OTHER SERVICES
 Fraudulent conveyances  Business plans
 Economic and financial damages  Financial projections
 Valuation  Financial restructuring
 Forensic accounting  Investor and lender presentations
 Fraud investigation  Accounting and financial guidance
 Lectures and seminars
 Bankruptcy accountants, financial advisors,
examiners, and trustees  Board of directors advisory services
EXHIBIT 93, continued CHARTERED CAPITAL ADVISERS, INC.

PROFESSIONAL LEADERSHIP

Participation in Professional Organizations

American Bankruptcy Institute
Association of Economic and Financial Experts
American Institute of Certified Public Accountants
Association of Certified Turnaround Professionals
Association of Insolvency and Restructuring Advisors
CFA Institute
CFA Society New York
National Association of Certified Fraud Examiners
New York State Society of CPAs (chairman and member of various committees)
The Institute of Business Appraisers
Turnaround Management Association (Executive Committee of the Board of Directors)
Quintero Index of Bankrupt Stocks
Released weekly to several national periodicals
Articles in National Publications
American Bankruptcy Institute Journal Bankruptcy Court Decisions
Bankruptcy Law Review Barron’s
Bloomberg Personal Boardroom Reports
Chapter 11 Reporter The CPA Journal
Detroit Legal News Euromoney
The Florida Bar Journal Investor’s Daily
Journal of Business Strategy Management Focus
National Bankruptcy Reporter The New York Times
The Newsletter of Corporate Renewal Reuters
The Secured Lender Turnarounds & Workouts
Viewpoint on Value The Wall Street Journal
Contributions to Major Books
The Acquisitions Manual The Bankruptcy Yearbook & Almanac
Handbook of Business Strategy The CPA’s Basic Guide to Mergers & Acquisitions
The New Era of Investment Banking Investing in Bankruptcies and Turnarounds
Authors of Professional Manuals and Audiocassette Programs
Credit Management and Debt Restructuring
Due Diligence: The Key to Securing a Good Deal
Investment Banking
Mergers and Acquisitions
The CPA’s Role in Financial Restructuring and Bankruptcy
Valuations of Closely Held Companies and Partnerships
Lectures to Professional Audiences
American Institute of CPAs American Management Association
Assoc. of Certified Turnaround Professionals Association for Corporate Growth
Center for Professional Education Financial Executives Institute
Institute of International Research Nat’l. Ass’n. of Certified Valuators & Analysts
Natl. Assn. of Mgmt. & Tech. Asst. Centers New York Institute of Finance
New York Society of Security Analysts New York State Society of CPAs
Turnaround Management Association Visiting International Professional Program
Numerous special seminars for banks, brokerage firms, financial information companies,
rating agencies, regulatory organizations, law firms, and accounting firms
 EXHIBIT 94
Deposition and Expert Testimony of Ronald G. Quintero
2015 Through 2019
Nature of
1
Year City, State Testimony Client Opposing Party or Company
2015 Santa Ana, CA Trial Robert Rivas, Esq. et al. Patrick Merrell et al.
2015 New York, NY Trial Royce Hosiery, LLC et al. Gottesman Co.
2015 New York, NY Arbitration Mooreland International LLP B. Holt Thrasher
2015 Trenton, NJ Trial Trenton Convalescent Center et al. EliteCare, NJ, LLC
2015 New York, NY Deposition Michael Krynski T. Chase, Jr. and Western Express, Inc.
2015 Rochester, NY Arbitration Rochester Beer & Beverage Corp. Adam E. Jablonski
2
2015 Washington, DC Deposition United States of America Parties to proposed merger
2016 New York, NY Trial Michael Krynski T. Chase, Jr. and Western Express, Inc.
2016 New York, NY Arbitration Warren Diamond et al. John Del Monaco et al.
2016 Boston, MA Deposition Ian Jeddy JMC Management, LLC et al.
2016 New York, NY Deposition Mitchell H. Kossoff Felderbaum/Florida Foreclosure Attys.
2016 Pontiac, MI Deposition Illinois National Insurance Co. AlixPartners LLP
2016 New York, NY Trial Kian Gohari United States of America
2016 New York, NY Arbitration Tess Haley Wachs et al. Comic Strip Promotions, Inc. et al.
2016 New York, NY Deposition Reuben Taub et al. Arrayit Corporation et al.
2016 Washington, DC Deposition United States of America Anthem, Inc. and Cigna Corp.
and Trial
2017 New York, NY Arbitration Zujin Li Qianghua Chen
2017 Philadelphia, PA Trial Samia and Mark Kirchner AMTRAK
2017 New York, NY Trial Mitchell H. Kossoff Felderbaum/Florida Foreclosure Attys.
2017 Ann Arbor, MI Deposition Greg Saggio, et al. Mueller Industries, Inc. et al. &
Tecumseh Products Co.
2017 Tampa, FL Trial Stephen Bracciale and Saint Anton National Sourcing, Inc. and Pedro
Capital, LLC Valdez
2017 Queens, NY Trial The City of New York and Antonio Colombina Frosch, as Executrix of
G. Decaro Estate of Steven A. Frosch, deceased,
and Colombina Frosch, individually
2017 New York, NY Trial Harry Willnus Trust Objectants JP Morgan Chase Bank
2018 New York, NY Deposition Book Dog Books, LLC et al. Cengage Learning, Inc., McGraw-Hill
and Trial Global Education Holdings, LLC, and
Pearson Education, Inc.
2018 Washington, DC Deposition United States of America AT&T Inc., DIRECT TV Group
and Trial Holdings, LLC, and Time Warner, Inc.
2018 Wilmington, DE Deposition
Members of shareholder class in Potomac Capital Partners II, LP
and Trial
re: PLX Technology Shareholder
Litigation
2018 Wilkes Barre, PA Arbitration Hazleton Shaft Corporation Continental Plants Group, LLC
2018 New York, NY Deposition and Sela2, Inc. et al. and BelHealth QPharma, Inc. and Patrick Den Boer
Arbitration Investment Partners, Inc.
2018 Tampa, FL Deposition Stephen Bracciale and Saint Anton National Sourcing, Inc. and Pedro
Capital, LLC Valdez
2018 New York, NY Arbitration Robert Stack, Onyekachi Ifudu, Midwood Chayim Aruchim Dialysis
MD, Chika Oguagha, MD, and Associates, Inc. et al.
Brooklyn Dialysis, LLC
2019 New York, NY Trial Lassina Diarra NJS Carpentry
2019 Oakland, CA Deposition and Matthew N. Sirott, MD and Robert East Bay Medical Oncology-
Arbitration Robles, MD derivatively on behalf Hematology Medical Associates, Inc.
of California Radiation Treatment and Bimal J. Patel, MD
Center, LLC
2019 Tampa, FL Deposition Tampa Bay Rays Baseball, Ltd. Volume Services, Inc.
2019 New York, NY Deposition Mohammed Ali Rashid Securities and Exchange Commission
2019 Las Vegas, NV Deposition Members of shareholder class in Newport Corporation board of directors
re: Newport Corporation
2019 Tampa, FL Deposition Erik J. Saterbo et al. Bryan N. Saterbo et al.
1
Client refers to party on whose behalf Mr. Quintero's firm was engaged. In many of the cases Mr. Quintero's firm was engaged by legal counsel.
2
Identities of the parties to the proposed merger and other details cannot be revealed pursuant to court order.
 Exhibit 95
Overview of the Training Activities of Ronald G. Quintero, CPA, CFA
Seminar Topics.
Accounting (including special Credit Risk Managing a Business
topics, e.g., ASC 718, 805, and Credit Training Managing High-Risk Credits
820) Due Diligence Mergers and Acquisitions
Analyzing and valuing equities, Economics Negotiations
fixed-income securities, stock Excel Applications Portfolio Management
options, warrants, derivatives, Fair Value Accounting Private Banking
real estate, private equity, and Valuation Private Equity
venture capital, alternative Financial Modeling Professional Ethics
investments, intangible assets, Financial Projections and Quantitative Analysis
and goodwill Forecasts Share-Based Consideration
Bankruptcy and Insolvency Financial Restructuring Turnarounds and Workouts
Business Plans Financial Statement Analysis Valuation Modeling
Business Valuations Financing a Business Valuing Early-Stage Companies
CFA Exam Preparation (Levels I, Global Investment Performance Valuing Financial Instruments
II, and III; most active trainer Standards (GIPS) Venture Capital
in the world) Initial Public Offerings Workouts
Corporate Finance Investment Banking
Cost of Capital Leveraged Buyouts (LBOs)
Seminar Locations. More than 60 cities throughout the United States, and more than 20 countries outside of the
U.S. located on five continents
Representative Training Clients.
 Accounting Industry–American Institute of Certified Public Accountants, Arthur Andersen, CPA Associates
International, Foundation for Accounting Education, KPMG, Marcum, Margolin Winer & Evens, Moore
Stephens, Public Company Accounting Oversight Board (PCAOB), RSM Albazie, Weiser
 Banks–Bank of China, Bank of Montreal (BMO), The Bank of New York, Barclays Bank, CIBC, Citicorp, Credit
Lyonaisse, FirstCaribbean International Bank, FleetBoston, HSBC, NatWest USA, Royal Bank of Canada (RBC),
Royal Bank of Scotland (RBS), Sun Bank, Union Bank of Switzerland (UBS), Wilmington Trust Corp.
 Financial Information Companies–Bloomberg, Standard & Poor’s, Thomson Financial
 International Organizations–Asian Development Bank, Inter-American Development Bank, International
Monetary Fund, The World Bank
 Legal Profession–Latham & Watkins, Litigation Counsel of America, Morgan Lewis & Bockius, Sullivan &
Cromwell
 Professional Organizations—American Institute of Certified Public Accountants, Association of Certified
Turnaround Professionals, Association for Corporate Growth, Broadcast Financial Management Association,
Financial Executives Institute, Financial Women’s Association, The National Association of Certified Valuators
and Analysts, New York State Society of Certified Public Accountants, New York Society of Security Analysts,
Stamford CFA Society, Turnaround Management Association
 Financial Companies–Barclays Capital, Charles Schwab, China Industrial Development Bank, CIBC
Oppenheimer, Citigroup, Credit Suisse First Boston, Essence Securities, Global Investment House, Goldman
Sachs, KBC Financial Products, Mekong Capital, Quad Capital, Rasmala Investments, Salomon Smith Barney,
TD Securities, UBS, Vina Capital Group, Wells Fargo Advisors, White Mountains Insurance Group
 Training Organizations–Accounting Conferences and Seminars (ACS), Banking Institute of the Republic of
China, Business Outreach Center Network, Capital Roundtable, Center for Professional Education (CPE), Duke
Corporate Education, Enterprise Development Center, Eureka Financial Ltd., The Expert Institute, Financial
Training Partners, FitchLearning, Global Financial Markets Institute, Globecon, Greater Newark Enterprises
Corporation, Institute of International Research, Midwest Universities Consortium for International Activities
(MUCIA), The New Jersey Center for Innovation Acceleration, New York Institute of Finance, 7city Learning,
Sharp Seminars, Technology Training, Terrapinn Financial Training
 Universities (as adjunct faculty member or lecturer)–Columbia University, Michigan State University,
University of New Hampshire, New Jersey Institute of Technology, New School for Social Research, New York
University Stern School of Business, Pace University, University of Rochester Simon Graduate School of
Business, Rutgers University, University of North Carolina, Zicklin School of Business (formerly Bernard
Baruch College)
 EXHBIT 96
Publishing Activities of Ronald G. Quintero, CPA, CFA, ABV
Quintero, Ronald G. “Acquiring the Investment Banking, edited by
Turnaround Candidate.” In The Raymond H. Rupert, 137-152.
Acquisitions Manual, edited by Chicago: Probus Publishing Company,
Sumner N. Levine, 379 – 441. (New 1993.
York: New York Institute of Finance,
1989. Quintero, Ronald G. “Financial Tools
for Strategy Evaluation.” In
Quintero, Ronald G. CFA Level I Handbook of Business Strategy, 2nd
Review Notes. New York: New York Edition, edited by Harold E. Glass, 7-1
Institute of Finance, 2001. to 7-62. Boston: Warren, Gorham &
Lamont, Inc., 1991. (First published in
Quintero, Ronald G. “Choosing and the 1st edition, 1983).
Using Your Valuation Expert: A
Valuation User’s Field Guide.” Quintero, Ron and Mayer, Jim. “Getting
Viewpoint On Value, Financing for the Turnaround
(November/December 1995), 4-5. Candidate.” Faulkner & Gray’s
Bankruptcy Law Review, (Spring
Quintero, Ronald G. “The CPA’s Role as 1992), 55-60.
Bankruptcy Examiner.” The CPA
Journal, (September 1991), 42-50. Quintero, Ronald G. “How a Business
Valuation Expert Estimates Value.”
Quintero, Ronald G. “The CPA’s Role in The Detroit Legal News, (October 26,
Turnarounds.” The CPA Journal, 1988), 4.
(September 1989), 18-26 (winner of
the 1989 Max Bloch Distinguished Quintero, Ronald G. “Making Use of
Article Award provided by the New Your Valuation Expert.” The Detroit
York State Society of Certified Public Legal News, (November 2, 1988), 4.
Accountants).
Quintero, Ronald G. Mergers and
Quintero, Ronald G. “Determining Acquisitions, 3rd Edition. New York:
Whether a Company Is Really a American Institute of Certified Public
Turnaround Candidate.” In Investing Accountants, 1998. (audiocassettes
in Bankruptcies and Turnarounds, and workbook; first edition published
edited by Sumner N. Levine, 283-309. in 1990).
New York: HarperBusiness, 1991.
Ronald G. Quintero. Mergers and
Quintero, Ronald G. “Financial Acquisitions. New York: American
Restructuring.” In The New Era of Institute of Certified Public

1
 EXHBIT 96
Publishing Activities of Ronald G. Quintero, CPA, CFA, ABV
Accountants, 1999. Management and Administration, by
Norman Pernick. Turnarounds &
Quintero, Ronald G. and Timpson, Workouts, (April 1, 1993), 15.
Roger D. “The Quintero Index of
Bankrupt Stocks: 1992.” In The Quintero, Ronald G. “Selecting a
Bankruptcy Yearbook & Almanac: Business Valuation Expert.” The
1993, edited by Christopher M. Detroit Legal News, (October 14,
McHugh, 233-238. Boston: New 1988), 4.
Generation Research, 1993.
Quintero, Ronald G. “The Ten Things
Quintero, Ronald G., Kowalski, David, That Matter.” Beyond the Numbers,
and Timpson, Roger D. “The Quintero (October/November 1996), 3-4.
Index of Bankrupt Stocks: 1994.” In
The Bankruptcy Yearbook & Quintero, Ronald G. “The Turnaround
Almanac: 1995, edited by Christopher Buyout Candidate: Deciding How
M. McHugh, 260-265. Boston: New Much to Pay.” Turnarounds and
Generation Research, Inc., 1996. Workouts, (February 15, 1993), 8-9.

Quintero, Ronald G. CFA Level I Q- Quintero, Ronald G. “Using Workout

Notes. (New York: R. G. Quintero & Professionals on Troubled Credits.”
Co., 2002 - 2019). The Secured Lender, (July/August
1991), 6-12.
Quintero, Ronald G. CFA Level II Q-
Notes. (New York: R. G. Quintero & Quintero, Ronald G. and Schwechter,
Co., 2002 - 2017). Loren H. “Valuing the Professional
Service Corporation.” The Florida Bar
Quintero, Ronald G. CFA Level III Q- Journal, (June 1983), 431-433. (Also
Notes. (New York: R. G. Quintero & published in Equitable Distribution
Co., 2002 - 2017). Reporter, June 1983), 142-144.

Quintero, Ronald G. CFA Financial Quintero, Ronald G. and Shaw, John C.

Statement Analysis Q-Notes. (New “What Is Vital To Learn About An
York: R. G Quintero & Co., 2003 – Acquisition Candidate.” Management
2017). Focus, (November/December 1981),
28-37 (winner of the annual Peat
Quintero, Ronald G. Review of Marwick Authors Award).
Bankruptcy Deadline Checklist: An
Easy-to-Use Reference Guide for Case

2
 EXHBIT 96
Publishing Activities of Ronald G. Quintero, CPA, CFA, ABV
Mr. Quintero is also the author of numerous course materials that are used for professional
training, covering topics that include, but are not limited to the following:

Accounting Financial Statement Analysis

Analyzing and valuing equities, fixed- Financing a Business
income securities, stock options, Initial Public Offerings
warrants, derivatives, real estate, private Investment Banking
equity, venture capital, alternative Leveraged Buyouts
investments, intangible assets, and Managing a Business
goodwill Managing High-Risk Clients
Bankruptcy and Insolvency Mergers and Acquisitions
Business Plans Negotiations
Business Valuations Private Banking
CFA Exam Preparation (Levels I, II, and Private Equity
III; most active trainer in the world) Professional Ethics
Corporate Finance Quantitative Analysis
Credit Risk Quantitative Equity Analysis
Credit Training Share-Based Consideration
Due Diligence Turnarounds and Workouts
Economics Valuation Modeling
Excel Applications Valuations of Financial Instruments
Fair Value Accounting and Valuation Valuing Early-Stage Companies
Financial Projections and Forecasts Venture Capital
Financial Modeling Workouts
Financial Restructuring

3
 EXHBIT 96
Publishing Activities of Ronald G. Quintero, CPA, CFA, ABV
Audiocassettes
“Broadcasting Mergers and Acquisitions” (Broadcast Financial Management Association,
1984)
“Turnarounds and Workouts” (American Institute of Certified Public Accountants, 1989)

Videocassettes
“Preparing for the CFA Exam: Level I” (New York Institute of Finance /MUCIA, 1999)
Ethics and Professional Standards
Financial Statement Analysis
Corporate Finance
Equity Securities
Alternative Investments

Webinars and Podcasts

Business Combinations and Consolidations
Business Valuations
CFA Level I Review
CFA Level II Review
CFA Level III Review
Due Diligence
Fair Value Accounting
Mergers & Acquisitions
Share-Based Accounting
Valuation for Financial Reporting

Awards
Frank Baker Kline Award—Lafayette College
Peat Marwick Authors Award
Max Block Award—New York State Society of CPAs
Albert Nelson Marquis Lifetime Achievement inductee

4
 EXHIBIT 97 

RONALD G. QUINTERO, CPA, CFA, ABV, CDBV,

CFE, CFF, CIRA, CMA, CTP
Managing Director • Chartered Capital Advisers, Inc.
375 Park Avenue, Suite 2607 • New York, NY 10152
(212) 327-0200 • (212) 327-0225 FAX • q@charteredcapital.com
www.charteredcapital.com

Areas of Expertise Professional Activities

 Valuations of businesses, financial instruments,  Served more than 750 public and private
and intangible assets clients of all sizes in a broad range of
 Mergers & acquisitions industries
 Financial restructuring  Performed more than 1,000 valuations of
 Bankruptcy & insolvency businesses, financial instruments, intangible
 Forensic accounting assets, and other assets and liabilities
 Financial forecasting  Served boards of directors of public, private,
 Investments and nonprofit organizations as member or
 Financial damages advisor
 Appointed as bankruptcy examiner,
Expert Testimony bankruptcy trustee, and neutral in litigation
 Testified as an expert witness on approximately  Award-winning scholar, lecturer, and writer
100 occasions since 1980 in courts and  Profiled in several “who’s who” publications
arbitrations throughout the United States during the past 25 years, as well as Marquis
 Represented clients in mediations Who’s Who Lifetime Achievement inductee
Professional Experience  Interviewed and profiled in several national
 More than 40 years’ experience as a financial publications, as well as network television
professional at leading firms  Delivered hundreds of lectures and seminars
 Founded Chartered Capital Advisers and its to more than 10,000 professionals
affiliate, R. G. Quintero & Co., in 1988 throughout North America, South America,
Europe, Asia, and Australia, some of which
 Investment banker at Bear, Stearns & Co., Inc.
have been made available for commercial sale
 Insolvency and restructuring advisor at Zolfo, in printed, audio, video, and online format
Cooper & Co.
 Most active trainer of CFA candidates in the
 Started and ran the first valuation practice of world over the past 25 years
KPMG
 Prolific author of articles in national
Education publications, chapters in leading professional
 A.B., Economics and Spanish, Lafayette College books, professional manuals, and self-study
 M.S., Accountancy, New York University Stern texts
School of Business  Member of American Institute of Certified
 A.P.C., Investment Management, New York Public Accountants, CFA Institute, CFA
University Stern School of Business Society New York, Turnaround Management
Association, Association of Certified Fraud
Certifications Examiners, Association of Insolvency and
 Certified Public Accountant, New York Restructuring Advisors, and American
 Chartered Financial Analyst Academy of Economic and Financial Experts
 AICPA-Accredited in Business Valuation  Served as member or committee chairman of
 Certification in Distressed Business Valuation several committees of the New York State
 Certified Fraud Examiner Society of Certified Public Accountants, as
 AICPA-Certified in Financial Forensics well as Treasurer and member of the
 Certified Management Accountant Executive Committee of the Board of
 Certified Insolvency and Restructuring Advisor Directors of the Turnaround Management
 Certified Turnaround Professional Association
 Certified Financial Planner
 APPENDIX 1
SCTY Cost of Equity Estimates

Average Cost of Equity Median Cost of Equity My Range of Levered

13.76% n/a n/a n/a 13.22% n/a n/a n/a Estimates
Levered Unlevered Relevered High Levered Unlevered Relevered High
17.8%

Financial Financial 13.2%

Risk Risk 13.8%

10.6%

low average median high

Industry Benchmarks*

Average Cost of Equity Median Cost of Equity

General Inputs

Valuation Date: 11/21/2016

Home Country: United States

Investee Country: United States
Industry: n/a

Size Measures ($USD in millions, except for Number of Employees)

Market Value of Common Equity: $2,146m

Book Value of Equity: $2,143m

5-Year Average Net Income: $1m

This summary isMarket Value of Invested

being provided to RonaldCapital: $9,014m
Quintero, Chartered Capital Advisers, Inc Page 1 of 10
(the Licensee) for his/her exclusive use. It is illegal to make unauthorized copies, Last Saved: 08/10/2019 at 7:30 pm
forward to an unauthorized user or to post electronically without the permission of Date of Valuation:
Duff & Phelps.
 APPENDIX 1
Total Assets: $8,862m CRSP Deciles Size Study
5-Year Average EBITDA: $1m
CAPM + Size Premium / Buildup
Net Sales: $730m
CRSP Decile Size Premium: 1.49% Decile 5
Number of Employees: 12243.00
Size Group Size Premium: n/a

Risk Measures
Risk Premium Report Study
Average Operating Margin: n/a CAPM + Size Premium / Build-up 2
Coefficient of Variation of Operating Margin: n/a Average Risk Premium over CAPM: 3.90%
Coefficient of Variation of Return on Equity: n/a Median Risk Premium over CAPM: 3.23%
Build-up 1 (Levered)
Average Levered Risk Premium over the Risk-free Rate (Size Study): 9.96%

Median Levered Risk Premium over the Risk-free Rate (Size Study): 8.89%
Build-up 1 (Unlevered)
Average Unlevered Risk Premium over the Risk-free Rate (Size Study): n/a
Median Unlevered Risk Premium over the Risk-free Rate (Size Study): n/a
Build-up 1 (Relevered)
Average Relevered Risk Premium over the Risk-free Rate (Size Study): n/a
Median Relevered Risk Premium over the Risk-free Rate (Size Study): n/a
Build-up 3
Average Levered Risk Premium over the Risk-free Rate (Risk Study): n/a

Median Levered Risk Premium over the Risk-free Rate (Risk Study): n/a

High Financial Risk Study

Z-Score: n/a
Build-up HFR
Risk Premium over the Risk-Free rate: n/a
CAPM + HFR Size Premium
Risk Premium over CAPM: n/a

Assumptions
My Scenario

Equity Risk Premium (ERP): 4.47% - Custom

CRSP Beta: 1.56 - Custom

RPR Beta: 1.56 - Custom

HFR Beta: n/a
This summary is being provided to Ronald Quintero, Chartered Capital Advisers, Inc Page 2 of 10
(the Licensee) for his/her exclusive use. It is illegal to make unauthorized copies, Last Saved: 08/10/2019 at 7:30 pm
forward to an unauthorized user or to post electronically without the permission of Date of Valuation:
Duff & Phelps.
 APPENDIX 1
Risk-free Rate: 3.5% - Custom

*Sources

Duff & Phelps Cost of Capital Navigator

Size Premium
Size Premium: Annual Data as of 12/31/2015

Risk Premium Report Study

Risk Premium Over Capm: Annual Data as of 12/31/2015
Risk Premium Over the Risk-free Rate (Build-up 1): Annual Data as of 12/31/2015
Size Premium (Build-up 2): Annual Data as of 12/31/2015

Method Summary Breakout

Levered

Average Cost of Equity Median Cost of Equity

13.76% 13.22%
 CRSP Deciles Size Study

CAPM + Size Premium

My Scenario

11.96% = 3.50% + 1.56 4.47% + 1.49%

CUSTOM CUSTOM CUSTOM DECILE 5
($2090.566M$3187.480M)

This summary is being provided to Ronald Quintero, Chartered Capital Advisers, Inc Page 3 of 10
(the Licensee) for his/her exclusive use. It is illegal to make unauthorized copies, Last Saved: 08/10/2019 at 7:30 pm
forward to an unauthorized user or to post electronically without the permission of Date of Valuation:
Duff & Phelps.
 APPENDIX 1

 Build-up + Size Premium

My Scenario

11.96% = 3.50% + 4.47% + 2.50% + 1.49%

CUSTOM CUSTOM CUSTOM INDUSTRY RISK DECILE 5
PREMIUM ($2090.566M$3187.480M)

 RiskCAPM
Premium Report Study
 + Size Premium

 My Scenario
Market Value of Common Equity

14.00% = 3.50% + 1.56 4.47% + 3.53%

CUSTOM CUSTOM CUSTOM = 0.1178 - 0.024761 *
LOG(2146.000)

Book Value of Equity

13.15% = 3.50% + 1.56 4.47% + 2.68%

CUSTOM CUSTOM CUSTOM = 0.072787 - 0.013815 *
LOG(2143.000)

5-Year Average Net Income

16.85% = 3.50% + 1.56 4.47% + 6.38%

CUSTOM CUSTOM CUSTOM = 0.063818 - 0.014857 *
LOG(1.000)

Market Value of Invested Capital

This summary is being provided to Ronald Quintero, Chartered Capital Advisers, Inc Page 4 of 10
(the Licensee) for his/her exclusive use. It is illegal to make unauthorized copies, Last Saved: 08/10/2019 at 7:30 pm
forward to an unauthorized user or to post electronically without the permission of Date of Valuation:
Duff & Phelps.
 APPENDIX 1

12.69% = 3.50% + 1.56 4.47% + 2.22%

CUSTOM CUSTOM CUSTOM = 0.104817 - 0.020901 *
LOG(9014.000)

Total Assets

12.88% = 3.50% + 1.56 4.47% + 2.41%

CUSTOM CUSTOM CUSTOM = 0.090039 - 0.016704 *
LOG(8862.000)

5-Year Average EBITDA

17.28% = 3.50% + 1.56 4.47% + 6.81%

CUSTOM CUSTOM CUSTOM = 0.068137 - 0.014043 *
LOG(1.000)

Net Sales

14.71% = 3.50% + 1.56 4.47% + 4.24%

CUSTOM CUSTOM CUSTOM = 0.087236 - 0.015656 *
LOG(730.000)

Number of Employees

13.39% = 3.50% + 1.56 4.47% + 2.92%

CUSTOM CUSTOM CUSTOM = 0.099945 - 0.017297 *
LOG(12243.000)

 Build-up 1
 My Scenario
Market
This summary is being provided Value
to Ronald of Common
Quintero, Equity
Chartered Capital Advisers, Inc Page 5 of 10
(the Licensee) for his/her exclusive use. It is illegal to make unauthorized copies, Last Saved: 08/10/2019 at 7:30 pm
forward to an unauthorized user or to post electronically without the permission of Date of Valuation:
Duff & Phelps.
 APPENDIX 1

12.33% = 3.50% + 9.29% + -0.46%

CUSTOM = 0.201306 - 0.03254 * EQUITY RISK PREMIUM
LOG(2146.000) ADJUSTMENT BASED ON
CUSTOM
Book Value of Equity

11.09% = 3.50% + 8.05% + -0.46%

CUSTOM = 0.157301 - 0.023062 * EQUITY RISK PREMIUM
LOG(2143.000) ADJUSTMENT BASED ON
CUSTOM
5-Year Average Net Income

16.84% = 3.50% + 13.80% + -0.46%

CUSTOM = 0.137977 - 0.023844 * EQUITY RISK PREMIUM
LOG(1.000) ADJUSTMENT BASED ON
CUSTOM
Market Value of Invested Capital

10.58% = 3.50% + 7.54% + -0.46%

CUSTOM = 0.192526 - 0.029619 * EQUITY RISK PREMIUM
LOG(9014.000) ADJUSTMENT BASED ON
CUSTOM
Total Assets

10.59% = 3.50% + 7.55% + -0.46%

CUSTOM = 0.178854 - 0.026176 * EQUITY RISK PREMIUM
LOG(8862.000) ADJUSTMENT BASED ON
CUSTOM
5-Year Average EBITDA

17.78% = 3.50% + 14.74%

This summary is being provided to Ronald Quintero, Chartered Capital Advisers, Inc
CUSTOM = 0.147398 - 0.023395 * Page 6 of 10
(the Licensee) for his/her exclusive use. It is illegal to make unauthorized copies, Last Saved: 08/10/2019 at 7:30 pm
forward to an unauthorized user or to post electronically without the permission of Date of Valuation:
Duff & Phelps.
 APPENDIX 1
LOG(1.000)

+ -0.46%
EQUITY RISK PREMIUM
ADJUSTMENT BASED ON
CUSTOM
Net Sales

13.28% = 3.50% + 10.24% + -0.46%

CUSTOM = 0.16769 - 0.02282 * EQUITY RISK PREMIUM
LOG(730.000) ADJUSTMENT BASED ON
CUSTOM
Number of Employees

11.52% = 3.50% + 8.48% + -0.46%

CUSTOM = 0.172467 - 0.02145 * EQUITY RISK PREMIUM
LOG(12243.000) ADJUSTMENT BASED ON
CUSTOM

 Build-up 2
 My Scenario
Market Value of Common Equity

14.00% = 3.50% + 4.47% + 2.50% + 3.53%

CUSTOM CUSTOM CUSTOM INDUSTRY RISK = 0.1178 - 0.024761 *
PREMIUM LOG(2146.000)

Book Value of Equity

13.15% = 3.50% + 4.47% + 2.50% + 2.68%

CUSTOM CUSTOM CUSTOM INDUSTRY RISK = 0.072787 - 0.013815 *
PREMIUM LOG(2143.000)

This summary is being provided to Ronald Quintero, Chartered Capital Advisers, Inc Page 7 of 10
(the Licensee) for his/her exclusive use. It is illegal to make unauthorized copies, Last Saved: 08/10/2019 at 7:30 pm
forward to an unauthorized user or to post electronically without the permission of Date of Valuation:
Duff & Phelps.
 APPENDIX 1
5-Year Average Net Income

16.85% = 3.50% + 4.47% + 2.50% + 6.38%

CUSTOM CUSTOM CUSTOM INDUSTRY RISK = 0.063818 - 0.014857 *
PREMIUM LOG(1.000)

Market Value of Invested Capital

12.69% = 3.50% + 4.47% + 2.50% + 2.22%

CUSTOM CUSTOM CUSTOM INDUSTRY RISK = 0.104817 - 0.020901 *
PREMIUM LOG(9014.000)

Total Assets

12.88% = 3.50% + 4.47% + 2.50% + 2.41%

CUSTOM CUSTOM CUSTOM INDUSTRY RISK = 0.090039 - 0.016704 *
PREMIUM LOG(8862.000)

5-Year Average EBITDA

17.28% = 3.50% + 4.47% + 2.50% + 6.81%

CUSTOM CUSTOM CUSTOM INDUSTRY RISK = 0.068137 - 0.014043 *
PREMIUM LOG(1.000)

Net Sales

14.71% = 3.50% + 4.47% + 2.50% + 4.24%

CUSTOM CUSTOM CUSTOM INDUSTRY RISK = 0.087236 - 0.015656 *
PREMIUM LOG(730.000)

Number of Employees

13.39% = 3.50% + 4.47% + 2.50%

This summary is being provided to Ronald Quintero, Chartered Capital Advisers, Inc CUSTOM CUSTOM CUSTOM INDUSTRY RISK Page 8 of 10
(the Licensee) for his/her exclusive use. It is illegal to make unauthorized copies, Last Saved: 08/10/2019 at 7:30 pm
forward to an unauthorized user or to post electronically without the permission of Date of Valuation:
Duff & Phelps.
 APPENDIX 1
PREMIUM

+ 2.92%
= 0.099945 - 0.017297 *
LOG(12243.000)

Unlevered

Average Cost of Equity Median Cost of Equity

n/a n/a
Relevered

Average Cost of Equity Median Cost of Equity

n/a n/a
High Financial Risk

Average Cost of Equity

This summary is being provided to Ronald Quintero, Chartered Capital Advisers, Inc Page 9 of 10
(the Licensee) for his/her exclusive use. It is illegal to make unauthorized copies, Last Saved: 08/10/2019 at 7:30 pm
forward to an unauthorized user or to post electronically without the permission of Date of Valuation:
Duff & Phelps.
 APPENDIX 1

Median Cost of Equity

n/a n/a

This summary is being provided to Ronald Quintero, Chartered Capital Advisers, Inc Page 10 of 10
(the Licensee) for his/her exclusive use. It is illegal to make unauthorized copies, Last Saved: 08/10/2019 at 7:30 pm
forward to an unauthorized user or to post electronically without the permission of Date of Valuation:
Duff & Phelps.
 CERTIFICATE OF SERVICE

I, Kelly L. Tucker, hereby certify that on August 26, 2019, I caused a true

and correct copy of the foregoing Plaintiffs’ Expert Report of Ronald G. Quintero

to be served upon the following counsel of record via File & ServeXpress:

David E. Ross, Esq. Kevin R. Shannon, Esq.

Garrett B. Moritz, Esq. Berton W. Ashman, Jr., Esq.
Benjamin Z. Grossberg, Esq. Jaclyn C. Levy, Esq.
Ross Aronstam & Moritz LLP Jay G. Stirling, Esq.
100 S. West Street, Suite 400 Potter Anderson & Corroon LLP
Wilmington, DE 19801 1313 N. Market Street
Hercules Plaza, 6th Floor
Wilmington, DE 19801

/s/ Kelly L. Tucker

Kelly L. Tucker (#6382)
EXHIBIT 153
 64084032
Aug 26 2019
03:56PM

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN RE TESLA MOTORS, INC. ) Consolidated

STOCKHOLDER LITIGATION ) C.A. No. 12711-VCS
) CLASS AND DERIVATIVE ACTION

EXPERT REPORT
of
JUERGEN MOESSNER

August 12, 2019

I. INTRODUCTION
1. I was retained by counsel for Plaintiffs Arkansas Teacher Retirement

System, Roofers Local 149 Pension Fund, Oklahoma Firefighters Pension and

Retirement System, KBC Asset Management NV, ERSTE-SPARINVEST

Kapitalanlagegesellschaft m.b.H., and Stichting Blue Sky Active Large Cap Equity

Fund USA (collectively, “Plaintiffs”) to provide expert opinions regarding the

matter styled In Re Tesla Motors, Inc. Stockholder Litigation, C.A. No. 12711-VCS,

pending in The Court of Chancery of the State of Delaware (the “Action”).

2. The Action relates to the merger of SolarCity Corporation (“SolarCity”

or the “Company”) into Tesla, Inc. (“Tesla”), which closed on or about November

21, 2016 (the “Merger”). Per the terms of the Merger, Tesla issued 0.110 shares of

Tesla stock for each share of SolarCity common stock outstanding at the Merger

closing date.1

3. This report sets forth my opinions, about which I am prepared to testify

under oath, as well as the bases for my opinions. I base this report on information

available to me at the time of its drafting. I reserve the right to amend this report

and/or my opinions to account for new information I learn subsequently.

1
Tesla Form 8-K filed November 21, 2016.
II. ASSIGNMENT SCOPE
4. I was asked to opine on the reasonableness of the financial projections

used by the Tesla board of directors (the “Tesla Board”) to value SolarCity in

connection with the Merger and whether any adjustments are necessary to make

those projections more accurately reflect the operative reality of SolarCity and the

larger solar industry.

5. Tesla’s financial advisor Evercore Group, LLC (“Evercore”) evaluated

two sets of financial projections for SolarCity: a) the “SCTY Management Case

Projections,” which SolarCity provided to Tesla on July 6, 2016 and updated on July

16, 2016;2 and b) the “Revised Sensitivity Case Projections,” which Evercore

prepared because it and the Board concluded that the SCTY Management Case

Projections were overly optimistic.3

6. SolarCity and its financial advisor, Lazard Frères & Co. LLC

(“Lazard”), also prepared a set of projections making certain assumptions regarding

SolarCity’s liquidity constraints (the “SCTY Liquidity Management Case

Projections”). The Tesla Board, however, did not receive those projections during

the course of the Merger negotiations, so it could not use them when determining

2
EVR-TESLA_00201812, EVR-TESLA_00201813; EVR-TESLA_00180839,
EVR-TESLA_00180840; TESLA002248713.
3
TESLADIR0091233 at 245; TESLA00000463 at 716; TESLA00248717.

-2-
the purchase price for SolarCity.4 Moreover, neither the Tesla Board nor Evercore

appear to have conducted any meaningful diligence into the assumptions underlying

the SCTY Liquidity Management Case Projections.5 Accordingly, I express no

opinion on the reasonableness of the SCTY Liquidity Management Case Projections

in this report.

III. SUMMARY OF OPINIONS

7. Based on the documents and information I reviewed, research I

conducted, and my professional experience, I formed the following opinions

regarding the projections Tesla used to determine the purchase price for SolarCity:

a) The SCTY Management Case Projections were overly

aggressive and did not reflect SolarCity’s operative reality at the
time of the Merger. Prior to the Merger, SolarCity management
historically had been unable to accurately project future
performance, calling into question the reliability of the SCTY
Management Case Projections. In addition, the SCTY
Management Case Projections ignored the impact of the liquidity
constraints facing SolarCity at the time of the Merger and the
scheduled phase-out of the Federal Solar Investment Tax Credit
(the “ITC” or “SITC”) that accounts for a significant amount of
the cash SolarCity would supposedly generate over the
projection period. The SCTY Management Case Projections
likewise made a number of overly optimistic assumptions given
the state of the solar industry at the time of the Merger.

b) The Revised Sensitivity Case Projections were less aggressive

than the SCTY Management Case Projections, but were still
overly optimistic and still failed to properly account for the
phase-out of the SITC. This resulted in an overstatement of the
4
Tesla Form 424B3 Definitive Proxy Statement filed October 12, 2016 (“Proxy”) at
70, 103; C. McBean Tr. at 247-248.
5
C. McBean Tr. at 247.

-3-
 “Tax Equity” source of cash in the terminal year of the projection
period and, relatedly, the overall amount of “Net Generation of
Cash”– i.e., the metric used by the Tesla Board and its advisors
as a proxy for SolarCity’s free cash flows.

c) The Revised Sensitivity Case Projections are not appropriate to

use to value SolarCity in a discounted cash flow (“DCF”)
analysis. Among other things, they assume (without basis) that
SolarCity would continue to generate significant amounts of cash
from Tax Equity financing through the SITC or otherwise make-
up the cash generation lost from the reduction of the SITC
through other unspecified means, both of which are not likely to
occur in a magnitude or on a timeline consistent with the 3-5%
perpetuity growth rate Evercore applied to the terminal year in
its DCF analysis. The Revised Sensitivity Case Projections must
at least be adjusted to reflect the phase-out of the SITC – i.e.,
reducing the overall amount of “Tax Equity” in the terminal year.
d) I corrected the Revised Sensitivity Case Projections’ failure to
account for the SITC phase-out by reducing the overall “Tax
Equity” source of cash in the terminal year. Importantly, I did
not eliminate all of the Tax Equity reflected in the terminal year.
Because the Tax Equity source of cash includes components in
addition to the SITC (as explained in Section F below) removing
all Tax Equity sources of cash in the terminal year would
overstate the negative impact of the phase-out of the SITC on
cash generation and would ignore the possibility that SolarCity
could still claim a 10% SITC on certain of its installations. Given
its lack of profitability, SolarCity was not able to absorb the SITC
as a typical offsetting tax credit, and instead had to monetize the
SITC through tax equity investments. Due to transaction
expenses and investor return requirements, SolarCity could not
monetize 100% of the SITC. Therefore, the SITC phase-out
would reduce SolarCity’s cash flow by less than 100% of the
SITC value. Accordingly, I conservatively adjusted Tax Equity
in the terminal year by only subtracting 80% (i.e., the
monetization rate) of the SITC reduction applicable to non-
International installation costs otherwise projected in the
terminal year from the Tax Equity line in the terminal year, while
assuming SolarCity would continue to claim a 10% SITC on all

-4-
 U.S. commercial and residential installations. The resulting
projections, which I refer to as the “SITC Phase Out Case,” are
reflected in the attached Exhibit A to this Report. As detailed
further below, it is my opinion that the SITC Phase Out Case is
a more reliable set of projections for SolarCity than either the
SCTY Management Case Projections or the Revised Sensitivity
Case Projections.

IV. PROFESSIONAL QUALIFICATIONS

8. I am currently the President of Global Capital Finance, a boutique

investment banking firm. Since 2005, I have specialized in the renewable energy

sector. I am the founder and sole managing member of the firm, which was

established as a spin-off from Credit Suisse First Boston (“CS First Boston”) in

2001, where I served as Managing Director, Global Head of Lease Finance, and on

CS First Boston’s U.S. Investment Banking Management Committee.

9. At CS First Boston, my responsibilities included all asset based

financing, both for advisory engagements and for CS First Boston’s principal

investments. I focused principally on “tax equity” transactions – i.e., transactions

involving monetization of tax benefits. While at CS First Boston, I worked on over

50 transactions involving tax equity.

10. I established the tax equity business when I joined CS First Boston from

ABB, Ltd. (“ABB”), a global electrification and industrial automation company, in

1997. While at ABB, I served as President of ABB Leasing. I was in charge of

advisory services and principal investments in the transportation and energy sector.

-5-
While at ABB, my focus was also on tax equity transactions. I was a member of the

senior management group of ABB Germany, as well as a Partner of ABB Financial

Services, one of the five primary divisions of ABB at the time. Prior to joining ABB

in 1992, I was an officer in the Corporate Finance division of Deutsche Bank, with

responsibility for evaluating and structuring tax equity transactions.

11. Since founding Global Capital Finance, I have personally led the firm’s

advisory team and been responsible for successfully closing more than 50 renewable

energy transactions (including more than 20 solar PV transactions for approximately

1,150 MW of solar PV), representing in excess of USD 5 billion. In this context, I

have represented developers, utilities, financial institutions, renewable energy and

infrastructure funds, and pension funds in various acquisitions, divestitures, tax

equity transactions, and loan originations.

12. My academic title is Diplom-Wirtschaftsingenieur, which is the

combination of Diplom-Ingenieur (MEng equivalent, Computer Science and

Operations Research) and Wirtschaftswissenschaften (MBA equivalent) from the

University of Karlsruhe (now called KIT Karlsruhe Institute of Technology), one of

the leading engineering schools in Germany.

13. Apart from my retention by Plaintiffs in connection with this report, I

have no business or personal connection to any of the parties in this Action. I am

-6-
being paid an hourly rate of $500 for all services that I perform in connection with

this action.

14. A copy of my current CV is attached to this report as Exhibit B.

V. DOCUMENTS RELIED UPON

15. As part of my retention, I reviewed numerous documents relating to

SolarCity’s financial performance, condition, and projections; various solar-industry

specific publications over the relevant time period; and transcripts of various

depositions taken in the Action. A complete list of the documents I relied upon in

formulating the opinions set out in this report is attached as Exhibit C.

VI. DISCUSSION
A. SolarCity’s Business
1. Overview
16. SolarCity was founded in 2006 and went public in 2012. According to

the Proxy filed with the U.S. Securities and Exchange Commission (“SEC”) on

October 12, 2016 for the Merger, SolarCity “designs, permits, finances, sells,

installs, maintains and monitors solar energy systems for residential commercial and

government applications.”6 Likewise per the Proxy, “SolarCity’s long-term

agreements with its customers generate recurring payments and create a portfolio of

. . . receivables that it monetizes. . . .”7 Stated otherwise, prior to the Merger,

6
Proxy at 11.
7
Id.

-7-
SolarCity installed and financed solar photovoltaic (“PV”) systems for customers

principally in select markets across the United States and, to a lesser degree,

internationally.8

17. Historically, SolarCity did not manufacture the components of its PV

systems and had no real manufacturing capabilities. Instead, SolarCity purchased

the solar PV components it installed from third parties.9 SolarCity attempted to enter

the PV manufacturing business with its 2014 acquisition of Silevo, LLC (“Silevo”).10

At the time it was acquired, Silevo principally manufactured solar panels in China,

but was developing solar panel manufacturing facilities in Buffalo, New York and

Fremont, California to replace its China operations.11 Prior to the Merger, Silevo

required “significant expenditure over the projection period to complete the Buffalo

& Fremont facilities and shutter the China Facility.”12 Liabilities associated with the

Silevo acquisition contributed substantially to the liquidity issues facing SolarCity

at the time of the Merger (discussed further below).13

8
See TESLA00000001 at 35 (“Primarily focused on US market but some
international sales from international footprint in Mexico, China and Canada”).
9
See SCTY Form 10-K filed February 24, 2015, at 39, 44.
10
Id.
11
SCTY Form 10-Q filed November 6, 2014, at 54, 60.
12
TESLA00000463 at 738.
13
By July 2016, SolarCity had spent $163 million in capital expenditures (“capex”)
and $74 million in operational expenditures (“opex”) in connection with the
development of Silevo’s US facilities and closing of its facility in China. SolarCity
further projected future capex and opex expenses of $270 million and $190 million,
respectively. In addition, prior to its acquisition by SolarCity, Silevo entered into a

-8-
 18. At the time of the Merger, SolarCity was the “market leader” in both

the US residential and commercial market, with a 35% share of the residential solar

market and a 15% share of the commercial solar market.14 Despite its market leading

status in the commercial sector, SolarCity’s commercial business was still largely

nascent in 2016, and residential customers comprised the significant majority of

SolarCity’s customer base. For example, according to documents presented to the

Tesla Board, SolarCity’s customers included over 100,000 homeowners, but only

400+ schools, universities, government agencies and corporations.15 As of 2016,

SolarCity’s business volume in the commercial sector was small and unprofitable,

and the SolarCity board discussed abandoning the commercial sector entirely.16 By

early 2016 SolarCity began exploring a reduction in growth in its commercial

business, and projected that for 2016, commercial installs would be at a cash flow

loss.17

contract with the State of New York that ultimately required SolarCity to: (1)
“[i]nvest $5bn over 10 years in total capital and operational expenditures in the New
York State beginning at the time of full capacity manufacturing”; (2) [e]mploy 1,460
people in Buffalo within 2 years of completion, 2,000 in New York within 5 years
of completion, and 5,000 in New York within 10 years of completing”; and (3) to
pay $41.2 million per year to the State of New York “for each year the target
investment of employment milestones are not met.” TESLA00000463 at 738.
14
See TESLA00000001 at 35.
15
Id.
16
A. Gracias Tr. at 100, 106-107, 122; T. Serra Tr. at 213-214; LAZ_TES00067124
at 198; TESLA00531173 at 183.
17
TESLA00531173 at 184; BOFA_00002978 at 983.

-9-
 19. SolarCity acquired residential customers primarily through direct and

indirect marketing to homeowners, offering to install solar PV systems “behind the

meter” (i.e., for household consumption) at no upfront cost to the homeowner.18

Installing a solar PV system allows homeowners to use “clean” electricity at rates

comparable to local utility residential rates, particularly in jurisdictions allowing

“net metering.”19 Leasing a system from SolarCity allowed customers to avoid the

significant upfront investment associated with purchasing and installing a residential

solar PV system.

20. For example, according to a study by the National Renewable Energy

Laboratory in early 2017,20 the cost of residential rooftop solar installations was

$2.80 per watt for direct current (DC), which translates to $3.22 per watt when

calculated on an alternating current (AC) basis. Consequently, for a system to

deliver 5 kilowatts (“kW”) of AC, the cost was approximately $16,100 in early 2017.

In contrast, through SolarCity’s various financing products, SolarCity customers

could have a solar PV system installed on their property while putting “zero-down.”

21. As SolarCity’s Chief Revenue Officer Hayes Barnard testified,

SolarCity’s “zero-down” financing options were an “important aspect of its sales

18
See SCTY Form 10-K filed February 10, 2016, at 6.
19
“Net metering allows residential and commercial customers who generate their
own electricity from solar power to sell the electricity they aren't using back into the
grid.” https://www.seia.org/initiatives/net-metering, last visited on July 10, 2019.
20
https://www.nrel.gov/docs/fy17osti/68925.pdf, last visited on July 23, 2019.

-10-
and marketing” prior to the Merger.21 Customers who could afford the upfront cost

of a solar PV installation represent a small sub-segment of the overall residential

solar PV market, and if SolarCity’s marketing efforts were only focused there, the

potential business volume would be much smaller and attract even lower margins

due to the loss of incremental income SolarCity earned from financing solar PV

systems to its customers. This problem would only increase with the phase-out of

the SITC, as homeowners with good credit would be able to contract directly with

an installer to reduce their costs rather than going through SolarCity, which provided

a turnkey solution but at a higher cost.

22. Prior to the Merger, SolarCity provided three financing options to its

customers: (1) “SolarLeases”; (2) “Solar Power Purchase Agreements” (or

“SolarPPAs”); and (3) “MyPower” loans.22 In a SolarLease contract, SolarCity

charged customers a fixed monthly fee to “lease” the solar PV system from

SolarCity, which retained an ownership interest in the physical installation. 23 In a

SolarPPA, SolarCity charged customers a fee per kilowatt hour (“kWh”) for

electricity produced by the solar PV system, which, though installed on the

homeowners’ house, remained SolarCity’s property.24 In both SolarLeases and

21
H. Barnard Tr. at 38-40.
22
SCTY Form 10-K filed February 10, 2016, at 6.
23
Id. at 5.
24
Id.

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SolarPPAs, SolarCity retained an ownership interest in the installed system, giving

SolarCity the ability to claim the SITC associated with the new system.25 Both

contract options were designed to lower the customer’s monthly electrical bills,

because the payments to SolarCity were expected to be below prevailing local

electric utility rates.26 Both contracts had initial 20-year terms, followed by the

option to renew for up to an additional 10 years.27

23. In addition to SolarLeases and SolarPPAs, beginning in 2014,

SolarCity launched its “MyPower” financing product.28 Through MyPower,

SolarCity provided customers with variable rate loans that the customers could use

to purchase solar PV systems.29 Unlike SolarLeases and SolarPPAs, MyPower

allowed SolarCity customers to own their solar PV system and claim the SITC

associated with those systems.30 SolarCity mostly discontinued the MyPower

program during the first quarter of 2016 and, after introducing Solar Loans in May

2016, eliminated the MyPower program completely in the third quarter.31 Solar

Loans differ from MyPower loans in that customers’ purchases of SolarCity-

25
Id. at 6.
26
Id. at 5.
27
Id. at 3.
28
Id. at 5.
29
Id. at 42.
30
Id.
31
SCTY Form 10-Q filed November 9, 2016, at 43; SCTY Form 10-Q filed August
9, 2016, at 35, 40; SCTY Form 8-K filed August 9, 2016, at 2.

-12-
installed systems are financed by a third-party, not SolarCity.32 Fees paid by

SolarCity to the lender cut into SolarCity’s sales revenues.33

2. How SolarCity Generates Cash

24. With the SolarLease and SolarPPA contracts, SolarCity created several

future cash flow streams through its installations:

a) recurring cash flow from the customers’ monthly payments;

b) potential cash flow from the sale of renewable energy certificates

(“SRECs”) where applicable;34

c) potential cash flow from contract renewals after the initial 20-
year terms; and
d) certain tax benefits associated with solar PV installations,
including SITCs and accelerated tax depreciation deductions.
25. Because SolarCity essentially covered the costs and expenses

associated with the majority of residential solar PV systems it installed, SolarCity

needed ways to monetize the future cash flow streams outlined above if it wanted to

continue installing new systems with little or no upfront costs paid by its customers.

32
SCTY Form 10-Q filed November 9, 2016, at 11.
33
Id.
34
SRECs are state-level incentive programs that allow owners of solar systems to
sell “certifications” for renewable energy to local utility providers. SRECs are the
result of the adoption of renewable portfolio standards (“RPS”) in various states
across the country. Generally speaking, to meet the requirements of an RPS,
electricity companies must prove that they have either produced renewable
electricity (e.g., solar, wind, etc.) themselves or have paid someone else who is
producing renewable energy (e.g., an owner of a solar PV system) for an SREC. In
the United States, a system owner typically earns one SREC for every 1000 kWhs
produced by their solar system.

-13-
SolarCity accomplished this by forming a number of bankruptcy-remote, special

purpose vehicles (“SPVs”) whose function was to monetize cash flows from

customer contracts.35 SolarCity owned a majority interest in many of these SPVs,

but its ownership interest varied from entity to entity. From an accounting

perspective, these SPVs are referred to as variable interest entities (“VIEs”). The

form and function of the VIEs is explained at length in the Company’s 2016 Annual

Report and in further detail below.36 In short, these VIEs were the vehicles through

which SolarCity was able to securitize and sell interests in its customer receivables,

SRECs, and tax assets to third parties.

26. Generally speaking, SolarCity initially funded solar PV installations

with its working capital and aggregation debt facilities. It then bundled individual

transactions into asset pools and monetized them by securitizing the expected cash

flows (e.g., tax attributes, primarily the SITC; electricity sales; and SRECs)

associated with these transactions. Securitizing expected future cash flows was the

primary mechanism by which SolarCity financed its business.

27. These securitizations were comprised of several tranches, as follows:

a) A tax equity tranche, executed through partnership flips, leases,

and/or inverted leases, and secured by tax attributes as well as
some of the contracted electricity sales;

35
BOFA_00002978 at 979; SolarCity Form 10-K filed March 1, 2017, at 68, 77-78.
36
SolarCity Form 10-K filed March 1, 2017, at 77-78.

-14-
 b) A loan tranche, executed through limited recourse loans and/or
cash equity transactions, and generally secured by contracted
electricity and SREC sales; and

c) An equity tranche, typically retained through lease purchase

options and partnership flip buy-out rights, through which
SolarCity maintained some beneficial ownership in the
remaining (largely uncontracted) electricity and SREC sales.37
28. The respective “monetization rates” for each tranche – i.e., the amounts

investors are willing to advance against the economic beneficial interest in such cash

flow component – depend on the quality of the collateral pool. However, because

of the differences in risks associated with these tranches, each has different costs.

Tax equity is typically the lowest cost of capital while equity (or retained value) is

typically the highest cost of capital. This is important because the tax equity tranche

is typically senior to the other tranches, including the equity tranche, except for

inverted leases, where tax equity is typically junior to the loan tranche.

29. The securitization business model relied on two primary factors: (i) the

ability to underwrite volume through aggregation facilities and working capital, and

(ii) maintaining highly uniform business volume from development activities, which

allowed the creation of sufficiently-sized, uniform asset securitization pools to

provide a steady supply of securities to investors. This makes SolarCity’s business

akin to an “underwriting” business model. As with any underwriting business model

37 See TESLA00531173 at 177, 190, 194.

-15-
(e.g., mortgages, auto loans, real estate, etc.), SolarCity’s business model depended

on its own creditworthiness as well as its discipline as an underwriter.

30. Because it relied heavily on VIEs and securitized transactions,

SolarCity can be thought of as two companies acting in concert: (i) a development

company (which SolarCity referred to as “DevCo”) that sold, marketed, and installed

the PV systems; and (ii) a holding company for the VIEs (which SolarCity referred

to as “PowerCo”) that conducted the operational and financing activities necessary

to finance new installations of solar energy systems.

B. A Brief Overview of the SITC

31. The SITC has been a key driver of the adoption of solar in the U.S. A

product of the Energy Policy Act of 2005 (P.L. 109-58), the SITC was enacted in

2006 to spur growth in the U.S. solar industry, which has grown by more than

10,000% since the SITC was enacted.38

32. As Evercore noted in its June 20, 2016 presentation materials for the

Tesla Board, the SITC “is a dollar-for-dollar reduction in federal income taxes based

on the amount invested in a solar system.”39 As Evercore further observed: “The

solar Investment Tax Credit (ITC) is one of the most important federal policy

38
https://www.seia.org/sites/default/files/2019-07/SEIA-ITC-Factsheet-2019-
July.pdf (last visited on July 24, 2019).
39
TESLA00000001 at 026.

-16-
mechanisms designed to incentivize the generation and deployment of solar energy

in the US.”40

33. A homeowner who purchases a solar PV system can apply for the SITC

directly. However, SolarCity retained ownership of the PV systems sold through its

SolarLease and SolarPPA contracts, and thus SolarCity had the right to claim the

SITC for those systems. Because SolarCity operated at a loss, it did not pay U.S.

federal taxes and was unable to use the SITC to offset its own tax burden.

Accordingly, SolarCity needed to monetize the SITC through tax equity transactions

with third party investors.

34. A pure sale of tax credits is not permitted under the 1986 Tax Reform

Act.41 The transfer of solar tax benefits, including the SITC, requires some

additional transfer of “economic substance” in order to meet applicable regulations.

35. To support a test of economic substance, tax equity investors must

make an investment that is tied to economic benefits other than just the tax benefits

– typically a share of income or revenue generated by the asset pool. As such, a tax

equity investor obtains both the tax benefits and a certain amount of cash flow

generated by the underlying solar asset.

40
Id.
41
The U.S. Congress passed the Tax Reform Act of 1986 (TRA) (Pub. L. 99–514,
100 Stat. 2085, enacted October 22, 1986) to simplify the income tax code, broaden
the tax base and eliminate many tax shelters.

-17-
 36. The SITC will begin to phase out in 2020.42 The SITC currently allows

a dollar-for-dollar tax credit for up to 30% of system costs. In 2020, the credit drops

to 26% for both residential and commercial systems. In 2021, the credit drops to

22% for both residential and commercial systems. In 2022, the SITC will

completely phase out for resident-owned residential systems and will drop to a 10%

credit for commercial projects and third-party-owned residential systems.43

37. Just as the SITC is important to the growth of the solar industry, it is

important to SolarCity’s business and growth prospects.44 Thus, at the time of the

Merger, the phase-out described above presented a significant risk to SolarCity and

its business.

42
I am aware that legislation to extend the SITC was introduced in the United States
Congress in July 2019. Such legislation was not pending or expected at the time of
the Merger. The prospect that such legislation will be passed and signed into law is
uncertain.
43
U.S. law contains separate provisions for “qualified solar electric property
expenditures” that a homeowner can use as the basis of a tax credit and “solar energy
properties” that corporations can use as the basis for a tax credit. Compare 26 U.S.C.
§ 25D(d)(2) (limiting “qualified solar electric property expenditures” to
expenditures for a “dwelling unit located in the United States and used as a residence
by the tax payer”) with 26 U.S.C. § 48 (a)(3)(B)(i) (allowing credits on “energy
properties” where “the construction, reconstruction, or erection of which is
completed by the taxpayer”). SolarCity has historically been able to claim a tax
credit for “residential” installations even though it does not reside in the dwellings
where it installs solar systems.
44
C. McBean Tr. at 36 (“Q. How important was the federal ITC to SolarCity’s
business model? A. It was important. It is important.”).

-18-
 38. Notwithstanding the importance of the SITC to SolarCity’s business

and ability to grow, I am aware of no evidence that SolarCity had any plans to replace

the SITC in terms of future cash sources to finance its growth and operations. For

example, SolarCity and Tesla director Antonio Gracias testified:

Q. Did SolarCity have any plans in place in 2015 to address the phase-

out of tax credits?

A. I don’t specifically remember the plans. I think generally the idea

in 2015 was to – when credits were in place, to grow as fast as possible.

...

So if you’re growing quickly in tax credit time, you can then afford to

grow less quickly in no tax credit time. So the idea was to grow as fast

as we could while we had those credits in place and then the company

could slow down. . . .45

39. Similarly, when asked what Evercore learned in its due diligence

regarding SolarCity’s plans to deal with the phase-out of the SITC, Evercore’s

corporate designee did not identify any business plan in effect at SolarCity to replace

the cash flow that would be lost as the SITC phased out. Instead, Evercore’s

corporate designee noted that SolarCity had a “huge lobbying group that is focused

45
A. Gracias Tr. at 98-99.

-19-
on this 24 hours a day” and that the company had already taken steps to vertically

integrate its operations in an effort to lower its cost structure.46

C. The SCTY Management Case Projections

40. The projections prepared by SolarCity management do not conform to

industry standards for corporate or asset finance projections. Corporate projections

in the solar industry typically project revenue, costs, and EBITDA-level profitability

in order to project net income. Asset finance projections are typically reflected as

cash flow from specific transactions. SolarCity blended the two in projecting its

business and asset financing. As Evercore noted, SolarCity did not have a GAAP47

financial model and instead provided Tesla only with a cash model – the SCTY

Management Case Projections.48

41. The SCTY Management Case Projections were unrealistic and were

acknowledged as such by various parties near the Merger date.

42. SolarCity’s former Chief Financial Officer and Tesla Board member

Brad Buss admitted that SolarCity management was “horrible and very optimistic”

when preparing projections.49 Accordingly, Mr. Buss acknowledged that SolarCity

“[g]enerally will miss install guidance in current year frequently.”50

46
C. McBean Tr. at 37-38.
47
Generally Accepted Accounting Principles.
48
TESLADIR0091233 at 941.
49
McBean Tr. at 137; EVR-TESLA 228876.
50
McBean Tr. at 137; EVR-TESLA 228876.

-20-
 43. In addition to Mr. Buss’s admission that SolarCity was not able to

forecast accurately, SolarCity’s own bankers noted that SolarCity had a “consistent

track record of missing plan” due to a variety of issues.51

44. In fact, in SolarCity’s relatively short history as a standalone public

company from 2012 to 2016, SolarCity lowered guidance previously offered to the

market four times. Three of those instances occurred in late 2015 and 2016,

including an earnings release issued after SolarCity provided Tesla with the SCTY

Management Case Projections.52

45. The SCTY Management Case Projections were especially aggressive

in light of industry forces and SolarCity’s limited financial flexibility.

46. Increasing net metering reforms, falling retail electricity prices, and

encroachment of new competitors in the shrinking market of interested and viable

potential customers were just a few of the factors pointing toward a downturn in

sales for SolarCity and its closest peers.53 Regulatory changes and economic

51
BOFA_00005370.
52
SCTY Form 8-K filed November 5, 2014 (lowering annual guidance from 500-
550 MW deployed to 505-520 MW deployed); SCTY Form 8-K filed October 29,
2015 (lowering annual guidance from 920-1000 MW installed to 878-898 MW
installed); SCTY Form 8-K filed May 9, 2016 (lowering annual guidance from 1.25
GW installed to 1.0-1.1 GW installed); SCTY Form 8-K filed August 9, 2016
(lowering annual guidance from 1.0-1.1 GW installed to 0.9-1.0 GW installed).
53
Nathan Serota, Hugh Bromley, Americas – Solar – Research Note: The death
spiral facing North America’s residential solar giants, Bloomberg New Energy
Finance (August 18, 2016).

-21-
recession were both distinct possibilities that would cause inordinate damage to

SolarCity’s business model.54

47. In addition to the foregoing industry forces, SolarCity was experiencing

significant liquidity concerns that necessarily impacted its ability to achieve the

SCTY Management Case Projections, given the manner in which SolarCity finances

its installations, business, and growth. See supra ¶¶ 26-29.

48. As SolarCity management recognized internally, by late 2015,

SolarCity faced a “major liquidity crisis.”55 SolarCity’s “intra-month cash balance

was expected to dip below revolver covenant levels of $116 million numerous

times”56 in 2016. Breaching this covenant would cause a “default without a ‘cure’

period and could result in cross defaults in other debt instruments in the Company’s

capital structure.”57 Meanwhile, the “disclosure of default could impair SolarCity’s

ability to monetize future assets with Tax Equity, Back-Levering and Cash Equity

in the time frame required to maintain solvency.”58

49. SolarCity was also struggling with additional capital needs and

operating expenses required to complete its Silevo manufacturing facilities in

Buffalo and Fremont. According to Evercore’s analysis, SolarCity would require

54
Id. at 5; TESLADIR0091233 at 280.
55
TESLA00003404 at 404-405.
56
TESLADIR0091233 at 241.
57
TESLA00000463 at 482.
58
Id.

-22-
$207 million in capital expenditures and $190 million in operating expenditures to

fund completion of these facilities.59

50. Moreover, if certain investment and employment milestones were not

achieved at the Silevo facilities in Buffalo, pursuant to the terms of SolarCity’s

agreement with the State of New York, SolarCity would have to pay the State of

New York $41.2 million per year for each year these milestones were not achieved.

If SolarCity ceased operations at the Buffalo facility, it would incur a termination

liability of $646 million.60

51. Because SolarCity’s business and growth depends on its ability to

provide the upfront financing to customers installing solar PV systems, a lack of

liquidity presented a great threat to SolarCity’s ability to grow in the manner

envisioned by the SCTY Management Case Projections.

52. Indeed, Evercore prepared the Revised Sensitivity Case Projections

because it deemed the SCTY Management Case Projections too optimistic in light

of the significant liquidity issues facing SolarCity at the time of the Merger.61

59
TESLADIR0091233 at 279.
60
Id. at 284.
61
See EVR-TESLA_00082568 at 573 (“Given [Evercore’s] view that this model is
somewhat optimistic given SolarCity’s liquidity challenges, we put together a
revised case with lower growth, costs and capital needs.”); C. McBean Tr. at 182-83
(“Q. So the sensitivity case that you put together was done in part to account for the
liquidity challenges that SolarCity was facing, correct? A. Yes.”).

-23-
 53. Similarly, according to the Proxy, SolarCity management prepared the

SCTY Liquidity Management Case Projections to “assume[] different levels of

access to the capital markets and borrowing costs.”62 Notably, the minutes of the

SolarCity Special Committee refer to these projections less euphemistically as the

“Restricted Liquidity Case.”63 Among other things, the Restricted Liquidity Case

assumed the discontinuation of SolarCity’s commercial, military, and utility

business units, as well as the discontinuation of its Silevo manufacturing

operations.64 Lazard further confirmed its belief that the company was operating in

a restricted liquidity situation.65

54. Thus, I agree with Evercore, SolarCity Management, and Lazard that

the liquidity concerns facing SolarCity at the time of the Merger would have a direct

impact on its ability to achieve the amount of growth reflected in the SCTY

Management Case Projections.

55. In addition, as explained further below, the SCTY Management Case

Projections were overstated because they failed to account for the phase-out of the

SITC.

62
Proxy at 103.
63
G. Bilicic Tr. at 50; TESLA00001897.
64
LAZ_TES00087106 at 115.
65
G. Bilicic Tr. at 51-52 (“[I]t was our view that this could well have been one of
the scenarios under which they would be operating and we were concerned about
the viability of the company on a standalone basis.”); TESLA00001897 at 898;
TESLA00001907 at 908; TESLA00002018 at 026.

-24-
 56. Because of the weakness in SolarCity’s results, its history of missing

its internal projections, its history of lowering guidance (even after the creation of

the SCTY Management Case Projections), the documented liquidity constraints

under which it was operating, and the significant expenses associated with the

completion of its new manufacturing facilities, the SCTY Management Case

Projections were not a reliable indicator of the SolarCity’s expected financial

performance.66

D. Tesla’s Revised Sensitivity Case Projections for SolarCity

57. In recognition of the overly aggressive nature of the SCTY

Management Case Projections, Evercore developed the Revised Sensitivity Case

Projections. While these Revised Sensitivity Case Projections are still quite

optimistic, they were less aggressive than the SCTY Management Case Projections.

58. The Revised Sensitivity Case Projections reduced residential

installations by 25% and reduced other and international installations by 30% 67 for

both 2017 and 2018.68 The decrease in MW inspected resulted in certain sources

66
See C. McBean Tr. at 137 (“Q. Which do you think was more reliable: Projections
[SolarCity] came up with or the revised projections that you prepared. A. We relied
on both. I think we felt comfortable the sensitivity case was a realistic view of the
business.”) (emphasis added.)
67
Installation volume is often referred to as “MW inspected,” which is an industry
term that denotes the volume of solar PV systems deployed to customers during a
given period.
68
TESLADIR0091233 at 246.

-25-
and uses of cash flow being reduced proportionately. However, R&D and Overhead

expenses were reduced by 10%, and Other DevCo Corp use of cash was increased

to reflect higher anticipated legal and contractual obligations.69

59. Setting aside the failure of the Revised Sensitivity Case Projections to

account for the reduction of the SITC (which I address further below), the Revised

Sensitivity Case Projections still did not account for a number of risks associated

with SolarCity’s business and its actual ability to achieve the projections.

60. For example, the Revised Sensitivity Case Projections, like the SCTY

Management Projections on which they are based, forecasted significant growth in

the commercial sector. But there is no evident support for such growth, especially

in a constrained liquidity situation. As Evercore advised the Tesla Board, “the

commercial market is characterized by a longer sale process, greater working capital

needs and greater difficulty when monetizing versus the residential market.”70 In

other words, commercial businesses require more upfront cash and are less suited

for SolarCity’s monetization strategy than residential owners. Notably, in the

Restricted Liquidity Case prepared by SolarCity, SolarCity would completely

discontinue its commercial business because of the liquidity situation facing the

Company.71 Thus, it is my opinion that Evercore’s 30% reduction to the projections

69
Id.
70
TESLA00000463 at 472.
71
See supra ¶¶ 48-50.

-26-
for non-residential installations does not adequately capture the difficulties of

expanding in the commercial business market with SolarCity’s business model or

the impact of SolarCity’s liquidity constraints on its ability to grow its commercial

business.

61. The Revised Sensitivity Case Projections reflect SolarCity’s

unreasonable assumption that the solar company would receive all of the financial

benefit of cost reductions anticipated over the projection period. It is far more likely,

however, that the cost reductions would result in lower costs for consumers, rather

than increased margins for SolarCity.

62. For example, SolarCity forecasted a steep decline in installation cost

in Mexico while keeping value created at substantially the same level.72 There is no

precedent in the solar PV market to support the assumption that a reduction in cost

would unilaterally benefit the installer, as assumed by the Revised Sensitivity Case

Projections. It is more likely that a decline in installation costs would provide site

owners with more alternatives, including a choice between solar installers and

additional up-front financing options.

63. Similarly, the Revised Sensitivity Case Projections reflect a general

assumption that equipment cost reductions will lead to increased margin.73

72
TESLA00248717.
73
Id.

-27-
Historical trends do not support this assumption.74 Rather, it is far more likely that

the reduced equipment costs will result in lower electricity costs for consumers and

not for solar companies like SolarCity.

64. Moreover, the Revised Sensitivity Case Projections, which are

supposedly intended to reflect SolarCity’s liquidity constraints, fail to account for

the impact of SolarCity’s reduced creditworthiness. SolarCity’s creditworthiness is

essential to its ability to implement its business plan.75 The Revised Sensitivity Case

Projections, however, do not consider the potential loss of Operations &

Maintenance (“O&M”) business or SolarCity’s generally reduced ability to

aggregate volume as a result of reduced aggregation facilities, limited working

capital, and more highly leveraged asset securitization pools. In addition, the

decreased creditworthiness would also likely lead to higher funding costs, as a result

of SolarCity being seen as a less attractive counterparty, and higher leverage of asset

securitization pools, due to the need to engage in cash equity transactions in order to

generate critically needed cash.

65. SolarCity’s subsequent internal projections and actual performance

following the execution of the Merger agreement further confirm the overly

optimistic nature of the Revised Sensitivity Case Projections. Indeed, in a

74
Nathan Serota, Hugh Bromley, H2 2016 US PV Market Outlook: Question Marks
Pile Up, Bloomberg New Energy Finance (December 20, 2016), at 8-10.
75
See supra ⁋ 29.

-28-
subsequent forecast prepared for 2017, projected activity was forecast at 725 MW

inspected versus the Revised Sensitivity Case Projections of 841 MW inspected.76

66. My conclusion that the Revised Sensitivity Case Projections were

unduly optimistic is supported by legacy SolarCity’s actual performance. Under

Tesla’s ownership, SolarCity’s legacy business has significantly underperformed the

Revised Sensitivity Case Projections. The chart below sets forth the actual results

of SolarCity’s legacy business versus both the SCTY Management Case Projections

and the Revised Sensitivity Case Projections in terms of the number of installed

megawatts (MW). 77

76
EY-TES-EM_006297 at 303; TESLA000091233 at 245.
77
See TESLA00248717; SolarCity Form 10-Q filed November 9, 2016, at 36; Tesla
Form 8-K filed February 22, 2017; Tesla Form 8-K filed May 3, 2017; Tesla Form
8-K filed August 2, 2017; Tesla Form 8-K filed November 1, 2017; Tesla Form 8-K
filed February 7, 2018; Tesla Form 8-K filed May 2, 2018; Tesla Form 8-K filed
August 1, 2018; Tesla Form 8-K filed October 24, 2018; Tesla Form 8-K filed
January 30, 2019; Tesla Form 8-K filed April 24, 2019; Tesla Form 8-K filed July
24, 2019.

-29-
 E. Accounting for the SITC in the Revised Sensitivity Case
Projections
67. For all of the reasons stated above, I believe the Revised Sensitivity

Case Projections, although less aggressive than the SCTY Management Case

Projections, still do not reflect all of the market realities facing SolarCity. I

nonetheless adopt them as the starting point for the adjustments I make to correct

certain flaws.

68. The Revised Sensitivity Case Projections stopped at the year 2020.

Accordingly, the projections for 2020 were the starting point for the “terminal

period” in Evercore’s DCF analysis. Terminal period projections must be

normalized to reflect the cash flows the business is expected to generate in a steady

-30-
state into perpetuity. In SolarCity’s case, because the projections for 2020 included

cash flows from the SITC and the SITC was scheduled to be further reduced and/or

eliminated in subsequent years, the terminal period projections must be normalized

to account for this change.

69. Evercore, however, used the 2020 projections as the basis for

calculating SolarCity’s terminal value and made only an unexplained $24 million

decrease to “uses of cash flow.”78 This adjustment fell far short of the normalizing

adjustment necessary to account for the SITC phase-out. Evercore’s corporate

designee further confirmed during her deposition that the terminal year projections

do not take into account the phase-out of the SITC.79

70. In its DCF analysis, Evercore assumed a 3% to 5% perpetuity growth

rate based on the 2020 (or terminal year) projections.80 By 2020, however, the SITC

will drop to 26% for both residential and commercial systems, then to 22% for 2021

and by 2022 will disappear entirely for resident-owned residential systems and

decrease to 10% for commercial and third-party owned residential systems.

71. Using projections of 2020 cash flows as the basis for calculating

terminal value was thus improper, particularly with regard to the Tax Equity source

of cash, as the expected phase-out of the SITC would dramatically reduce the

78
TESLADIR0091233 at 258.
79
C. McBean Tr. at 296-97.
80
TESLADIR0091233 at 258.

-31-
availability of this type of financing over 2020-2022 (and beyond). In other words,

to calculate SolarCity’s terminal value, Evercore included projected cash flows that

would significantly decline by 2022 and then grew them by 3-5% beginning in 2020

and continuing every year into perpetuity.81

72. The effect of this error was significant. To put the importance of this

component into context, from 2016 through 2020, Tax Equity financing accounts for

between 40% and 47% of all of SolarCity’s projected sources of cash. 82 In 2020,

Tax Equity accounted for $1.835 billion of SolarCity’s sources of cash under the

Revised Sensitivity Case.83 Thus, by applying a 3-5% perpetuity growth rate to a

total “cash generation” estimate that includes $1.835 billion of Tax Equity financing,

Evercore assumes that SolarCity will successfully replace that $1.835 billion of cash

and then grow it by 3-5% in perpetuity. There is no evidence to support this

unrealistic assumption. As a threshold matter, it is flatly inconsistent with all that is

known in the industry regarding the importance of the SITC to spur growth in the

solar industry. More fundamentally, as noted above, it is unclear what, if anything,

SolarCity planned to do to make up for the lost source of cash once the SITC phased

out.

81
See C. McBean Tr. at 297 (“We then assume that the source of cash – the total
source of cash grows in perpetuity at 3 [to] 5%.” [sic]).
82
TESLADIR0091233 at 245.
83
C. McBean Tr. at 297-298; TESLADIR0091233 at 245.

-32-
 73. Moreover, the cost per watt of solar PV has continuously declined over

time.84 Accordingly, even if the SITC were not being phased out, cash flow from

tax equity would continue to decrease on a per-watt basis. None of these

considerations were reflected in the terminal period cash flows Evercore used in its

consolidated DCF analysis.

74. In order to accurately calculate the DCF value of SolarCity, the cash

flows projected for 2020 in the Revised Management Case Projections must be

reduced to reflect the anticipated substantial reduction of projected tax equity cash

flows before applying a perpetuity growth rate.

F. Normalized Terminal Cash Flows

75. As noted above, cash flows SolarCity generated by monetizing the

SITC must be removed from the 2020 projections in the Revised Management Case

Projections to “normalize” the cash flows before applying a perpetuity growth

rate. This is most appropriately done in the “Tax Equity” line of the projections

because this is where the monetization of the SITC would be reflected.

76. Tax equity investors typically invest and earn returns on the basis of

three sources of value: (i) the SITC itself, (ii) other income tax benefits generated by

84
Nathan Serota, Hugh Bromley, Americas – Solar – Research Note: The death
spiral facing North Anerica’s residential solar giants, Bloomberg New Energy
Finance (August 18, 2016), at 7; Nathan Serora, Hugh Bromley, H2 2016 US PV
Market Outlook: Question Marks pile up, Bloomberg New Energy Finance
(December 20, 2016), at 10.

-33-
accelerated tax depreciation for solar projects, and (iii) an investment of “economic

substance,” which is required by the U.S. Treasury to transfer the tax rights. With a

significantly reduced SITC just after the end of the forecast period, SolarCity’s

ability to attract tax equity investors would be significantly impaired going forward.

77. I have not reviewed information as part of my work that detailed

precisely how the Tax Equity line of the Revised Sensitivity Case Projections was

prepared. However, knowing the SITC necessarily comprises a significant portion

of the Tax Equity cash flows, an adjustment to these cash flows is possible to account

for the known phase-out of the SITC beginning in 2020 and accelerating to

completion in 2022.

78. As part of this process, I have made three key assumptions that all serve

to reduce the impact the SITC phase-out would have on SolarCity’s terminal cash

flow. I discuss these assumptions in more detail below.

79. The first assumption relates to the statutes under which SolarCity could

claim tax credits. The “steady state” SITC was 10% for commercial solar PV

installations and 0% for residential solar PV installations.85 I have conservatively

85
The 30% SITC phase-out schedule sees the SITC reduce to 26% in 2020, 22% in
2021 and then 10% for commercial installations and 0% for residential installations
in 2022 and beyond. Accordingly, there would be incremental SITC available on
which to raise financing in 2021 compared to the terminal period, but this is a one-
time benefit that would not recur and therefore not appropriately considered in
terminal period.

-34-
assumed SCTY would be able to claim the 10% for commercial solar PV

installations even on their residential solar PV installations consistent with its

historic practices. SolarCity only provided forecasts until 2020. In the year 2020,

the impact of the SITC phase-out is comparably small (reduction of 4% from 30%

to 26%). To facilitate the comparison, I have not adjusted the 2020 forecast, which

would be negatively impacted by $82 million. It would have been ideal to separate

2021 from the terminal year, but to facilitate the comparison, I have only adjusted

the terminal year for the SITC phase-out. However, this requires a one-time only

positive adjustment of $246 million to reflect the benefit of the reduced SITC (22%,

i.e., 12% higher than the terminal year) in 2021.

80. There are two provisions under which tax credits can be claimed on

solar installations. The first is 26 USC § 25D, which is the residential energy

efficiency property credit. The second is 26 USC § 48 which more broadly relates

to energy tax credits. Even though the bulk of SolarCity’s business is focused on

the residential market and therefore falls under 26 USC § 25D, I conservatively

assume that all installations, including residential, could still be claimed by

SolarCity under 26 USC § 48. This assumption benefits SolarCity because it means

that these installations may receive the 10% SITC in perpetuity rather than falling to

0% per the SITC phase-out. As Evercore’s corporate designee noted, SolarCity

-35-
could still claim a 10% SITC on “leased” systems.86 In light of this potential, I have

conservatively assumed SolarCity would be able to claim the SITC on 10% of all

non-international installation costs – i.e., both commercial and residential.

81. Second, I assumed that the SITC can be calculated based on projected

installation costs, rather than the much higher “total value creation” calculation

employed by SolarCity. It is my understanding that SolarCity used a “total value

creation” calculation to determine the amount of the tax credit that would ultimately

be claimed. These “total value creation” calculations, however, are substantially

above the actual installed cost because they include not only SolarCity’s installation

costs, but also additional costs embedded in the purchase price paid by the VIEs to

acquire the relevant assets from SolarCity.87 Consequently, basing adjustments on

projected installation costs, rather than “total value creation” estimates, dramatically

reduces the amount of SITC reduction in the terminal period.

82. Finally, I applied a monetization rate to SolarCity’s installed cost

projections. Because SolarCity had to attract tax equity investors to fund operations

and cover transaction expenses, I assume an 80% monetization rate, which is

relatively conservative as compared to typical monetization rates of 85-90%, based

on my experience and my review of SolarCity’s prior transactions. This suggests a

86
C. McBean Tr. at 42-43.
87
TESLA00566917 at 966; TESLA00403205.

-36-
very attractive return for tax equity investors and helps ensure their target return in

achieved. More importantly, because a lower monetization rate here reduces the

amount of SITC being subtracted in the terminal year projections, it is actually more

advantageous to SolarCity than a higher monetization rate. In other words, by

assuming that SolarCity will always receive cash flows reflecting 80% of the SITC

in its steady-state, SolarCity then only loses 80% of the SITC when I adjust the

terminal year projections to account for the phase-out.

83. Removing the value of the portion of the SITC discontinued from

terminal period cash flow is relatively straightforward. The 10% SITC percentage

“steady state” assumption noted above requires the deduction of 20% of the SITC

applied to domestic installation cost multiplied by the monetization rate of 80%.

84. The resulting calculation of the reduced SITC in the terminal period (as

compared to the 2020 estimates in the Revised Management Case Projections) is

$410 million, which is comprised of $327 million from residential installations and

$83 million from commercial installations. The result of these calculations is a

terminal period cash generation figure of $27 million as shown in Exhibit A.

85. Notably, any uncertainty or imprecision in my adjustments has led to a

higher valuation of SolarCity relative to other more exacting ways of accounting for

the phase-out of the SITC. To be clear, it is not certain that SolarCity would be able

to monetize a reduced SITC of 10% at attractive conditions or at all as of 2022 given

-37-
(i) investors are less likely to engage in tax equity transactions as tax credit rates

decline and (ii) differing interpretations of the solar tax credits that can be claimed

under the tax code. Likewise, as explained above, the applied 80% monetization

rate is very favorable to SolarCity given the manner in which I made my

adjustment. Moreover, by basing my adjustment only on projected installation costs,

rather than the “Total Value Created” metric used by SolarCity, the terminal period

sources of cash remain significantly over what is actually likely to occur once the

SITC phase-out begins. Overall, I have made several assumptions when

normalizing the terminal year cash flow from Tax Equity that an advisor to Tesla

may not have made in true arms’-length, third-party negotiations. Easily, with

different defensible assumptions (such as applying the SITC to a higher basis than

installation cost, using a higher monetization rate, applying a discount to 100% of

all domestic installations being eligible for the reduced SITC in perpetuity),

normalizing the terminal year “Tax Equity” would have resulted in negative cash

generation at SolarCity in the terminal year. Thus, in my opinion, my adjustments

are very conservative.

86. As a final note, apart from the known SITC phase-out, all other

elements of the Revised Sensitivity Case Projections were left unchanged. As

previously discussed, I do not believe these projections, reduced as they were,

reflected SolarCity’s operative reality in 2016 for the various reasons already set

-38-
EXHIBIT A
REVISED SENSITIVITY CASE PROJECTIONS - NORMALIZED TERMINAL CASH FLOWS
($ in millions, except per share, MW, and per watt data)

2016 2017 2018 2019 2020 Terminal

Megawatts Inspected
Residential 592 579 766 975 1,268 1,268
Other 190 251 311 371 426 426
International 6 11 18 24 30 30
Total MW Inspected 788 MW 841 MW 1095 MW 1370 MW 1724 MW 1724 MW
% Growth 1.3% 6.7% 30.2% 25.1% 25.8%

PowerCo Available Cash $88 $81 $88 $99 $130 $130

Tax Equity 1,112 1,060 1,306 1,534 1,835 1,425
Aggregation Facility 652 521 674 853 1,092 1,092
Cash Equity 141 285 300 156 149 149
Loan Products 105 310 451 551 715 715
Net Silevo Financing - 268 (113) (155) - -
Other DevCo Funding 258 129 168 200 247 247
Source of Cash $2,356 $2,654 $2,875 $3,239 $4,168 $3,758

Residential Installation ($1,145) ($1,034) ($1,344) ($1,628) ($2,041) ($2,041)

Other Installation (339) (397) (450) (475) (520) (520)
International Installation (5) (11) (18) (24) (30) (30)
Installation Cost ($1,489) ($1,442) ($1,812) ($2,127) ($2,591) ($2,591)
S&M (496) (420) (458) (547) (686) (686)
DevCo Manufacturing (203) (241) (152) 35 75 75
DevCo Corp (268) (463) (350) (408) (395) (395)
Other (127) (135) (104) (121) (134) (134)
Use of Cash ($2,583) ($2,701) ($2,875) ($3,168) ($3,731) ($3,731)

Net Generation (Use) of Cash ($227) ($48) $0 $71 $437 $27

Terminal Period SITC Phase-Out

Residential Installation Cost $2,041
Monetization Rate 80% industry value
Initial SITC Rate 30%
Revised SITC Rate 10%
Residential SITC Phase-Out ($327)

Other Installation Cost $520

Monetization Rate 80% industry value
Initial SITC Rate 30%
Revised SITC Rate 10%
Other SITC Phase-Out ($83)

Grand Total SITC Phase-Out ($410)

REVISED SENSITIVITY CASE PROJECTIONS
($ in millions, except per share, MW, and per watt data)

2016 2017 2018 2019 2020

Megawatts Inspected
Residential 592 579 766 975 1,268
Other 190 251 311 371 426
International 6 11 18 24 30
Total MW Inspected 788 MW 841 MW 1095 MW 1370 MW 1724 MW
% Growth 1.3% 6.7% 30.2% 25.1% 25.8%

PowerCo Available Cash $88 $81 $88 $99 $130

Tax Equity 1,112 1,060 1,306 1,534 1,835
Aggregation Facility 652 521 674 853 1,092
Cash Equity 141 285 300 156 149
Loan Products 105 310 451 551 715
Net Silevo Financing - 268 (113) (155) -
Other DevCo Funding 258 129 168 200 247
Source of Cash $2,356 $2,654 $2,875 $3,239 $4,168

Residential Installation ($1,145) ($1,034) ($1,344) ($1,628) ($2,041)

Other Installation (339) (397) (450) (475) (520)
International Installation (5) (11) (18) (24) (30)
Installation Cost ($1,489) ($1,442) ($1,812) ($2,127) ($2,591)
S&M (496) (420) (458) (547) (686)
DevCo Manufacturing (203) (241) (152) 35 75
DevCo Corp (268) (463) (350) (408) (395)
Other (127) (135) (104) (121) (134)
Use of Cash ($2,583) ($2,701) ($2,875) ($3,168) ($3,731)

Net Generation (Use) of Cash ($227) ($48) $0 $71 $437

Source of Cash (per Watt)

PowerCo Available Cash $0.11 $0.10 $0.08 $0.07 $0.08
Tax Equity $1.41 $1.26 $1.19 $1.12 $1.06
Aggregation Facility $0.83 $0.62 $0.62 $0.62 $0.63
Cash Equity $0.18 $0.34 $0.27 $0.11 $0.09
Loan Products $0.13 $0.37 $0.41 $0.40 $0.41
Net Silevo Financing $0.00 $0.32 ($0.10) ($0.11) $0.00
Other DevCo Funding $0.33 $0.15 $0.15 $0.15 $0.14
Use of Cash (per Watt)
Residential Installation ($1.93) ($1.79) ($1.75) ($1.67) ($1.61)
Other Installation ($1.78) ($1.58) ($1.45) ($1.28) ($1.22)
International Installation ($0.83) ($1.00) ($1.00) ($1.00) ($1.00)
Installation Cost ($1.89) ($1.71) ($1.65) ($1.55) ($1.50)
S&M ($0.63) ($0.50) ($0.42) ($0.40) ($0.40)
DevCo Manufacturing ($0.26) ($0.29) ($0.14) $0.03 $0.04
DevCo Corp ($0.34) ($0.55) ($0.32) ($0.30) ($0.23)
Other ($0.16) ($0.16) ($0.09) ($0.09) ($0.08)
EXHIBIT B
 Juergen Moessner
(12 Hickory Pine Court, Purchase, NY 10577)

Experienced financial services professional with more than 25 years of senior executive
experience and more than $50bn personal transaction record for real assets as principal
investor and financial advisor worldwide, with special expertise regarding complex
cross-border transactions in the power and transportation industries, tax equity and the
renewable energy sector.

Professional Experience

Global Capital Finance, New York and Frankfurt - since 01/2001

Founder, President and Managing Member
The firm was set-up as management buy-out, with the transfer of the outstanding
international transaction backlog of my department at CSFB, as well as most of the
international professional staff. Since 2005, the strategic focus is renewable energy, and
the firm is a leading financial advisor in the sector (www.globalcapitalfinance.com). I
was personally responsible for the completion of more than 50 renewable energy
transactions with a total value in excess of USD 5 billion, including almost USD 2 billion
related to solar PV.

Credit Suisse First Boston, New York, London, Frankfurt, Zürich - 07/1997 to 01/2001
Investment Banking Division
- Managing Director and Head of Global Lease Finance
- Member of the US Investment Banking Management Committee
I established the business with responsibility for all financial advisory business in the
asset based finance industry with a special focus on tax equity. Some of the outstanding
transaction backlog at ABB was transferred via a business transfer agreement to CSFB,
and I took over responsibility for the asset based loan portfolio of CSFB (largely loans
secured by aircraft), as well as the portfolio of CS Leasing (consisting of proprietary asset
based finance investments regarding aircraft, real estate, tax equity, etc.). Global Lease
Finance was one of the worldwide market leaders for tax-leveraged transactions and I
was personally responsible for a significant number of landmark transactions.

ABB, Mannheim (Germany) - 11/1992 to 06/1997

ABB Financial Services Business Segment
- President, ABB Leasing
- Business Unit Manager, ABB Credit Germany and ABB Credit Switzerland (Baden)
- Member of the Oberer Führungskreis (Senior Management Group), ABB Germany
- Partner, ABB Financial Services (one of about 40 executives with global income share)
I was responsible to build a portfolio of large proprietary investments booked in Germany
and Switzerland (completed transactions in the USA, Netherlands, Germany and
Australia, primarily for power and rolling stock). In addition, I built similar portfolios for
affiliate entities in Finland and Japan and supported the affiliate entities in Norway,
Sweden, Denmark and the Netherlands.
I was responsible for all financial advisory business in the asset based finance industry,
with a strategic focus on rolling stock and power. ABB Leasing was one of the European
market leaders for tax-leveraged transactions and I was personally responsible for a
significant number of landmark transactions.

Deutsche Bank, Frankfurt – 01/1989 to 12/1992

Corporate Finance Division
- Prokurist (Authorized Officer) of Deutsche Bank AG
- Prokurist (Authorized Officer) of DB Export-Leasing GmbH
After I completed a rotation as management trainee (included Swaps, Mutual Funds,
Private Banking/Asset Management, and Credit), I took a permanent position in
Corporate Finance/International Leasing as of 11/1989. Initially I had general
responsibility for analytical services and joint responsibility for execution of all non-
aircraft asset based finance transactions in Asia/Pacific and the Americas; as of 07/1990,
I had joint responsibility for execution of all non-aircraft asset based finance transactions
worldwide and origination of non-aircraft based asset finance transactions in Europe.
During that time, I completed large tax-leveraged investments in the USA, the
Netherlands, France, Hungary, Bulgaria, Singapore, Thailand, China and Australia, and I
developed a tax equity financial advisory business.

Other
Part-time assignments – 10/1986 to 06/1988
Universität Karlsruhe - Teaching Assistant, Operations Research

Summer Analyst/Associate assignments - 06/1982 to 12/1988

Nixdorf, Mannheim (Germany) and Paris (France) – Electronics – Master Thesis
Bull, Frankfurt (Germany) – Software
Pernod Ricard, Marseille (France) – Food and Beverages
Saarland Versicherungen, Saarbrücken (Germany) – Insurance
First Bank, Lubbock (Texas, USA) - Banking
Saar LB, Saarbrücken (Germany) – Banking
Dillinger Hütte, Saarlouis (Germany) – Steel

Bundeswehr, Zweibrücken (Germany) - 10/1982 to 12/1983

Private, 3rd NBC Defense Batallion
Mandatory Military Service

Education

Universität Karlsruhe (Germany) - 10/1983 to 12/1988

Diplom-Wirtschaftsingenieur (Masters in Finance and Engineering)

Deutsch-Französisches Gymnasium, Saarbrücken (Germany) – 05/1982

Abitur and Baccalaureat Section D (German and French High School Diploma)
EXHIBIT C
 Documents Relied Upon

Court Documents

 Second Amended Verified Class Action and Derivative Complaint (March 9,

2017)
 Deposition of Antonio Gracias (April 18, 2019)
 Deposition of Jeffrey Straubel (May 23, 2019)
 Deposition of George Bilicic, Lazard Freres (May 30, 2019)
 Deposition of Hayden Barnard (June 4, 2019)
 Deposition of Courtney McBean, Evercore (June 5, 2019)
 Deposition of Tanguy Serra (June 6, 2019)

SEC Filings

 Tesla Form 424B3, Joint Proxy Statement/Prospectus, filed October 12, 2016
 Tesla Form 8-K filed November 21, 2016
 Tesla Form 8-K filed February 22, 2017
 Tesla Form 10-K filed March 1, 2017
 Tesla Form 8-K filed May 3, 2017
 Tesla Form 8-K filed August 2, 2017
 Tesla Form 8-K filed November 1, 2017
 Tesla Form 8-K filed February 7, 2018
 Tesla Form 8-K filed May 2, 2018
 Tesla Form 8-K filed August 1, 2018
 Tesla Form 8-K filed October 24, 2018
 Tesla Form 8-K filed January 30, 2019
 Tesla Form 8-K filed April 24, 2019
 Tesla Form 8-K filed July 24, 2019
 SolarCity Form 8-K filed November 5, 2014
 SolarCity Form 10-Q filed November 6, 2014
 SolarCity Form 10-K filed February 24, 2015
 SolarCity Form 8-K filed October 29, 2015
 SolarCity Form 10-K filed February 10, 2016
 SolarCity Form 8-K filed May 9, 2016
 SolarCity Form 10-Q filed May 10, 2016
 SolarCity Form 8-K filed August 9, 2016
 SolarCity Form 10-Q filed August 9, 2016
  SolarCity Form 10-Q filed November 9, 2016
 SolarCity Form 10-K filed March 1, 2017

Discovery Documents

 BOFA_00002978
 BOFA_00003818
 BOFA_00003822
 BOFA_00005370
 EVR-TESLA_00082472
 EVR-TESLA_00082568
 EVR-TESLA_00082788
 EVR-TESLA_00083013
 EVR-TESLA_00084703
 EVR-TESLA_00162339
 EVR-TESLA_00163026
 EVR-TESLA_00163084
 EVR-TESLA_00163371
 EVR-TESLA_00163387
 EVR-TESLA_00163432
 EVR-TESLA_00163447
 EVR-TESLA_00180255
 EVR-TESLA_00180839
 EVR-TESLA_00180840
 EVR-TESLA_00180956
 EVR-TESLA_00182045
 EVR-TESLA_00183964
 EVR-TESLA_00183965
 EVR-TESLA_00186363
 EVR-TESLA_00194944
 EVR-TESLA_00195333
 EVR-TESLA_00195608
 EVR-TESLA_00195864
 EVR-TESLA_00196119
 EVR-TESLA_00196388
 EVR-TESLA_00196598
 EVR-TESLA_00197125
 EVR-TESLA_00201812
 EVR-TESLA_00201813
 EVR-TESLA_00203046
 EVR-TESLA_00203048
 EVR-TESLA_00211087
 EVR-TESLA_00223592
 EVR-TESLA_00224440
 EVR-TESLA_00224569
 EVR-TESLA_00224682
 EVR-TESLA_00225547
 EVR-TESLA_00226699
 EVR-TESLA_00228876
 EVR-TESLA-00211076
 EY-TES-EM_006297
 LAZ_TES00000060
 LAZ_TES00023849
 LAZ_TES00023983
 LAZ_TES00025178
 LAZ_TES00039096
 LAZ_TES00039212
 LAZ_TES00039329
 LAZ_TES00039330
 LAZ_TES00039331
 LAZ_TES00039337
 LAZ_TES00039341
 LAZ_TES00045396
 LAZ_TES00047962
 LAZ_TES00057666
 LAZ_TES00063749
 LAZ_TES00063750
 LAZ_TES00067124
 LAZ_TES00085033
 LAZ_TES00086460
 LAZ_TES00086512
 LAZ_TES00087048
 LAZ_TES00087062
 LAZ_TES00087106
 TESLA00000001
 TESLA00000123
 TESLA00000463
 TESLA00000712
 TESLA00000864
 TESLA00000976
 TESLA00001112
 TESLA00001115
 TESLA00001346
 TESLA00001348
 TESLA00001360
 TESLA00001446
 TESLA00001455
 TESLA00001459
 TESLA00001469
 TESLA00001473
 TESLA00001732
 TESLA00001735
 TESLA00001739
 TESLA00001741
 TESLA00001757
 TESLA00001759
 TESLA00001795
 TESLA00001800
 TESLA00001813
 TESLA00001838
 TESLA00001842
 TESLA00001845
 TESLA00001847
 TESLA00001849
 TESLA00001851
 TESLA00001853
 TESLA00001855
 TESLA00001858
 TESLA00001862
 TESLA00001866
 TESLA00001868
 TESLA00001870
 TESLA00001875
 TESLA00001878
 TESLA00001880
 TESLA00001882
 TESLA00001886
 TESLA00001888
 TESLA00001891
 TESLA00001893
 TESLA00001895
 TESLA00001897
 TESLA00001905
 TESLA00001907
 TESLA00002018
 TESLA00002047
 TESLA00002078
 TESLA00002090
 TESLA00002259
 TESLA00002292
 TESLA00002323
 TESLA00003404
 TESLA00064612
 TESLA00146187
 TESLA00146188
 TESLA00248713
 TESLA00248715
 TESLA00248717
 TESLA00255155
 TESLA00255156
 TESLA00255170
 TESLA00255173
 TESLA00255181
 TESLA00255192
 TESLA00255291
 TESLA00255305
 TESLA00255391
 TESLA00255392
 TESLA00255394
 TESLA00255406
 TESLA00255412
 TESLA00403205
 TESLA00423379
 TESLA00423740
 TESLA00423741
 TESLA00423742
 TESLA00425880
 TESLA00425881
 TESLA00425902
 TESLA00427912
 TESLA00427914
 TESLA00427918
 TESLA00432556
 TESLA00441315
 TESLA00441318
 TESLA00441478
 TESLA00445557
 TESLA00445644
 TESLA00445689
 TESLA00477325
 TESLA00530020
 TESLA00531173
 TESLA00540568
 TESLA00540572
 TESLA00559121
 TESLA00559125
 TESLA00559126
 TESLA00559127
 TESLA00559128
 TESLA00559130
 TESLA00566916
 TESLA00566917
 TESLA00605997
 TESLA00651275
 TESLA00651276
 TESLA00651281
  TESLA00651282
 TESLA00651283
 TESLA00651304
 TESLA00651305
 TESLA00651307
 TESLA00651308
 TESLA00657955
 TESLA00657959
 TESLA00658895
 TESLA00658896
 TESLA00739014
 TESLADIR0000087
 TESLADIR0084651
 TESLADIR0091233

Other

 Lazard Working Group List

 Solar Energy Industries Association, Net Metering,
https://www.seia.org/initiatives/net-metering (last visited July 10, 2019)
 Ran Fu, David Feldman, Robert Margolis, Mike Woodhouse, and Kristen
Ardani, U.S. Solar Photovoltaic System Cost Benchmark: Q1 2017, National
Renewable Energy Laboratory (September 2017),
https://www.nrel.gov/docs/fy17osti/68925.pdf
 Energy Policy Act of 2005 (P.L. 109-58)
 Solar Energy Industries Association, Solar Investment Tax Credit (ITC) (July
2019), https://www.seia.org/sites/default/files/2019-07/SEIA-ITC-Factsheet-
2019-July.pdf
 Tax Reform Act of 1986 (Pub. L. 99-514, 100 Stat. 2085, enacted October 22,
1986)
 26 U.S.C. § 25D
 26 U.S.C. § 48
 Nathan Serota, Hugh Bromley, Americas – Solar – Research Note: The death
spiral facing North America’s residential solar giants, Bloomberg New
Energy Finance (August 18, 2016)
 Nathan Serota, Hugh Bromley, H2 2016 US PV Market Outlook: Question
Marks pile up, Bloomberg New Energy Finance (December 20, 2016)
 CERTIFICATE OF SERVICE

I, Kelly L. Tucker, hereby certify that on August 26, 2019, I caused a true

and correct copy of the foregoing Plaintiffs’ Expert Report of Juergen Moessner to

be served upon the following counsel of record via File & ServeXpress:

David E. Ross, Esq. Kevin R. Shannon, Esq.

Garrett B. Moritz, Esq. Berton W. Ashman, Jr., Esq.
Benjamin Z. Grossberg, Esq. Jaclyn C. Levy, Esq.
Ross Aronstam & Moritz LLP Jay G. Stirling, Esq.
100 S. West Street, Suite 400 Potter Anderson & Corroon LLP
Wilmington, DE 19801 1313 N. Market Street
Hercules Plaza, 6th Floor
Wilmington, DE 19801

/s/ Kelly L. Tucker

Kelly L. Tucker (#6382)
 64084032
Aug 26 2019
03:56PM

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

)
In re TESLA MOTORS, INC. ) Consolidated
STOCKHOLDER LITIGATION ) C.A No. 12711-VCS
)
) CLASS AND DERIVATIVE ACTION

EXPERT REPORT

of

MURRAY M. BEACH

August 12, 2019

 TABLE OF CONTENTS

I. INTRODUCTION AND SUMMARY OF OPINIONS.......................................................... 1 

II. QUALIFICATIONS AND COMPENSATION .................................................................... 1 

III. MATERIALS RELIED UPON ............................................................................................. 2 

IV. SOLARCITY BACKGROUND ............................................................................................ 2 

A. SolarCity’s Financial Strategy .................................................................................... 3 
B. SolarCity’s Deteriorating Financial Condition ......................................................... 4 
C. Tesla’s Acquisition of SolarCity ................................................................................ 13 

V. ANALYSIS OF SOLARCITY’S ACCESS TO THE CAPITAL MARKETS ................. 19 

A. Background of Public Company Capital Market Offering Types......................... 19 
B. Determinants of Choice Between Capital Market Offering Types ........................ 21 
C. Typical Discounts by Capital Market Offer Types ................................................. 25 
i)  Seasoned Equity Offerings ........................................................................... 25 
ii)  Private Placements ........................................................................................ 28 
D. A Seasoned Equity Offering for SolarCity Was Highly Unlikely .......................... 30 
 I. INTRODUCTION AND SUMMARY OF OPINIONS

1. I have been retained by Co-Lead Plaintiffs Arkansas Teacher Retirement System,

Roofers Local 149 Pension Fund, Oklahoma Firefighters Pension and Retirement System, KBC

Asset Management NV, ERSTE-SPARINVEST Kapitalanlagegesellschaft m.b.H., and Stichting

Blue Sky Active Large Cap Equity Fund USA. I have been asked to offer opinions regarding

SolarCity Corp.’s (“SolarCity” or “SCTY”) ability to access capital markets prior to the Merger

(defined below).

2. I reserve the right to amend this Report to reflect new information that may emerge

as a result of ongoing discovery, information provided by other experts in the litigation, documents

provided by Counsel, future rulings from the Court in this case, and trial proceedings.

3. In my opinion, as of June 21, 2016, it is highly unlikely that SolarCity could have

executed a seasoned equity offering (“SEO”) to raise $250 to $300 million.

II. QUALIFICATIONS AND COMPENSATION

4. I am President of Business Consulting Group, LLC, (“BCG”) located in Westwood,

Massachusetts. I have been an investment banker and financial analyst for over thirty years, and

have provided opinions on value to companies, investors, and courts in hundreds of situations.

5. I have executed and supervised hundreds of merger and acquisition transactions and

have been responsible for the financing or recapitalization of over one hundred publicly traded and

privately held corporations.

6. I have been retained on several occasions to provide expert testimony in litigation

cases on behalf of both plaintiffs and defendants and have lectured numerous times in graduate

courses at universities and professional associations.

1
 7. I hold an MBA from the Amos Tuck School of Business Administration at Dartmouth

College, and an AB from Harvard College. I have also been awarded the Accredited Business

Appraisal Reviewer (ABAR) designation. My resume is attached as Exhibit 1.

8. My compensation is based on the number of hours worked on this assignment as well

as out-of-pocket expenses. My hourly rate is $600 per hour. To assist me, I have worked with

employees of BCG and Forensic Economics, Inc. who have worked under my supervision and at

my direction for this assignment.

III. MATERIALS RELIED UPON

9. In the course of my assignment in this action, I (or employees of Forensic Economics

or BCG acting under my supervision) relied upon the documents listed in Exhibit 2.

IV. SOLARCITY BACKGROUND

10. SolarCity was a solar energy company founded in 2006.1 Prior to the Merger (defined

below), SolarCity sold its solar energy systems through its national sales organization, which

included internal call centers, door-to-door sales, a channel partner network, and a customer

referral program.2 SolarCity employed an in-house engineering team, which provided a

customized solar energy system design for each customer.3 Once the design was complete,

SolarCity obtained all necessary building permits, performed the installation, scheduled an

inspection with the local building department, and arranged for connection to the utility power

1
SolarCity Form 10-K, filed with the SEC on February 10, 2016, at p. 2.
2
Id. at 4.
3
Id. at 4.

2
grid.4 SolarCity also offered energy storage services through its collaboration with Tesla Motors

Inc. (“Tesla”).5

11. Between its initial public offering in December 2012 and the close of the Merger

(defined below), SolarCity traded on the NASDAQ under the ticker “SCTY.”6

A. SolarCity’s Financial Strategy

12. SolarCity described itself as “an industry leader in offering innovative financing

alternatives for our customers.”7 These alternatives included:

a) SolarLease – Launched in 2008, SolarLease provided customers with a fixed

monthly fee typically below that from utility companies;

b) SolarPPA – Launched in 2009, SolarPPA provided customers with a variable

monthly fee based on the amount of electricity produced by the customer’s solar
energy system; and

c) MyPower – Launched in 2014, MyPower provided customers with a SolarCity-

financed loan which allowed customers to take advantage of federal tax credits
to lower electricity prices, with monthly payments being applied to the balance
of the outstanding loan.8

13. SolarCity’s SolarLease and SolarPPA programs allowed customers to switch to solar

energy with little to no upfront costs and, as of 2016, had 20-year terms with the option to renew

the agreement for an additional 10 years.9 SolarCity discontinued offering MyPower contracts in

the majority of its territories in the first quarter of 2016, and expected to phase out sales under the

program in the remainder of its territories by year-end 2016, offering a more limited loan program

4
Id. at 4.
5
Id. at 4.
6
Id. at 34; Bloomberg.
7
SolarCity Form 10-K, filed with the SEC on February 10, 2016, at p. 5.
8
Id.
9
Id. at 6.

3
thereafter to customers who wanted to purchase solar systems outright.10 According to SolarCity,

its various agreements provided long-term, high-quality recurring payments, as well as investment

tax credits, accelerated tax depreciation, and other incentives.11

14. SolarCity monetized these assets by selling them to financing funds in exchange for

immediate cash and a residual interest, with a portion of the cash being used to cover costs

associated with installing the related solar energy systems.12 As of year-end 2015, SolarCity had

over 40 financing funds with 20 investors.13 According to SolarCity’s SEC filings, its future

depended on its ability to raise capital through these funding sources.14 As such, SolarCity

identified the availability of such financing as one of its key risk factors.15

B. SolarCity’s Deteriorating Financial Condition

15. On October 15, 2015, SolarCity’s CEO Lyndon Rive and CFO Brad Buss presented

an analysis that forecasted SolarCity would need to raise at least $180 million to $300 million in

cash for 2016 (the “October 15, 2015 Presentation”).16 They forecasted year-end 2015 cash

balances to be as low as $65 million to $190 million due, in part, to

a) certain financings taking longer than expected to close;

b) a reduction in cash inflow due to lower than expected 2015 installs (920 MW
versus a budget of 1.05 GW and previously issued guidance of 920 MW to
1,000 GW);17

10
SolarCity Form 10-Q, filed with the SEC on August 9, 2016, at p. 40.
11
SolarCity Form 10-K, filed with the SEC on February 10, 2016, at p. 6.
12
Id.
13
Id.
14
Id. at 16.
15
Id. at 17.
16
TESLA00529579-587, at 582.
17
TESLA00529579-587, at 581; SolarCity Form 8-K, filed with the SEC on July 29, 2015, Ex.
99.1, at p. 6.

4
 c) higher-than-budgeted cost; and

d) working capital increase.18

16. The October 15, 2015 Presentation stated that, according to Goldman Sachs and

Credit Suisse, SolarCity faced several challenges with issuing new convertible instruments to raise

capital because

a) SolarCity’s stock price decline made it such that investors would be better off
purchasing existing SolarCity convertible instruments given then-current
trading prices;

b) stock borrowing (i.e., convertible debt) was limited and expensive due to
existing levels of short interest;

c) investors would require a higher coupon rate given borrowing costs and market
conditions;

d) an additional equity issuance in the range of $150 million to $250 million would
be required to allow investors to hedge their exposure by shorting SolarCity’s
common stock, which: i) most likely would need to be done at a discount to
market prices in the range of 0% to 5%; and ii) could be perceived negatively
by investors;

e) banker fees equalling $13.5 million (3%); and

f) there was a four-week timeline for the transaction.19

17. On October 27, 2015, SolarCity’s Board of Directors met to discuss its upcoming

third-quarter 2015 earnings call.20 The Board materials noted in a section titled “Update on Capital

Raise” that Goldman Sachs and Credit Suisse advised that an equity raise would require a discount

18
SolarCity Form 8-K, filed with the SEC on July 29, 2015, Ex. 99.1, at p. 6.
19
TESLA00529579-587, at 583 and 585.
20
Delivering Better Energy, Board of Directors Meeting – Oct. 27, 2015, Q3 2015 Earnings Call
– Oct. 29, 2015, TESLADIR0024715.

5
of 7% - 12% or higher, and that “final execution could be extremely tough.”21 For these and other

reasons, Goldman Sachs and Credit Suisse did not recommend an equity raise.22

18. On October 29, 2015, SolarCity disclosed its financial results for the third quarter of

2015, which included installations of a total of 256 Megawatts (“MW”) of distributed solar

power.23 In the filing, SolarCity reduced installation guidance for the fourth quarter of 2015 to

280 – 300 MW and 878 – 898 MW for the full-year 2015, below the previously provided range of

920 – 1,000 MW.24 The filing also included fourth-quarter guidance of a higher-than-expected

adjusted loss of $2.60 – $2.75 per share, compared to analyst expectations of a $2.17 per share

loss.25 SolarCity also provided installation guidance for 2016 of 1.25 Gigawatts (“GW”).26

SolarCity’s stock price closed at $29.65 per share on October 30, 2015, down approximately 22%

from the previous day’s closing price of $38.07 per share, and approximately 41% from the

previous month’s closing high of $50.10 per share on September 8, 2015.27

19. On December 18, 2015, Congress approved a spending-and-tax package that included

a five-year extension of the solar ITC, which was otherwise set to expire on December 31, 2016.28

SolarCity’s stock price closed at $56.91 per share on December 18, 2015, up nearly $20.00 per

share from the closing price of $37.04 one week prior on December 11, 2015,29 as support for the

21
Id. at 6.
22
Id.
23
SolarCity Form 8-K, filed with the SEC on October 29, 2015, Ex. 99.1 at pp. 1-2.
24
Id. at 7; and SolarCity Form 8-K, filed with the SEC on July 29, 2015, Ex. 99.1 at p. 6.
25
SolarCity Form 8-K, filed with the SEC on October 29, 2015, Ex. 99.1 at p.7; and “BUZZ-
SolarCity Corp: Stock slumps on Q3 miss, weak Q4 forecast,” Reuters News, (October 29, 2015,
5:47 pm).
26
SolarCity Form 8-K, filed with the SEC on October 29, 2015, Ex. 99.1 at p. 8.
27
Source: Bloomberg.
28
“US Congress passes 5-year PTC/ITC extensions,” Recharge (December 18, 2015).
29
Source: Bloomberg.

6
ITC extension began to spread.30 SolarCity’s stock price, however, steadily declined following

this positive development.

20. Before the market opened on January 6, 2016, SolarCity disclosed that, in response

to the Nevada Public Utilities Commission (“PUC”) decision to allow the State’s only power

company to increase monthly fees to solar panel users by nearly four times, and reduce surplus

energy credits by approximately 2/3, SolarCity had been forced to eliminate more than 550 jobs

in Nevada.31 SolarCity’s stock price closed at $50.20 per share on January 6, 2016.32

21. On January 14, 2016, the Nevada PUC affirmed the new fees levied on solar panel

owners.33 Also on January 14, 2016, research analysts at Bernstein issued a report stating that,

after conversations with management, they questioned SolarCity’s new capital-raising strategies

(which included the sale of leases and loans) in light of their belief that tax equity and asset based

security financing were unlikely to last.34 SolarCity’s stock price closed at $37.12 per share on

January 14, 2016, down nearly $10 per share over the prior week. SolarCity’s stock price

continued to decline over the subsequent week, closing at $31.77 per share on January 21, 2016.35

30
“Rep. Higgins Fights for Solar Investment Tax Credit Extension on House Floor,” US Fed
News (December 11, 2015).
31
“Following Nevada PUC’s Decision to Punish Rooftop Solar Customers, SolarCity Forced to
Eliminate More than 550 Jobs in Nevada,” PR Newswire (January 6, 2016); and “Nevada solar
industry collapses after state lets power company raise fees,” The Guardian (January 13, 2016).
32
Source: Bloomberg.
33
“SolarCity falls as Nevada affirms fees, analyst reveals asset sale...,” Theflyonthewall.com,
(January 14, 2016).
34
“BUZZ-SolarCity’s stock sinks as Bernstein questions financial strategy,” Reuters News,
(January 14, 2016).
35
Source: Bloomberg.

7
 22. On February 9, 2016, SolarCity’s stock price closed at $26.35.36 Following the close,

SolarCity disclosed financial results for the fourth quarter of 2015, which included 272 MW of

distributed solar installations, again falling short of previously lowered guidance of 280 – 300

MW.37 Although SolarCity maintained 2016 guidance of 1.25 GW of installed distributed solar,

guidance for the first quarter of 2016 was just 180 MW, representing an approximately 34%

quarter-over-quarter decline, due to “higher-than-usual seasonal slowdown” caused in part by

SolarCity’s decision to exit operations in Nevada.38 The filing also included first-quarter 2016

guidance of a higher-than-expected adjusted loss of $2.55-$2.65 per share, compared to analyst

expectations of a $2.36 per share loss.39 SolarCity’s stock price declined approximately 30% the

following day, closing at $18.63.40

23. On March 1, 2016, SolarCity’s stock closed at $18.01 per share.41 No later than

March 3, 2016, news leaked that Tesla and Elon Musk were considering acquiring SolarCity.42

SolarCity’s stock closed at $19.46 and $22.49 on March 2 and 3, 2016, respectively.43

24. At SolarCity’s April 2016 Board meeting, details of its 2016 operating plan were

presented to the Board (the “April 2016 Board Presentation”).44 In the April 2016 Board

Presentation, management projected a total cash burn of $171 million over the first and second

36
Source: Bloomberg.
37
SolarCity Form 8-K, filed with the SEC on February 9, 2016, Ex. 99.1 at pp. 1-2.
38
Id. at 5-6.
39
Id. at 6; “Solar Stocks Drop After SolarCity Reports Q4 Results,” TheFlyontheWall.com
(February 9, 2016).
40
Source: Bloomberg.
41
Source: Bloomberg.
42
TESLADIR0036041.
43
Source: Bloomberg.
44
Deposition of George Bilicic (“Bilicic Dep.”) Ex. 5, LAZ_TES00087048-053.

8
quarter of 2016.45 As a result, SolarCity’s intra-month cash balances were projected to decline to

levels below the then-current unencumbered liquidity covenant on its secured revolving credit

facility in each month between May and August of 2016.46

25. According to SolarCity’s 10-K for the year ended December 31, 2016, if SolarCity

defaulted on the revolving credit facility,

the amounts outstanding under our debt agreements could be

accelerated, which would negatively impact our liquidity and capital
resources. In particular, under the terms of our secured revolving
credit facility, the occurrence of an event of default with respect to
a credit facility (including both recourse and non-recourse
indebtedness) having an aggregate principal amount of more than
$10.0 million could trigger a cross-default that could result in the
acceleration of or the taking of other remedies under our secured
revolving credit facility. In addition, the occurrence of an event of
default that results in the acceleration of more than $50.0 million of
recourse indebtedness could trigger a cross-default that could result
in the acceleration of or the taking of other remedies under our
convertible senior notes.47

26. SolarCity’s stock price closed at $22.51 on May 9, 2016.48 After the market closed

on May 9, 2016, SolarCity disclosed earnings for the first quarter of 2016, which included 214

MW of installed distributed solar, which exceeded prior guidance of 180 MW.49 SolarCity,

however, also disclosed a reduction in 2016 installation guidance from 1.25 GW to between 1.0 –

1.1 GW.50 Management provided materials to the Board in advance of their April 26, 2016

meeting that provided for “2016 Guidance Revision” from 1.25 GW to 900 MW, below the 1.0-

45
Id. at LAZ_TES00087051.
46
Id. at LAZ_TES00087052.
47
SolarCity Form 10-K, filed with the SEC on March 1, 2017, at p. 35.
48
Source: Bloomberg.
49
SolarCity Form 8-K, filed with the SEC on May 9, 2016, Ex. 99.1 at pp. 1-2.
50
Id. at 6.

9
1.1 GW disclosed to the market in May.51 In the earnings announcement on May 9, SolarCity also

disclosed guidance for the second quarter of 2016 of a higher-than-expected adjusted loss of $2.70-

$2.80 per share, compared to analyst expectations of a $2.13 per share loss.52 On May 10, 2016,

SolarCity’s stock closed at $17.82, reflecting a drop of approximately 20%.53

27. On June 2, 2016, SolarCity management internally circulated an analysis of

SolarCity’s June liquidity situation, which revealed that SolarCity was on the verge of failing to

satisfy its unencumbered liquidity covenant in the revolving credit facility.54 The “Current

liquidity situation” plan was for SolarCity to, among other things, withhold $13 million of accounts

payable beginning on June 27, 2016. Since this was not sufficient to clear the unencumbered

liquidity covenant, management prepared two alternative plans. “Liquidity Plan A” required,

among other things, that Solar City withhold $29 million of accounts payable beginning on June

20, 2016.55 “Liquidity Plan B” required, among other things, that SolarCity withhold $75 million

of accounts payable beginning on June 13, 2016.56 In all cases, SolarCity would have to eventually

pay its delinquent accounts payable. Plan A and Plan B only cleared the unencumbered liquidity

covenant by $5 million and $2 million, respectively.57 SolarCity’s vice president of global capital

markets testified that not paying vendors when bills were due would have negative consequences

51
TESLA00531141-72, at 63.
52
SolarCity Form 8-K, filed with the SEC on May 9, 2016, Ex. 99.1 at p. 6; “SolarCity shares
drop on wider-than-expected loss, outlook,” MarketWatch, (May 9, 2016, 4:41 pm).
53
Source: Bloomberg.
54
Deposition of Lyndon Rive (“L. Rive Dep.”) Ex. 15, TESLA00710234-43.
55
Id. at TESLA00710235-36.
56
Id. at TESLA00710236-37.
57
Id. at TESLA00710235-37.

10
for the business but in this case, those negative consequences were better than violating the

unencumbered liquidity covenant.58

28. SolarCity’s stock price closed at $21.19 per share on June 21, 2016, just prior to the

announcement of Tesla’s intent to acquire SolarCity.59 Over the period of September 30, 2015,

through June 21, 2016, SolarCity’s stock price declined by approximately 50%.

FIGURE 1
SOLARCITY STOCK PRICES, SEPT. 30, 2015 – JUN. 21, 201660
$60

$50

$40

$30

$20

$10

$0
9/30/15 10/31/15 11/30/15 12/31/15 1/31/16 2/29/16 3/31/16 4/30/16 5/31/16

29. SolarCity’s deteriorating financial condition is also evidenced by the increasing yields

on its publicly traded debt over this period. For example, the yield on SolarCity’s $566 million

1.625% convertible notes due in 201961 was 9.3% on September 30, 2015.62 By June 21, 2016,

58
Deposition of Radford Small (“Small Dep.”) at p. 58.
59
Source: Bloomberg.
60
Source: Bloomberg.
61
SolarCity Form 10-Q, filed with the SEC on August 9, 2016, at p. 17.
62
Source: Bloomberg TRAC pricing.

11
the yield on these notes increased to 19.9%,63 consistent with the yields for publicly traded debt

with a credit rating of CCC and below at the time.64

30. During this approximately nine-month period, SolarCity’s growth prospects and stock

price were declining while its losses and total debt levels were increasing. As shown in Table 1

below, SolarCity’s borrowings increased from $2.3 billion as of the third quarter of 2015, to $3.1

billion and $3.2 billion as of the first and second quarters of 2016.

TABLE 1
SOLARCITY TOTAL DEBT LEVELS SEPT. 30, 2015 – JUN. 30, 201665
($ thousands)

9/30/2015 12/31/2015 3/31/2016 6/30/2016

Recourse:
Revolving credit facility 291,392 355,607 371,192 362,744
Vehicle loans 16,129 28,172 20,681 17,004
Convertible senior notes 796,000 894,560 895,585 896,621
Solar bonds 210,670 214,087 216,183 217,826

Nonrecourse:
Term loans 140,938 145,166 302,396 290,039
MyPower revolving credit facility 120,863 210,735 111,839 128,932
Revolving aggregate credit facility 308,303 446,963 551,178 518,772
Cash Equity Debt n/a n/a n/a 120,661
Solar asset-backed notes 425,038 409,531 624,151 623,058

Total Debt $2,309,333 $2,704,821 $3,093,205 $3,175,657

63
Source: Bloomberg TRAC pricing.
64
Source: Bloomberg (Ticker Symbol: H1CU). As of 6/21/2016, the ICE BofAML 1-3 Year
CCC & Lower U.S. High Yield Index had a yield to maturity of 20.18%. According to Standard
& Poor’s, “An obligation rated ‘CCC’ is currently vulnerable to nonpayment and is dependent
upon favorable business, financial, and economic conditions for the obligor to meet its financial
commitments on the obligation. In the event of adverse business, financial, or economic
conditions, the obligor is not likely to have the capacity to meet its financial commitments on the
obligation.” https://www.standardandpoors.com/en_US/web/guest/article/-
/view/sourceId/504352.
65
Source: SolarCity SEC filings.

12
 31. As of June 15, 2016,66 over 27.2 million SolarCity shares were sold short,

representing approximately 41% of SolarCity’s public float, which was greater than over 99% of

the firms trading on the NASDAQ at the time.67 This indicates that there was an abnormally large

number of investors expecting that SolarCity’s stock price would decline substantially in the near

future.68

C. Tesla’s Acquisition of SolarCity

32. After the market closed on June 21, 2016, Tesla disclosed that it had submitted a

proposal to acquire 100% of the outstanding shares of SolarCity in an all-stock transaction with an

exchange ratio in the range of 0.122x to 0.131x shares of Tesla common stock for each share of

SolarCity common stock (the “Merger”).69 According to the filing, the implied consideration of

between $26.50 to $28.50 per share represented a premium of approximately 21% to 30% over

SolarCity’s closing price of $21.88 per share on June 20, 2016.70

33. On June 22, 2016, SolarCity’s stock price closed at $21.88 per share, up $0.69 (3.3%)

from the previous day’s closing price of $21.19 per share.71 Based on SolarCity’s 98.3 million

common shares outstanding at the time,72 this $0.69 per share stock-price increase represented an

approximately $67.8 million increase in SolarCity’s market capitalization.

66
Data on short interest is available twice monthly, on the 15th and last day of the month.
67
Source: Bloomberg; SolarCity Form 10-Q, filed with the SEC on May 10, 2016, cover page.
68
An October 15, 2015 presentation stated that the cost of borrowing shares of SolarCity stock
was 14% per year. TESLA00529579-587, at 583.
69
Tesla Form 8-K filed with the SEC on June 21, 2016, Exhibit 99.1.
70
Id.
71
Source: Bloomberg.
72
SolarCity Form 10-Q, filed with the SEC on May 10, 2016, cover page.

13
 34. Tesla’s stock price closed at $196.66 per share on June 22, 2016, down $22.95

(10.5%) from the previous day’s closing price of $219.61 per share.73 Based on Tesla’s 133.9

million common shares outstanding at the time,74 this $22.95 per share stock-price decrease

represented an approximately $3.07 billion decrease in Tesla’s market capitalization.75

35. On June 25, 2016, SolarCity retained Lazard as its financial advisor in connection

with the Merger.76 Over the next several weeks, the Special Committee of the Board (the

“SolarCity Special Committee”) and its advisors met numerous times. At these meetings,

SolarCity, its advisors, and management discussed the Merger, potential alternative transactions

to the Merger, financing options and SolarCity’s near-term financial and liquidity position.

36. On July 6, 2016, the SolarCity Special Committee instructed Lazard to contact parties

other than Tesla to gauge their interest in a potential business combination with SolarCity. Lazard

was also instructed to conduct a liquidity analysis.77

37. On July 9, 2016, Lazard presented preliminary results of its liquidity analysis to the

SolarCity Special Committee.78 The analysis revealed that SolarCity was close to breaching the

liquidity covenant in its revolving credit facility and “would be operating with little margin for

error until October 2016.”79 Lazard informed the SolarCity Special Committee that the Merger

would enable SolarCity to “shore up its liquidity and to protect its equity value from any sell-off

73
Source: Bloomberg.
74
Tesla Form 10-Q, filed with the SEC on May 10, 2016, cover page.
75
The S&P 500 was down only 0.16% on June 22, 2016. Source: Bloomberg.
76
Bilicic Dep. Ex. 1, LAZ-TES00000060-71.
77
TESLA00001855-57, at 56.
78
TESLA00001858-861; and LAZ_TES00039330.
79
TESLA00001858-861, at 858; and LAZ_TES00039330, at pp. 2 and 4-5.

14
resulting from a liquidity event.”80 The SolarCity Special Committee and Lazard discussed

potential alternatives to the Merger to avoid a default given SolarCity’s liquidity position, which

included a private investment in public equity (“PIPE”) transaction or the sale of SolarCity’s

Silevo assets.81 The minutes of this meeting acknowledge that these alternatives would be difficult

to execute before SolarCity’s August 4 earnings call during which it planned to again lower its

installation guidance.82

38. On July 14, 2016, the SolarCity Special Committee further discussed SolarCity’s

liquidity position with Lazard and Lazard’s outreach to other potential parties interested in a

transaction.83 Lazard explained that

if the Company were to experience a liquidity event or be unable to

access the capital markets in the near term, absent a deal with Tesla
or another third party, the Company could potentially be forced to
sell equity at a lower price, which could cause equity value
destruction.84

39. During the meeting, the SolarCity Special Committee also discussed the impact that

the impending August 4 downward revision to guidance could have on SolarCity’s liquidity

position and its relationship with lenders.85 Lazard informed the Special Committee that of the

nine companies identified as potential counterparties to a transaction, eight had been contacted and

four passed on having any further discussions.86

80
TESLA00001858-861, at 859; and LAZ_TES00039330, at p. 2.
81
TESLA00001858-861, at 859.
82
Id.
83
TESLA00001862-65.
84
Id. at 62.
85
Id. at 63.
86
LAZ_TES00039331-36, at 36.

15
 40. On July 18, 2016, management provided an update on SolarCity’s liquidity position

to the SolarCity Special Committee and Lazard.87 Management informed the Special Committee

that it was “closely managing its payables,” and would require $250 million to $300 million of

additional liquidity “to maintain operational flexibility.”88 Management presented various options

for preserving near-term liquidity, including a 10%-15% reduction in overhead and shutting down

SolarCity’s Silevo manufacturing operations.89 Management also expressed concern that the

disclosure of SolarCity’s June 30, 2016, cash balance and impending reduction in installation

guidance, would have a negative effect on SolarCity’s stock price and liquidity position.90 The

SolarCity Special Committee and Lazard agreed that SolarCity should continue pursuing

alternatives to the Merger in case it fell through, including a potential PIPE transaction and bridge

loan.91

41. On July 20, 2016, Lazard updated the SolarCity Special Committee and management

on its efforts to find a party interested in making a PIPE in SolarCity.92 According to the minutes,

Lazard stated it “believed it would be challenging to complete a PIPE on terms that would be

acceptable to the Company.”93 At his deposition, Lazard’s representative testified:

A. That’s correct, and the way the minutes are written I would say
at this point not only that acceptable, but maybe not even
actionable.

Q. What do you mean non-actionable?

87
TESLA00001872-74.
88
Id. at 72.
89
Id.
90
TESLA00001872-74, at 73.
91
Id.
92
Bilicic Dep. pp. 39:16-41:9; Ex. 11, TESLA00001878-79.
93
TESLA00001878-79, at 79.

16
 A. Right, the money wasn’t there. You know, the feedback from
the market when we talked to people is that they didn’t think this
business was financeable. . . . People were worried about - - the
language used by some of the people approached concerns about
solvency, viability and liquidity of the company and financing
into a business that was not going to be viable for the long
term.94

42. On July 21, 2016, Lazard advised the SolarCity Special Committee that SolarCity’s

liquidity position “warranted prompt action.”95 The SolarCity Special Committee identified the

Merger as an option “to protect [SolarCity’s] equity value from any sell-off resulting from a

liquidity event, should one occur.”96 Lazard informed the Special Committee that Silver Lake and

five additional third parties had informed Lazard that they were uninterested in making an

investment in SolarCity.97

43. On July 23, 2016, management again discussed with the SolarCity Special Committee

its concern regarding the impending August 4 decrease of 2016 installation guidance, and that the

disclosure of this information “would likely put downside pressure on the Company’s stock.”98

Lazard informed the Special Committee that it had difficulties over the prior week attempting to

identify any other investors interested in PIPE financing, as well as obtaining agreements to modify

or amend SolarCity’s revolver, and that the difficulties in obtaining stand-alone financing

heightened its concern regarding SolarCity’s liquidity position.99

94
Bilicic Dep. pp. 40:9-41:3.
95
TESLA00001882-85, at 83.
96
Id.
97
Id.
98
TESLA00001888-90, at 89.
99
TESLA00001888-90, at 90; and Bilicic Dep. at p. 48:3-21.

17
 44. Before the market opened on August 1, 2016, Tesla announced that it had entered into

an Agreement and Plan of Merger with SolarCity, whereby SolarCity would survive the merger as

a wholly owned subsidiary of Tesla. The Merger was consummated as an all-stock transaction

with each share of SolarCity common stock converted into 0.110 shares of Tesla common stock.100

45. On August 9, 2016, Lyndon Rive wrote an internal memo stating that three potential

sources for financing had either passed or would not be able to fund in time for an upcoming

liquidity requirement. He further stated: “We have tried every lever but we just cannot get the

debt in time,” and that “We are now at the last resort stage. We need funding.”101

46. In January 2017, Ernst & Young LLP (“E&Y”), SolarCity’s auditor, found that

SolarCity had not included payments related to Solar Bonds and payments on the corporate

revolver due in 2017 in prior projections provided to E&Y.102 SolarCity had expected SpaceX,

which held Solar Bonds, to roll over $165 million in SolarCity-issued Solar Bonds that SpaceX

was owed.103 SpaceX investors, however, had pressured the company to get the money back from

SolarCity.104 E&Y found that in SolarCity’s “going concern analysis,” SolarCity “determined that

it will not have sufficient cash to meet its obligations as they come due.”105 This would remain

true whether the Solar Bonds were reinvested or not. SolarCity would be $169 million short if the

Solar Bonds were not reinvested and $2 million short even if the Solar Bonds were reinvested.106

100
Tesla Form 8-K, filed with the SEC on August 1, 2016, at p. 1.
101
TESLA00082764 (emphasis added).
102
EY-TES-EM-000371-75, at 71.
103
Id. at 73.
104
EY-TES-EM-026275-79, at 75.
105
EY-TES-EM-000371-75, at 73.
106
Id.

18
As a result, Tesla had to execute an “Equity Commitment Letter” promising to use its cash and

cash equivalents or engage in capital raising to contribute capital to keep SolarCity afloat.107

V. ANALYSIS OF SOLARCITY’S ACCESS TO THE CAPITAL MARKETS

A. Background of Public Company Capital Market Offering Types

47. Publicly traded companies can raise capital by selling equity to a diverse group of

investors through a seasoned equity offering (“SEO”), or to a targeted group of investors through

a private placement (“Private Placement”).

48. In SEOs, the securities sold are registered under the Securities Act of 1933 and sold

in a public offering similar to an initial public offering or “IPO.” SEOs are typically registered

with the SEC under a preliminary prospectus. Upon filing of the prospectus, a “waiting period”

begins in which the SEC reviews the prospectus for defects. During the waiting period, which

typically lasts around 20 days, underwriters solicit nonbinding indications of interest from

potential investors in the offering. Once the final prospectus is filed with the SEC, the offer

becomes effective and the price is set.108,109

107
EY-TES-2016-EWP-001013.
108
See, for example, Robert M. Bowen, Xia Chen, and Qiang Cheng, “Analyst Coverage and the
Cost of Raising Equity Capital: Evidence from Underpricing of Seasoned Equity Offerings,”
Contemporary Accounting Research, 25(3), 2008, 657-699, at p. 662.
109
Firms can also conduct an SEO through a shelf registration, in which firms file a single “all-
encompassing” registration statement that covers all security offerings in the subsequent three
years. See, for example, Marie Dutordoir, Norman Strong, and Ping Sun, “Shelf Versus
Traditional Seasoned Equity Offerings: The Impact of Potential Short Selling,” Journal of
Financial and Quantitative Analysis, 54(3), 2019, 1285-1311, at p. 1285.

19
 49. In Private Placements, the securities sold are typically restricted securities and not

registered with the SEC. As such, Rule 144 requires that certain conditions be met before the

securities can be resold to the public market.110,111

50. A private investment in public equity (“PIPE”) is a type of Private Placement. PIPEs

are negotiated between private investors and publicly traded companies, and are typically for

convertible debt, preferred securities or common stock.112 Unlike other Private Placements, PIPEs

can include complex contracting terms such as warrants, resets, floors, caps, dividends, and other

terms.113 PIPEs also typically require the issuer to file a registration statement with the SEC within

30 days of the execution of the purchase agreement, which allows for securities issued in a PIPE

to be freely traded more quickly than would restricted private placements (often within 20 days of

the filing of the registration statement).114

110
“Rule 144: Selling Restricted and Control Securities,” Investor Publications dated January 16,
2013.
111
These conditions include that, if the issuer is a “reporting company,” the securities be held for
at least six months (one year if the issuer is not subject to the reporting requirements). In
addition, Rule 144 requires that reporting companies have complied with reporting requirements
under the Securities Exchange Act of 1934. Once the conditions of Rule 144 have been met,
consent must be given by the issuer before the restrictive legend on the stock certificate can be
removed by the transfer agent and the securities can be freely traded. See “Rule 144: Selling
Restricted and Control Securities,” Investor Publications dated January 16, 2013.
112
See, for example, David J. Brophy, Paige P. Ouimet and Clemens Sialm, “Hedge Funds as
Investors of Last Resort?” The Review of Financial Studies, 22(2), 2009, 541-574, at p. 567; and
Susan Chaplinsky and David Haushalter, “Financing under Extreme Risk: Contract Terms and
Returns to Private Investments in Public Equity,” The Review of Financial Studies, 23(7), 2010,
2789-2820, at pp. 2789-2790.
113
Susan Chaplinsky and David Haushalter, “Financing under Extreme Risk: Contract Terms
and Returns to Private Investments in Public Equity,” The Review of Financial Studies, 23(7),
2010, 2789-2820, at pp. 2789-2790.
114
Id. at pp. 2789-2790, 2792-2793.

20
 51. PIPEs can be executed faster than an SEO because PIPEs do not require the filing and

acceptance of a registration statement with the SEC prior to issuance. PIPE transactions typically

can be arranged and executed within a month.115 Once the issuer and investors execute an

agreement, the issuer typically files a Form 8-K with the SEC providing the details of the terms of

the PIPE as well as the identities of the investors.116

B. Determinants of Choice Between Capital Market Offering Types

52. Extensive research has been published regarding the differences between companies

that raise capital through an SEO versus a Private Placement (including a PIPE). The studies

consistently find that Private Placements are associated with high information asymmetry (i.e.,

information gap between insiders and the investing public).117 In other words, because Private

Placements can occur without the types of disclosures required for an SEO, the seller has greater

115
Id. at pp. 2789-2790, 2793.
116
Id.
117
See, for example, YiLin Wu, “The Choice of Equity-Selling Mechanisms,” Journal of
Financial Economics, 74, 2004, 93-119; Panagiotis Andrikopoulos, Ji Sun, and Jie Guo,
“Ownership Structure and the Choice of SEO Issue Method in the UK,” International Journal of
Managerial Finance, 13(4), 2017, 378-396; Seth Armitrage, Dionysia Dionysiou, and Angelica
Gonzalez, “Are the Discounts in Seasoned Equity Offers Due to Inelastic Demand?,” Journal of
Business Finance & Accounting, 41(5), 2014, 743-772; Indraneel Chakraborty and Nickolay
Gantchev, “Does Shareholder Coordination Matter? Evidence from Private Placements,” Journal
of Financial Economics, 108, 2013, 213-230; Hsuan-Chi Chen, and John D. Schatzberg, “The
Choice of Equity Selling Mechanisms: PIPEs versus SEOs,” Journal of Corporate Finance, 16,
2010, 104-119; Charmaine Glegg, Oneil Harris, Jeff Madura, and Thanh Ngo, “The Impact of
Mispricing and Asymmetric Information on the Price Discount of Private Placements of
Common Stock,” The Financial Review, 47, 2012, 665-696; Michael Hertzel and Richard L.
Smith “Market Discounts and Shareholder Gains for Placing Equity Privately,” The Journal of
Finance, 48(2), 1993, 459-485; Jongha Lim, Michael W. Schwert, and Michel S. Weisbach,
“The Economics of PIPEs,” The Ohio State University, Fisher College of Business, Working
Paper, 2019, 1-52; Ioannis V. Floros and Travis R.A. Sapp, Journal of Banking & Finance, 36,
2012, 3469-3481; An-Sing Chen, Lee-Young Cheng, Kuang-Fu Cheng, and Shu-Wei Chih,
“Earnings Management, Market Discounts and the Performance of Private Equity Placements,”
Journal of Banking & Finance, 34, 2010, 1922-1932; and Matthew T. Billett, Redouane
Elkamhi, and Ioannis V. Floros, “The Influence of Investor Identity and Contract Terms on Firm
Value: Evidence from PIPEs,” Journal of Financial Intermediation, 24, 2015, 564-589.

21
information regarding the value of its stock and, therefore, the buyer demands a greater discount

to account for the added risk. Companies in financial distress are not incentivized to eliminate

information asymmetry because doing so would most likely result in the disclosure of negative

information leading to a lower valuation. Indeed, the empirical research finds that, unlike low-

quality firms, high-quality firms are incentivized to reduce information asymmetry to increase

their valuations. Therefore, the market for Private Placements (and PIPEs) where high information

asymmetry exists attracts poor-quality, financially distressed firms. Chaplinsky and Haushalter

(2010) state that:

There are several important distinctions between the PIPE market

and more established markets for financing. The first is the
distressed nature of the companies using the PIPE market. By
almost any standard, PIPE issuers are poorly performing firms. In
the year prior to issue, more than 84% of PIPE issuers have negative
operating cash flow and more than 50% of the issuers have falling
stock prices. Moreover, a majority of the companies will be out of
cash within a year. These characteristics leave PIPE issuers with a
smaller universe of financing options than companies able to access
public debt or equity as a means of fund-raising. [FN]

FN - By comparison, companies making follow-on public equity

offerings generally exhibit superior performance both in terms of
operations and stock returns in the months leading up to the issue.118

53. Krishnamurthy et al. (2005) also find that reliance on Private Placements is by firms

in financial distress and conclude that “[s]ince private placements are often the only viable

financing choice for firms in financial distress, these firms are likely to rely on private placements

even if they have no information asymmetry and associated adverse selection problems.”119 In

118
Susan Chaplinsky and David Haushalter, “Financing under Extreme Risk: Contract Terms
and Returns to Private Investments in Public Equity,” The Review of Financial Studies, 23(7),
2010, 2789-2820, at pp. 2789-2790 and footnote 1 (emphasis added).
119
Srinivasan Krishnamurthy, Paul Spindt, Venkat Subramaniam, and Tracie Woidtke, “Does
investor identity matter in equity issues? Evidence from private placements,” Journal of
Financial Intermediation, 14, 2005, 210–238, at p. 212 (emphasis added).

22
other words, Private Placements are typically the only financing vehicle for distressed firms that

are transparent about the degree of their financial troubles.

54. Similarly, Chen et al. (2010) found that

Previous studies on PIPEs (e.g., Chaplinsky and Haushalter, 2006;

Brophy et al., 2009) typically regard a PIPE offering as a last resort
equity financing for firms that are barred from traditional financing
options. Our empirical results support this view for the majority of
PIPE issuers . . . .

Our findings have implications for interpreting the nature of the

PIPE market relative to public offerings. Traditionally, the SEO
market rejects firms with high or extreme information asymmetry
and weak operating performance. The emergence and rapid growth
of the PIPE market fills the capital need of at least some of these
firms; and in doing so, this market also compensates investors
willing to bear such risks by offering large risk premia in the form
of attractive discounts. Hence, the PIPE market may act as a
supplement to the traditional SEO market.120

55. Chen et al. (2010) then discuss the weak operating performance and high levels of

information asymmetry associated with firms that utilize PIPEs and conclude that

Since most of the PIPE firms are likely denied access to the SEO
market given their high level of information asymmetry and weak
operating performance, an SEO should not be considered a true
alternative for these issuers.121

56. Chen et al. (2010) further examine companies that failed to close an SEO and

subsequently closed a PIPE or second attempted SEO and found

120
Hsuan-Chi Chen, Na Dai, and John D. Schatzberg, “The choice of equity selling mechanisms:
PIPEs versus SEOs,” Journal of Corporate Finance, 16, 2010, 104-119, at p. 105 (emphasis
added). See also, David J. Brophy, Paige A. Quimet, and Clemens Sialm, “Hedge Funds as
Investors of Last Resort,” The Review of Financial Studies, 22(2), 2009, 541-574; and Susan
Chaplinsky and David Haushalter, “Financing Under Extreme Certainty: Contract Terms and
Returns to Private Investments in Public Equity,” The Review of Financial Studies, 23(7), 2010,
2789-2820.
121
Hsuan-Chi Chen, Na Dai, and John D. Schatzberg, “The choice of equity selling mechanisms:
PIPEs versus SEOs,” Journal of Corporate Finance, 16, 2010, 104-119, at p. 118 (emphasis
added).

23
 As shown in Panel B, firms that switched to the PIPE market appear
to possess greater information asymmetry and exhibit weaker
operating performance than firms that chose to return to the public
market. As implied by the corresponding means and medians
presented in Panel A, these firms that switched forms were only able
to raise a small fraction of what they had originally attempted in the
former public filing. This contrasts with the firms who returned to
the SEO market where the corresponding statistics display a slight
increase. One potential explanation for the latter finding is that those
firms returning to the SEO market may have been timing the market
in hopes of achieving a higher offering price. On the other hand,
firms that switched to the PIPE market may have been denied access
to a second attempt at the SEO market due to their individual
characteristics. The tests which follow provide consistency with this
latter interpretation for PIPE firms.122

57. Research has also shown that the type of investor a firm pursues varies and is

associated with issuer risk. Brophy et al. (2016) examined a large sample of traditional and

structured PIPEs and found that hedge funds invest in PIPEs for companies with higher

asymmetric information, weaker fundamentals, few institutional holders, and short-sale

constraints. Hedge funds reduce the risk associated with these investments by negotiating price-

protection mechanisms.123 Companies that issue PIPEs to hedge funds are forced to do so at

significantly higher discounts than do companies that issue to other investors.124 The authors

examine the long-run stock-price performance for PIPE issuers and conclude that

We find evidence consistent with the fact that firms that sell their
equity to hedge funds have few alternatives to raise external
financing because of severe information asymmetries and poor
operating performance. . . .

Hedge funds are well suited to act as investors of last resort. Either
by negotiating repricing rights, shorting the underlying security, or

122
Hsuan-Chi Chen, Na Dai, and John D. Schatzberg, “The choice of equity selling mechanisms:
PIPEs versus SEOs,” Journal of Corporate Finance, 16, 2010, 104-119, at pp. 117-118
(emphasis added).
123
David J. Brophy, Paige P. Ouimet and Clemens Sialm, “Hedge Funds as Investors of Last
Resort?” The Review of Financial Studies, 22(2), 2009, 541-574, at pp. 542-543.
124
Id.

24
 other means, hedge funds are able to reduce their risk in what could
otherwise be a high-risk and illiquid position. Thus, hedge funds
might be more willing to invest in firms that otherwise would be shut
out of the external capital market. We also show that hedge funds
that invest in PIPE securities tend to perform relatively well, even
though the companies they invest in perform poorly. Our results are
consistent with the hypothesis that hedge funds act as investors of
last resort, playing an important role in the market for young, high-
risk firms with substantial asymmetric information and large capital
needs.125

C. Typical Discounts by Capital Market Offer Types

58. There is extensive research on the discount at which various types of capital market

offerings are sold to public and private investors. The widespread finding of these studies is that

discounts to the public trading price of the underlying security vary by offering type, industry, and

investor type, and are correlated with the perceived risk of the issuer.

i) Seasoned Equity Offerings

59. As shown in Table 2 below, because SEOs are typically associated with the least risky

issuers, research has shown that discounts are the lowest among equity offering types but have

increased over time.126

125
Id. at pp. 569-570 (emphasis added).
126
Additional studies have documented the general increase in SEO discounts over these time
periods. See, for example, Kalok Chan and Yue-Cheong Chan, “Price informativeness and stock
return synchronicity: Evidence from the pricing of seasoned equity offerings,” Journal of
Financial Economics, 114, 2014, 36-53, at pp. 37, 44-45.

25
TABLE 2
SEASONED EQUITY OFFERING DISCOUNTS BY EXCHANGE AND STUDY PERIOD127

Mean Offering Discount

Author(s) Period Full Sample NYSE NASDAQ
Smith (2007) 1971-1975 0.50% n/a n/a
Loderer et al. (1991) 1980-1984 1.40% n/a n/a
Corwin (2003) 1980-1989 1.15% 0.48% 1.30%
Mola and Loughran (2004) 1986-1989 1.10% 1.00% 1.20%
Mola and Loughran (2004) 1990-1995 3.10% 2.00% 4.00%
Altinkilic and Hansen 1990-1999 2.47% 1.47% 3.01%
Corwin (2003) 1990-1998 2.92% 1.48% 3.48%
Mola and Loughran (2004) 1996-1999 3.70% 2.20% 4.50%
Chen et al. (2010) 1996-2006 4.40% n/a n/a

60. Research has shown that discounts for SEOs also varied based on the exchange on

which the underlying shares traded. As can be seen in Table 2 above, discounts for NASDAQ

firms have been higher than those for NYSE firms in each period measured. Researchers attribute

this to the fact that NASDAQ issuers are generally younger, smaller capitalization firms with less

stringent listing requirements and, therefore, riskier than NYSE firms.128

61. Mola and Loughran also examined the relationship between risk and offering

discount using other proxies for risk, such as the industry the business serves. Indeed, as shown

127
Simona Mola and Tim Loughran, “Discounting and Clustering in Seasoned Equity Offering
Prices,” Journal of Financial and Quantitative Analysis, 39(1), March 2004, 1-23, at pp. 1, 8, 10;
Oya Altınkılıc and Robert S. Hansen, “Discounting and underpricing in seasoned equity offers,”
Journal of Financial Economics, 69, 2003, 285-323, at p. 292 (sample limited to industrial
firms); Shane A. Corwin, “The Determinants of Underpricing for Seasoned Equity Offerings,”
The Journal of Finance, 58(5), 2003, 2249-2279, at pp. 2249, 2262; Hsuan-Chi Chen, Na Dai,
and John D. Schatzberg, “The Choice of Equity Selling Mechanisms: PIPEs versus SEOs,”
Journal of Corporate Finance, 16, 2010, 104-119, at p. 109.
128
See, for example, Simona Mola and Tim Loughran, “Discounting and Clustering in Seasoned
Equity Offering Prices,” Journal of Financial and Quantitative Analysis, 39(1), March 2004, 1-
23, at p. 8.

26
in Table 3 below, discounts for utilities and non-technology companies have historically been

lower than those for non-utilities and technology companies.

TABLE 3
SEASONED EQUITY OFFERING DISCOUNTS BY INDUSTRY AND STUDY PERIOD129

Mean Offering Discount

Non- Non-
Author(s) Period Utilities Utilities Tech Tech
Mola and Loughran (2004) 1986-1989 1.0% 1.1% 1.1% 0.7%
Mola and Loughran (2004) 1990-1995 1.0% 3.3% 3.0% 3.5%
Mola and Loughran (2004) 1996-1999 2.1% 3.7% 3.4% 4.8%

62. I also found evidence that SEO discounts for renewable energy companies able to

successfully execute SEOs are significantly higher than average rates. Specifically, I performed

an analysis of SEOs using the SDC database through Thomson Eikon. I searched the SDC

database for all SEOs that met the following criteria:

a) Issued Date: June 21, 2011, and June 21, 2016;

b) Nation of Incorporation: United States;

c) Issue Type: Follow-On;

d) Security Type: Common Stock;

e) Primary Stock Exchange(s): NASDAQ, NYSE, NYSE Amex, or NYSE MKT;

f) Offering Technique: Accelerated Bookbuild, Firm Commitment, or Negotiated

Sale; and

g) Transaction Status: Live.

63. The screen resulted in 1,992 offerings. I then excluded from my sample all offerings

in which the underlying shares were sold by existing shareholders, which resulted in 1,395

offerings. I then examined the 19 SEOs by firms identified as operating in the “renewable energy”

129
Id.

27
TRBC Business Sector. The average (median) discount for these SEOs was 23.41% (23.91%). In

addition, for 15 of the 19 offerings,130 the discount was greater than the 12% (or higher) upper end

of the range suggested by Goldman Sachs and Credit Suisse in October 2015 before SolarCity’s

financial condition further deteriorated as discussed above. Furthermore, for 11 of the 19

offerings, the discounts were greater than the 20% discounts typically found in PIPE transactions

discussed below.131 See Exhibit 3.

ii) Private Placements

64. As discussed above and shown in Table 4 below, to compensate for the higher degree

of information asymmetry and weaker operating performance for the underlying company, Private

Placements typically occur at discounts significantly higher than for SEOs.

130
Included in my sample is an offering by SolarCity of 3.9 million shares. The offering was
announced on June 18, 2013, as part of a share lending agreement to facilitate a convertible bond
offering. On August 29, 2013, SolarCity disclosed the elimination of the share lending
agreement and its intent to offer the shares of common stock in a public offering. Approximately
four months later on October 16, 2013, the offering was priced at the previous day’s closing
price of $46.54 per share, up 29.4% from the closing price of $35.96 on June 17, 2013, the
trading day prior the announcement of the offering under the original terms. See “SolarCity
Announces Proposed Convertible Senior Notes Offering and Related Share Lending
Agreement,” Business Wire, (June 18, 2013, 6:31 am); SolarCity Form S-1A filed with the SEC
on August 29, 2013; and SolarCity Form FWP dated October 16, 2013.
131
I note that I am not opining that these transactions are directly comparable to SolarCity.
Aside from SolarCity’s distressed condition, there are other differences between SolarCity and
the offering companies, including that in many of these transactions the companies were much
smaller, the offer price was less than $5.00 per share, and the capital raises were much less than
$250 to $300 million.

28
 TABLE 4
PRIVATE PLACEMENT OFFERING DISCOUNTS BY STUDY PERIOD132
Author(s) Period Mean
Hertzel and Smith (1993) 1980-1987 20.1%
Wu (2004) 1986-1997 8.7%
Krishnamurthy et al. (2005) 1983-1992 19.4%
Barclay et al. (2007) 1979-1997 18.7%

65. As discussed above and shown in Table 5 below, PIPE transactions also occur at

significantly higher discounts than those for SEOs because of the high information asymmetry and

distressed condition of companies that have no alternative but to obtain financing through a PIPE.

TABLE 5
PIPE OFFERING DISCOUNTS BY INVESTOR AND STUDY PERIOD133

Mean Offering Discount

Full Hedge Other
Author(s) Period Sample Funds Investors
Chen et al. (2010) 1996-2006 16.4% n/a n/a
Chaplinsky et al. (2010) 1995-2000 18.7% n/a n/a
Brophy et al. (2009) 1995-2002 n/a 14.1% 9.0%
Floros and Sapp (2012) 1995-2008 5.0-24.8% 9.3 -15.2% 5.2 – 7.5%
Billett et al. (2015)* 2001-2010 26.7% n/a n/a

* 26.7% represents the median offering discount.

132
YiLin Wu, “The Choice of Equity-Selling Mechanisms,” Journal of Financial Economics, 74,
2004, 93-119, at p. 101; Barclay, Holderness, and Sheehan, “Private Placements and Managerial
Entrenchment,” Journal of Corporate Finance, 13, 2007, 461-484, at p. 467; Srinivasan
Krishnamurthy, Paul Spindt, Venkat Subramaniam, and Tracie Woidtke, “Does investor identity
matter in equity issues? Evidence from private placements,” Journal of Financial
Intermediation, 14, 2005, 210-238, at p. 222; and Michael Hertzel and Richard L. Smith,
“Market Discounts and Shareholder Gains for Placing Equity Privately,” The Journal of Finance,
48(2) 1993, 459-485, at p. 470.
133
Hsuan-Chi Chen, Na Dai, and John D. Schatzberg, “The choice of equity selling mechanisms:
PIPEs versus SEOs,” Journal of Corporate Finance, 16, 2010, 104-119, at p. 109; Susan
Chaplinsky and David Haushalter, “Financing under Extreme Risk: Contract Terms and Returns
to Private Investments in Public Equity,” The Review of Financial Studies, 23(7), 2010, 2789-
2820, at p. 2801; David J. Brophy, Paige P. Ouimet and Clemens Sialm, “Hedge Funds as

29
D. A Seasoned Equity Offering for SolarCity Was Highly Unlikely

66. I have been asked to analyze SolarCity’s access to the capital markets, assuming that

SolarCity would need to raise $250 to $300 million, as management indicated was needed in July

2016.134 In my opinion, as of June 21, 2016, it is highly unlikely that SolarCity could have

executed an SEO to raise $250 to $300 million for several reasons.

67. First, as discussed above, SolarCity was a distressed, poorly performing company

seeking capital to avoid triggering an unencumbered liquidity covenant that would trigger a default

under its secured revolving credit facility. The academic research finds that SEOs are typically

used by firms with low information asymmetry, strong operating performance, and positive recent

stock-price performance.135 SolarCity did not meet any of these characteristics as of June 21,

2016, or thereafter. Rather, SolarCity was distressed and the capital markets typically reject an

SEO by a distressed company. It would have been difficult for SolarCity to convince a reputable

Investors of Last Resort?” The Review of Financial Studies, 22(2), 2009, 541-574, at pp. 547,
550-551; Ioannis V. Floros and Travis R.A. Sapp, “Why do firms issue private equity
repeatedly? On the motives and information content of multiple PIPE offerings,” Journal of
Banking & Finance, 36, 2012, 3469-3481, at p. 3480; and Matthew T. Billett, Redouane
Elkamhi, and Ioannis V. Floros, “The influence of investor identity and contract terms on firm
value: Evidence from PIPEs,” Journal of Financial Intermediation, 24, 2015, 564-589, at p. 581.
134
TESLA00001872-74, at 72. See also L. Rive Dep. at pp. 129-135.
135
Hsuan-Chi Chen, Na Dai, and John D. Schatzberg, “The Choice of Equity Selling
Mechanisms: PIPEs versus SECs,” Journal of Corporate Finance, 16, 2010, 104-119; Indraneel
Chakraborty and Nickolay Gantchev, “Does Shareholder Coordination Matter? Evidence from
Private Placements,” Journal of Financial Economics, 108, 2013, 213-230; Marie Dutordoir,
Norman Strong, and Ping Sun, “Shelf Versus Traditional Seasoned Equity Offerings: The Impact
of Potential Short Selling,” Journal of Financial and Quantitative Analysis, 54(3), 2019, 1285-
1311; Rongbing Huang and Donghang Zhang, “Managing Underwriters and the Marketing of
Seasoned Equity Offerings,” The Journal of Financial and Quantitative Analysis, 46(1), 2011,
141-170; Ioannis Floros and Travis R.A. Sapp, “Why Do So Many Firms Issue Private Equity
Repeatedly? On the Information Content of Multiple PIPE Offerings,” Journal of Banking &
Finance, 36, 2012, 3469-3481; Yongtae Kim and Myung Seok Park, “Pricing of Seasoned
Equity Offers and Earnings Management,” The Journal of Financial and Quantitative Analysis,
40(2), 2005, 435-463.

30
underwriter to agree to assume the risk of underwriting an SEO for SolarCity. Indeed, Goldman

Sachs and Credit Suisse – two of the key banks that underwrote SolarCity’s IPO – advised

SolarCity in October 2015 that any equity raise would be “extremely tough” and did not

recommend it be pursued.136 SolarCity’s financial condition was significantly worse in June 2016.

68. Second, I searched my sample of 1,395 SEOs to determine whether any of the offering

firms exhibited market-based evidence of financial distress in the form of high short interest and

debt yields like SolarCity had at the time and could not find any. Specifically, I searched the 1,395

offerings with available data and found no firms with short interest as a percentage of public float

of 40% or greater and publicly traded debt with yields greater than 15% just prior to the offering

like SolarCity. Therefore, there are no firms in my 5-year sample of successful SEOs that were

similar to SolarCity as of June 21, 2016, in terms of short interest and yields on publicly traded

debt.

69. Third, Lazard was unable to find any investor willing to invest in SolarCity through

a PIPE. As discussed above, PIPEs are “last resort equity financing” for companies that are locked

out of the traditional equity markets and, as such, require high purchase discounts and other

investor-friendly contracting terms.137 Furthermore, several of the investors that Lazard contacted

to seek a PIPE were hedge funds.138 As discussed above, hedge funds are considered “investors

of last resort” for firms with few alternatives due to “severe information asymmetries and poor

136
Presentation titled: Delivering Better Energy, Board of Directors Meeting – Oct. 27, 2015, Q3
2015 Earnings Call – Oct. 29, 2015, TESDIR0024715, at p. 6.
137
See for example, Hsuan-Chi Chen, Na Dai, and John D. Schatzberg, “The Choice of Equity
Selling Mechanisms: PIPEs versus SEOs,” Journal of Corporate Finance, 16, 2010, 104-119;
See also supra, ¶¶52-57.
138
TESLA00001882-885, at 883; LAZ_TES00067125-7240, at 7173.

31
operating performance.”139 Lazard testified that the feedback it received from these potential

investors was that “they didn’t think this business was financeable,” because of “concerns about

solvency, viability, and liquidity of the company and financing into a business that was not going

to be viable for the long term.”140 Thus, Lazard was unable to find a “last resort” investor for a

“last resort” equity financing transaction. As such, it is highly unlikely that SolarCity, having

failed to clear the lower bar of convincing a hedge fund to invest in a PIPE, could successfully

clear the higher bar of an SEO, particularly given its rapidly deteriorating financial condition.141

70. Fourth, had SolarCity made the decision on June 21, 2016 to attempt an SEO, it would

have taken time for SolarCity to complete and file a preliminary prospectus, for the SEC to review

and comment on the prospectus, and for SolarCity to incorporate any necessary changes into the

final prospectus. Furthermore, SolarCity was aware by June 21, 2016, of the likelihood of

triggering the unencumbered liquidity covenant associated with its secured revolving credit facility

should it fail to secure sufficient additional financing. And, by at least July 9, 2016, if not sooner,

SolarCity was discussing the potential impact of its plan to further reduce installation guidance in

its August 2016 earnings announcement. Because this information may have been deemed to be

“material,” it may have been (and likely was) information that would be required to be disclosed

in the prospectus, which most likely would have negatively affected SolarCity’s stock price and

increased the execution risk of the SEO.

139
David J. Brophy, Paige P. Ouimet and Clemens Sialm, “Hedge Funds as Investors of Last
Resort?” The Review of Financial Studies, 22(2), 2009, 541-574, at pp.541, 550, and 569.
140
Bilicic Dep. at pp. 40:4-41:3.
141
I considered facts that occur after June 21, 2016 because even if SolarCity tried, it could not
have immediately completed an SEO, on that date. The relevant market evidence after June 21,
2016, which shows SolarCity’s investment bankers were unable to find an investor willing to
invest in a SolarCity PIPE during the period that SolarCity underwriters would have been
attempting to underwrite an SEO, supports my conclusion that an SEO was highly unlikely to
have succeeded.

32
 71. In my opinion, in the highly unlikely event that SolarCity could have attempted an

SEO beginning June 21, 2016, and found an underwriter willing to accept the risk, SolarCity would

have been forced to offer a very substantial discount. Because of SolarCity’s distressed financial

condition, academic studies on SEOs performed by healthy, viable companies are not applicable

for determining what the discount rate might have been. Lazard prepared an illustrative analysis

of a $300 million SolarCity equity offering on July 25, 2016 and used a discount rate of 15%.142 I

find this discount rate to be too low, though it is above the 12% discount rate estimated by Goldman

Sachs and Credit Suisse in October 2015. Given that: i) PIPEs on average require discount rates

of 20% or more and SolarCity was unable to convince hedge funds to invest in a PIPE; and ii)

SolarCity’s convertible debt was trading at a yield of 19.9%, I would expect that the underwriter

and the market would have demanded an even greater discount if SolarCity had attempted an SEO.

72. The unaffected stock price is difficult to determine because of leaks concerning a

possible transaction with Tesla before June 21, 2016, SolarCity’s rapidly deteriorating financial

condition, and the need to disclose negative non-public information in connection with selling

shares to the public in an SEO. On June 21, 2016, SolarCity’s stock closed at $21.19. I note,

however, that as early as March 3, 2016, speculation regarding a potential transaction between

SolarCity and Tesla was leaked into the market, which may have contributed to an increase in

SolarCity’s stock price.143 SolarCity’s stock closed at $19.46 and $22.49 on March 2 and 3, 2016,

respectively. Lazard used hypothetical Base Prices of $15 to $22 but recognized it was difficult

142
Bilicic Dep. Ex. 18, LAZ_TES00087062-68, at 67.
143
TESLADIR0036041; https://seekingalpha.com/news/3161326-solarcity-soars-amid-elon-
musk-buyout-rumors.

33
to predict what the unaffected stock price was.144 Lazard’s representative testified that in the

event of an equity offering:

…having to disclose the liquidity challenges of the company, the

market being aware that we were having challenges accessing the
capital markets, the discussion about degradation of megawatt
guidance, all of that would contribute to a negative bias in the stock,
so downward pressure, and that [would] be exacerbated by having
to go out and sell equity in the middle of that.145

73. Even assuming the unlikely scenario that an SEO by SolarCity was feasible,

predicting a precise price or price range at which SolarCity could have successfully sold its stock

in an SEO on June 21, 2016 or anytime thereafter, would have been difficult. Selection of the

wrong price could have caused the SEO to fail. Based on the extensive research discussed above,

the factual record regarding SolarCity’s deteriorating financial condition as of June 21, 2016, and

my experience in the placement of SEOs and PIPEs, my advice to SolarCity at the time would

have been that: i) it would be virtually impossible to execute an SEO; and ii) if an SEO could be

executed, the required discount would be so large as to render the offering impracticable.

144
Bilicic Dep. Ex. 18, LAZ_TES00087062-68, at 67; Bilicic Dep. at pp. 68-70.
145
Bilicic Dep. pp. 70:19-71:3.

34
I certify that, to the best of my knowledge and belief:

 the statements of fact contained in this report are true and correct;

 the reported analyses, opinions and conclusions are limited only by the reported
assumptions and limiting conditions, and are my personal, impartial, and unbiased
professional analyses, opinions and conclusions;

 I have no present or prospective interest in the subject business to this case, and I
have no personal interest or bias with respect to the parties involved;

 my compensation is not contingent upon the value reported or upon any

predetermined result or value; and

 my compensation is not contingent on an action or event resulting from the analyses,

opinions, or conclusions in, or the use of, this report.

August 5, 2019

Date Murray M. Beach

35
 Exhibit 1

Curriculum Vitae
Murray M. Beach

Education:

Harvard College, Cambridge, MA: Graduated with Honors in History, 1976, AB

Amos Tuck School, Dartmouth College: Graduated with concentration in Finance & Operations, 1979,
MBA

Professional Credentials:

Certified Public Accountant: Granted 1985

Registered Principal with the NASD/FINRA: 1987
Series 63, 1987
ABAR, 2008

Work Experience:

Business Consulting Group, LLC, Westwood, MA 2012 – Present Founder and President. I manage this
valuation and advisory firm, which specializes in providing mergers and acquisitions, private placements
fairness opinions, valuations, and litigation support.

TM Capital Corp., Boston, MA 2012—Present Senior Advisor. I serve as an advisor and consultant to
the senior partners of TM Capital on various matters including merger assignments, fairness opinions, and
private placements.

TM Capital Corp., Boston, MA 2008 – 2011 Managing Director. I served as Head of the Technology
Group for this leading independent investment and merchant bank. I also managed the Boston Office. I
focused on mergers and acquisitions, private placements, fairness opinions and litigation support for both
private and public corporations.

Boston Corporate Finance, Inc., Westwood, MA 2002 – 2007 Founder and President. I managed this
investment banking advisory firm specializing in providing mergers and acquisitions, private placements
and other advisory services to private and publicly traded corporations. The primary focus of the work
was on technology based or dependent companies located worldwide.

KPMG Corporate Finance, LLC, Boston, MA 2000 – 2002 Managing Director and Group Head. I was
responsible for leading KPMG’s merger and acquisition team in performing assignments for technology,
media and telecommunications (TMT) companies in North America. I was also co-head of technology
mergers and acquisitions for KPMG worldwide. In the two years I was at KPMG, I supervised or lead
teams which closed approximately two-hundred sales or merger assignments for technology companies
around the world.

Advest, Inc., Boston, MA and Hartford CT 1990 – 2000 Senior Managing Director, Head of Corporate
Finance. I managed the corporate finance and investment banking division for Advest for nine years with
over sixty employees and offices in Boston, Hartford, New York, Philadelphia and Washington, DC. I
was a member of the Board of Directors of the company as well as a member of: The Senior Management
Committee; The Commitment Committee; The Capital Markets Committee and, the Investment
Committee. I was responsible for supervising or leading over 100 public underwritings as well as
numerous private placements, merger and acquisition advisory assignments, fairness opinions and

1
 Exhibit 1

valuation assignments. While at Advest I prepared and gave testimony in a number of litigation cases in
both State and Federal courts. I also served as the financial advisor to the State of Connecticut in
restructuring troubled companies and valuing its investments in growing businesses in the State.

Advest Capital, Inc., Hartford CT and Boston, MA 1995 – 2000 President. While at Advest, I was
President of Advest Capital, Inc. (ACI) was created to manage private equity investment funds. I was
responsible for the founding of two funds. ACI served as a corporate general partner of these funds and I
was the individual representing ACI’s interest in its operation and investment decisions.

Ulin, Morton, Bradley & Welling, Inc., Boston, MA 1985 – 1990 Managing Director. I provided merger
and acquisition services to numerous private and public companies. My work helped to grow the firm
from six to twenty-one professionals, prior to it being sold to Advest, Inc. in 1990. During five years at
UMBW, I was responsible for or assisted in the closing of over twenty M&A assignments worth in excess
of eight-hundred million dollars in aggregate. I also headed the valuation staff for this firm. Our
valuation work consisted of over four-hundred assignments done for numerous reasons, including:
Employee Stock Ownership Programs (ESOPs); fairness opinions; estate planning; corporate planning;
and, litigation support. The litigation support work consisted of preparation of and giving of expert
testimony in numerous State and Federal cases. Cases involved disputes of: breach of contract; wrongful
termination; shareholder dissenter rights; divorce; patent infringement; copyright infringement; creditor
committees; and Federal taxes. I prepared and gave testimony in cases filed in Maine, New Hampshire,
Vermont, Massachusetts, Rhode Island, Connecticut, New York, Delaware, and Illinois.

Business Appraisals, Inc., Hanover, NH 1982 – 1985 Founder and Executive Vice President. Provided
valuation services to companies and their owners throughout the United States. I performed over 100
valuations for private sales, ESOPs, estate tax filings, and litigation support. Litigation work included
testimony, either in deposition or in trial, in cases in New Hampshire, Massachusetts, Vermont, Maine,
and Connecticut state courts. It also included Federal Cases in Massachusetts and New Hampshire.

Alexander Grant & Company, Chicago, IL 1978 – 1982 Senior Accountant performing audit work on
numerous industrial and service companies. I was a member of Advanced Development Program,
designed to accelerate the select staff members to senior positions.

Other Affiliations:

M&A International, Inc. Chairman 2008 – 2009, President 1995, 2005 – 2007, Member
of the Executive Committee 1991 – 1996, 2003 – 2009, Senior
Advisor 2011-- 2012

Connecticut Venture Council: Member 1992 – 2000, President 1996 – 1998

Connecticut Technology Council: Member 1994 – 2000, President 1997 – 1998

National Rowing Foundation: Member Board of Directors, 1998 – Present

Gennius, Inc.: Member Board of Directors, 2006 – 2015

Rypos, Inc.: Member Board of Directors, 2018 - Present

2
 Exhibit 1

Speaking and Educational Engagements:

Amos Tuck School, Dartmouth College: Guest lecturer in Micro Economics Course lecturing on
valuation methodologies and factors used by investment bankers (1986)

Internal Revenue Service, Agent Training Seminar: Guest lecturer on valuation methodologies and
techniques to be used in valuing the stock in closely held businesses if included in estate tax filings and
other tax returns.

Amos Tuck School, Dartmouth College: Guest lecturer in Financial Management Course, lecturing on
valuation and merger and acquisition practices used by investment bankers (1989).

Massachusetts Continuing Legal Education: Expert in Residence on Valuations, 1991. I prepared and
gave several lectures during 1989 to lawyers on valuation techniques and methodologies used by expert
witnesses. Also prepared and participated as an expert in mock court demonstrations for MCLE on
divorce litigation.

Wharton School of Business, University of Massachusetts: Guest lecturer in Entrepreneurship Course,

speaking on raising capital and creating liquidity for rapidly growing companies. (1992, 1993)

University of Connecticut: Guest lecturer in Financial Management Course, speaking on valuation and
selling businesses. (1993, 1994)

Harvard Business School, Harvard University: Guest lecturer on mergers and acquisition for closely-
held businesses, covering valuation process, marketing process and typical problems encountered. (1995)

United States Senate, Banking Sub-Committee Hearing on repeal of the Glass-Steagall Act: Testified
before this committee as an expert on capital raising for private companies and in the initial public
offering of companies and the likely impact of the repeal of the act on these practices and the associated
adjustment in the cost of capital which would result. (1997)

Johnson School of Business, Cornell University: Guest lecturer on mergers and acquisition and public
offerings for Financial Management Course, covering the topic of setting the value and marketing this
value to investors and potential buyers. (1998)

Amos Tuck School, Dartmouth College: Guest lecturer in Investment Banking Course, speaking on
valuing and closing merger and acquisition assignments. (2004, 2005)

Boston College: Guest lecturer on the financing of high growth companies from start-up to full maturity.
(2013, 2014, 2016, 2018)

3
 Exhibit 1

Recent Expert Witness & Litigation Consultant Experience:

JAMS CASE NO. 1425019284: IN THE MATTER OF ARBITRATION BETWEEN: MARTIN

SHKRELI v. RETROPHIN, INC.

IN THE UNITED STATES COURT FOR THE DISTRICT OF DELAWARE: LYLE J. GUIDRY AND
RODNEY CHOATE, ON BEHALF OF THE MCRC ESOP AND A CLASS OF PERSONS
SIMILARLY SITUATIED V. WILMINGTON TRUST, N.A. AS SUCCESSORS TO WILMINGTON
TRUST RETIREMENT AND INSTITUTIONAL SERVICES COMPANY, Consolidated Case NO. 17-
250-RGA

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE:

IN RE EBIX, INC., STOCKHOLDER LITIGATION Civil Action No. 8526-VCS

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE: IN RE ENERGY TRANSFER

EQUITY, LP UNIT HOLDER LITIGATION Consolidated C.A. No. 12197-VCG

IN THE UNITED STATES COURT FOR THE SOUTHERN DISTRICT OF NEW YORK: IN RE
ZUBAIR PATEL, et al. vs. L-3 COMMUNICATIONS HOLDINGS, INC. et al., a Delaware Corporation
Civil Action No. 1:14-cv-06038-VEC

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE: IN RE XENCOR, Inc.

STOCKHOLDER LITIGATION Consolidated C.A. No. 10742-CB

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE: IN RE GFI Group, Inc.

STOCKHOLDER LITIGATION Consolidated C.A. No. 10136-VCL

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE: IN RE ARTHROCARE,

CORPORATION. STOCKHOLDER LITIGATION Consolidated C.A. No. 9313-VCL

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE: IN RE THE MCMORAN

EXPLORATION CO. STOCKHOLDER LITIGATION Consolidated C.A.No. 8132-VCN

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS,
DALLAS DIVISION: CedarCrestone, Inc. v. Affiliated Computer Services, Inc. n/k/a Xerox Business
Services LLC, Civil Action No.3:12-cv-4673

IN THE UNITED SATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN

FRANCISCO DIVISION: ORACLE AMERICA, INC. a Delaware corporation and ORACLE
INTERNATIONAL CORPORATION, a California corporation v. CEDARCRESTONE, INC., a
Delaware Corporation No. 12-cv-04626-NC

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE: IN RE THE ANCESTRY, INC.

STOCKHOLDER LITIGATION Consolidated C.A. No. 7988-CS

JAMS CASE NO. 1400013237: IN THE MATTER OF ARBITRATION BETWEEN: E S AND M, LLC
and ANDRE DANESH, v. FOREST FENWAY INVESTORS, LLC and JEFFREY A. LIBERT,

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE: IN RE THE MOSAIC

COMPANY STOCKHOLDER LITIGATION Consolidated C.A. No. 6228-VCL

4
 Exhibit 1

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE: IN RE: GSI COMMERCE,

INC. SHAREHOLDER LITIGATION Consolidated CA No. 6346-VCN

IN THE CIRCUIT COURT OF THE 17th JUDICIAL CIRCUIT OF FLORIDA, in and for BROWARD
COUNTY: ALAN SCHEIN and RESULTS TECHNOLOGIES, INC., a Florida Corporation V. ERNST
& YOUNG, LLP, a Delaware limited liability partnership Case No: 03-266(19)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS: In The Matter
Of Buckley v. Goldman Sachs & Co., et al. Civil Action No. 02-11497

5
Exhibit Exhibit 2

TESLA MOTORS, INC.

Materials Reviewed

 Court Filings:
Second Amended Verified Class Action Complaint, March 9, 2017.
Tesla motors, Inc. Memorandum Opinion, March 28, 2018.

 Depositions and Deposition Exhibits:

Deposition of Lyndon Rive, May 15, 2019.
Deposition of Radford Small, May 24, 2019, with exhibits 1-9.
Deposition of Gregory Bilicic, May 30, 2019, with exhibits 1-19.
Deposition of Courtney McBean, June 5, 2019, with exhibits 1-43.

 Bates Stamped Documents:

Bates Nos. DBSI_00001928-1932.
Bates Nos. DBSI_00001933-1954.
Bates No. DBSI_00003031.
Bates No. DBSI_00003032.
Bates Nos. DBSI_00003034-3036.
Bates Nos. EVR-TESLA_00209521-9522.
Bates Nos. EVR-TESLA_00224629-4630.
Bates Nos. EVR-TESLA_00224682-4684.
Bates Nos. EVR-TESLA_00225067-5069.
Bates Nos. TESLA00021507-21508.
Bates No. TESLA00021933.
Bates No. TESLA00021975.
Bates Nos. TESLA00022175-22176.
Bates Nos. TESLA00025767-25770.
Bates No. TESLA00026528.
Bates Nos. TESLA00026801-26805.
Bates No. TESLA00026821.
Bates Nos. TESLA00064894-895.
Bates No. TESLA00064929.
Bates Nos. TESLA00064930-64931.
Bates Nos. TESLA00066549-66552.
Bates Nos. TESLA00083075-83077.
Bates No. TESLA00083090.
Bates No. TESLA00083772.
Bates No. TESLA00084182.
Bates Nos. TESLA00088735-88738.
Bates No. TESLA00088793.
Bates Nos. TESLA00088843-88846.
Bates No. TESLA00091848.
Bates No. TESLA00091897.
1
Bates Nos. TESLA00092092-92094.
Bates Nos. TESLA00092974-92975.
Bates Nos. TESLA00093153-93154.
Bates Nos. TESLA00095991-95992.
Bates No. TESLA00137082.
Bates Nos. TESLA00138588-138591.
Bates Nos. TESLA00217828-217830.
Bates No. TESLA00237031.
Bates No. TESLA00248049.
Bates Nos. TESLA00522135-22137.
Bates No. TESLA00524703.
Bates Nos. TESLA00526821-26829.
Bates Nos. TESLA00526833-526834.
Bates No. TESLA00527463.
Bates Nos. TESLA00539551-539553.
Bates Nos. TESLA00540568-540571.
Bates Nos. TESLA00545545-545551.
Bates Nos. TESLA00563860-563863.
Bates Nos. TESLA00565497-565498.
Bates Nos. TESLA00711711-711715.
Bates Nos. SC_Third_Parties_0049584-0049586.
Bates Nos. TESLA00001855-1857.
Bates Nos. TESLA00001858-1861.
Bates Nos. TESLA00001862-1865.
Bates Nos. TESLA00001866-1867.
Bates Nos. TESLA00001868-1869.
Bates Nos. TESLA00001872-1874.
Bates Nos. TESLA00001882-1885.
Bates Nos. TESLA00001888-1890.
Bates Nos. TESLA00001897-1899.
Bates Nos. TESLA00738740-738743.
Bates Nos. TESLA00739559-739561.
Bates Nos. CGMI_00004949-4951.
Bates Nos. CGMI_00004952-4960.
Bates Nos. TESLQA00000712-759.
Bates Nos. CGMI_00011714-11715.
Bates Nos. BOFA_00007346-7348.
Bates Nos. BOFA_00007499-7500.
Bates No. BOFA_00082764.
Bates Nos. BOFA_00007776-7782.
Bates Nos. TESLA00531141-531172.
Bates Nos. SC_Third_Parties_0016119-16120.
Bates Nos. TESLA00529579-529587.
Bates Nos. TESLA00585366-585400.
Bates Nos. TESLADIR0095939-95944.
Bates Nos. TESLA00002018-2031.
Bates Nos. TESLA00002323-2355.
Bates Nos. TESLA00065990-65991.
2
Bates Nos. TESLA000711310-711311.
Bates Nos. TESLA000711312-711313.
Bates No. TESLADIR0024714.
Bates No. TESLADIR0024715.
Bates Nos. CS011165-11170.
Bates Nos. CS011230-11238.
Bates Nos. TESLA00126695-126706.
Bates Nos. EVR-TESLA_00079727-79737.
Bates Nos. EVR-TESLA_000113711-113719.
Bates Nos. EVR-TESLA_00032518-32521.
Bates No. DBSI_00004085.
Bates Nos. CS014211-14221.
Bates Nos. EVR-TESLA_00178461-178486.
Bates Nos. EVR-TESLA_00101126-101141.
Bates Nos. CS001462-1477.
Bates Nos. EVR-TESLA_00159578-159589.
Bates Nos. LAZ_TES00044350-44355.
Bates Nos. LAZ_TES00067720-67727.
Bates Nos. TESLA00309667-309676.
Bates Nos. CS000255-263.
Bates Nos. EVR-TESLA_00159562-159577.
Bates Nos. EVR-TESLA_00088711-88718.
Bates Nos. EVR-TESLA_00079460-79474.
Bates Nos. TESLA00087744-87745.
Bates No. CS004370.
Bates Nos. CS004371-4385.
Bates Nos. CS010618-10619.
Bates Nos. CS010620-10703.
Bates Nos. CS003113-3114.
Bates Nos. CS003115-3155.
Bates Nos. SPACEX004120-4122.
Bates Nos. TESLA00000001-108.
Bates Nos. TESLA00000230-335.
Bates Nos. TESLA00000712-759.
Bates Nos. TESLA00000868-942.
Bates Nos. TESLA00000979-987.
Bates Nos. TESLA00001115-1176.
Bates Nos. TESLA00001377-1445.
Bates No. EY-TES-2016-EWP-002328.
Bates Nos. LAZ_TES00039212-39328.
Bates No. LAZ_TES00039239.
Bates No. LAZ_TES00039330.
Bates Nos. LAZ_TES00039331-39336.
Bates Nos. LAZ_TES00039337-39340.
Bates Nos. LAZ_TES00067125-67240.
Bates Nos. TESLA00142716-142722.
Bates Nos. EY-TES-EM-000371-373.
Bates No. EY-TES-2016-EWP-001013.
3
 Bates Nos. EY-TES-EM-026275-026278.
Bates No. TESLADIR0036041.

 SEC Filings:
Tesla Motors, Inc. SEC filings, 2016-2017. Source: SEC Edgar.
SolarCity Corporation SEC filings, 2013-2017. Source: SEC Edgar.

 Other Materials:
SolarCity Ex. 10.19L – Required Group Agent Action 13, pp. 1-26.
Email from Eric Senay to Jason Wheeler, dated August 12, 2016.
2016-06-08 CS010704 SCTY Operating Model v8-Extension.XLSX.
Bloomberg (Ticker Symbol: H1CU) - ICE BofAML 1-3 Year CCC & Lower U.S. High
Yield Index.
https://www.standardandpoors.com/en_US/web/guest/article/-/view/sourceId/504352.
“Rule 144: Selling Restricted and Control Securities,” Investor Publications dated
January 16, 2013.
Various articles cited in the text of the Report.
All other materials and sources referenced in the report or exhibits.

4
EXHIBIT 154
 Exhibit 3
Seasoned Equity Offering Discounts for Renewable Energy Sector

Primary  Total Issuer TRBC Issue Discount/ 

Issue Date Issuer Name Exchange Offer Price Proceeds Business Sector (Premium)
6/9/2016 Gevo Inc Nasdaq $0.45 $9,486,205 Renewable Energy 53.13%
3/28/2016 Gevo Inc Nasdaq $0.35 $1,302,500 Renewable Energy 23.91%
6/24/2015 Green Brick Partners Inc Nasdaq $10.00 $174,448,970 Renewable Energy 1.48%
7/30/2014 American DG Energy Inc NYSE MKT $1.51 $4,001,500 Renewable Energy 31.05%
5/20/2014 Methes Energies International Ltd Nasdaq $2.00 $5,600,000 Renewable Energy 31.51%
4/23/2014 Plug Power Inc Nasdaq $5.50 $124,300,000 Renewable Energy 21.54%
4/2/2014 Pacific Ethanol Inc Nasdaq $16.00 $28,000,000 Renewable Energy 10.62%
3/25/2014 Solazyme Inc Nasdaq $11.00 $63,250,000 Renewable Energy 16.73%
3/6/2014 Plug Power Inc Nasdaq $5.74 $22,400,006 Renewable Energy 14.96%
1/17/2014 FuelCell Energy Inc Nasdaq $1.25 $31,625,000 Renewable Energy 25.60%
1/10/2014 Plug Power Inc Nasdaq $3.00 $30,000,000 Renewable Energy 9.64%
10/15/2013 SolarCity Corp Nasdaq $46.54 $181,971,400 Renewable Energy ‐29.42%
9/9/2013 Plug Power Inc Nasdaq $0.54 $11,550,600 Renewable Energy 28.95%
6/11/2013 First Solar Inc Nasdaq $46.00 $448,362,000 Renewable Energy 18.44%
5/30/2013 MagneGas Corp Nasdaq $0.89 $2,428,044 Renewable Energy 23.93%
2/13/2013 Plug Power Inc Nasdaq $0.14 $2,647,400 Renewable Energy 76.27%
6/28/2012 Gevo Inc Nasdaq $4.95 $61,875,000 Renewable Energy 43.56%
3/22/2012 Plug Power Inc Nasdaq $1.15 $17,192,500 Renewable Energy 28.57%
3/21/2012 FuelCell Energy Inc Nasdaq $1.50 $34,500,000 Renewable Energy 14.29%

Full Sample
Minimum ‐29.42%
Median 23.91%
Mean 23.41%
Maximum 76.27%

Excluding SolarCity
Minimum 1.48%
Median 23.92%
Mean 26.34%
Maximum 76.27%
 CERTIFICATE OF SERVICE

I, Kelly L. Tucker, hereby certify that on August 26, 2019, I caused a true

and correct copy of the foregoing Plaintiffs’ Expert Report of Murray M. Beach to

be served upon the following counsel of record via File & ServeXpress:

David E. Ross, Esq. Kevin R. Shannon, Esq.

Garrett B. Moritz, Esq. Berton W. Ashman, Jr., Esq.
Benjamin Z. Grossberg, Esq. Jaclyn C. Levy, Esq.
Ross Aronstam & Moritz LLP Jay G. Stirling, Esq.
100 S. West Street, Suite 400 Potter Anderson & Corroon LLP
Wilmington, DE 19801 1313 N. Market Street
Hercules Plaza, 6th Floor
Wilmington, DE 19801

/s/ Kelly L. Tucker

Kelly L. Tucker (#6382)