UPDATE 2-SolarCity expects lower IPO price after delay

Wed Dec 12, 2012 1:34pm EST

* Now expects to sell 11.5 mln shares at $8 each

* Previously planned to sell 10.1 mln shares at $13-$15

* Pricing Wednesday night, trading Thursday - underwriter

By Olivia Oran and Nichola Groom

Dec 12 (Reuters) - SolarCity Corp, the top U.S. installer of residential solar systems, slashed the expected price of its initial public offering and said it would sell more shares a day after an underwriter said the deal had been postponed.

The move values the Elon Musk-backed startup at $585 million, almost half its earlier proposed valuation of nearly $1 billion.

SolarCity is among Silicon Valley's hottest clean technology companies, and its IPO has been widely anticipated in venture capital and solar energy circles.

The company has grown rapidly, largely because it allows customers to lease solar panels by paying a monthly fee and avoiding the hefty costs of an outright purchase. It has also benefited from a slide in the price of solar panels that has helped spur dramatic growth in U.S. solar installations.

But a gap between how SolarCity was marketed - as a fast growing technology firm - and investor perception of the company as more of a utility or power company play, likely contributed to price sensitivity, according to a source familiar with the deal.

While technology companies can often command higher valuations because of their growth potential, utility companies are typically regarded as safer investments and trade at lower multiples.

Investors had said previously that SolarCity's projected $1 billion valuation was too rich. That value would have made it the second most valuable U.S.-listed solar company behind panel manufacturer and project developer First Solar Inc, which has a market capitalization of $2.6 billion.

Under the new proposed valuation, SolarCity would be valued closer to SunPower Corp's $618 million market capitalization.

SolarCity said on Wednesday it now expects to sell 11.5 million shares at $8 each. It had previously planned to sell 10.1 million shares priced between $13 and $15 each.

The offering is likely to be priced on Wednesday night and start trading on Thursday on the Nasdaq, an underwriter said.

The company said in a filing that existing stockholders would also sell about 65,000 shares. ()

The clean technology sector has suffered some recent high-profile flameouts with the bankruptcies of solar company Solyndra and battery maker A123 Systems.

Though solar installations are growing dramatically in the United States, investors are also gun shy after pouring money into solar manufacturers whose share prices collapsed due to industry oversupply and a sharp slide in the price of their products.

"You've got the fiscal cliff uncertainty, market uncertainty and misunderstanding about which part of the solar value chain is expanding and seeing growth," said Ron Pernick, founder of Portland, Oregon-based cleantech research firm Clean Edge. "Markets are staying pretty steady but I still think there is an undercurrent around all of the uncertainty. I don't see how that would help any company seeking to go public right now."

SolarCity was promoted as the most promising alternative energy IPO candidate since the debut of Musk's electric car company, Tesla Motors Inc, in 2010.

Technology entrepreneur and PayPal co-founder Musk is SolarCity's chairman and the first cousin of its co-founders, Lyndon and Peter Rive. He currently holds a 31 percent stake in the company and said he will buy $15 million of SolarCity stock in the IPO.

SolarCity's revenue has more than quadrupled in the last five years.

The San Mateo, California-based company reported a net loss of $80 million on revenue of $103.4 million for the nine months ending Sept. 30, 2012.

Google Inc and U.S. Bancorp have helped finance some SolarCity projects, but investors said that determining an IPO price was challenging because there are few publicly traded direct competitors with which to compare it.

Underwriters picked for the IPO include Goldman Sachs, Credit Suisse, and Bank of America Merrill Lynch.