Will The Sun Shine on Tesla’s Acquisition of SolarCity?

Posted by: EmmamHowe // Marketing/Green Policy Development

The cleantech-savvy vanguard, Elon Musk of Tesla Motors, recently offered to buy his cousin Lyndon Rive's company, SolarCity, in an unexpected deal that values the solar installer at more than $2.5 billion. This contract represents a value of $26.50 to $28.50 per share, or a premium of approximately 21 percent to 30 percent over the closing price of SolarCity’s shares.

Many are calling this a very risky move, as Musk has taken out loans to buy up shares in Tesla and SolarCity, some backed by his personal stock holdings in both companies, thus exposing himself to margin calls if Tesla’s stock prices slide too far. Critics believe this deal will add to the growing complexity and vertical integration of Tesla and will also add an unprofitable operation to its already-strained finances. Tesla, in a huge growth effort that includes building a $5 billion battery factory in Nevada, isn’t expected to be profitable until 2020 at the earliest and recently launched a share sale to raise $1.7 billion for capital expenses.

However, In Musk’s view, putting Tesla and SolarCity together is “the obvious thing to do” as “the world does not lack for automotive companies, the world lacks for sustainable energy companies.” Musk believes the timing of the deal is right as Tesla is ramping up production of batteries used in conjunction with solar panels, SolarCity’s main business, he said. The acquisition aims to create a company employing nearly 30,000 people with all products renamed “Tesla” that will package electric cars, batteries and solar panels for customers.

So what does Musk believe this means for the future of clean energy? He envisions Tesla customers driving clean cars, using Tesla battery packs to help consume energy more efficiently, and finally being able to access the most “sustainable energy source that’s available: the sun.” He claims the world is changing its tune about renewable energy and that most of his customers have an interest in solar, though few have installed it. Thus, even though the deal has a high degree of risk associated with it, if the acquisition succeeds, this will hopefully demonstrate the profitability and desirability of the sustainable energy market.

http://www.bloomberg.com/news/articles/2016-06-21/tesla-announces-offer-to-acquire-rooftop-solar-company-solarcity
http://www.greentechmedia.com/articles/read/EV-and-Battery-Builder-Tesla-Offers-to-Acquire-PV-Leader-SolarCity-For-2?utm_source=breakingnews&utm_medium=Newsletter&utm_campaign=breakingnews#st_refDomain=&st_refQuery=
http://www.nytimes.com/2016/06/22/business/dealbook/tesla-solarcity-elon-musk.html