Tesla Motor Inc. on August 1st announced it had reached an agreement to acquire SolarCity in an all-stock offer valued at US$2.6 billion, with approximate US$ 25.37 a share, in Q4. SolarCity shareholders will receive 0.11 share of Tesla for each of their own company share.
Founded by Elon Musk and his cousinsPeter and Lyndon Rive, SolarCity was born from Musk’s concept to develop residential solar systems. Accordingly, Elon Musk is the founder and chairman of both SolarCity and Tesla, as well as the shareholder owning the largest proportion, with 22.2% share of SolarCity and 21.3% share of Tesla respectively.
Elon Musk called the merger of the two corporations a “no-brainer” deal, saying the acquisition would definitely benefit both companies and help reduce their operating costs. However, some analysts held the opposite perspective, pointing out that it would not possibly happen as the finance of both companies are in the red, with valid stats suggesting a total loss of US$1.66 billion of both Tesla and SolarCity in 2015. Therefore, as the news was released, Tesla’s stock price slid by 12%.
Not only did the criticism give Musk pressure, but the development of the Model 3 has also pushed Tesla to its limit. Apart from that, the heavily subsidized SolarCity will face an operation difficulty once the US government stops or cuts the new energy subsidy support. Therefore, Lyndon Rive, the co-founder and CEO of SolarCity, once said he would not vote for the proposal.
Tesla’s current market value stands at US$34.6 billion. Early in June this year, it has declared to acquire SolarCity in a US$2.8billion all-stock deal.
(Post share authorized from technews.tw. Translated by Eva Chang and copyedited by Kevin Yang, translators at TrendForce Corp.)
(Photo Credit: SolarCity's blog)