Tesla will spend about $2.6 billion on solar panel maker SolarCity in an all-stock deal.
While electric car maker has said that the tie-up would create a one-stop shop for cleaner energy, some have questioned the motives behind it.
Elon Musk is the chairman and biggest shareholder of both companies. And SolarCity is run by his cousin, lyndon Rive. SolarCity’s stock slid more than 6 per cent before the market opened today.
The buyout gives SolarCity Corp stockholders 0.110 Tesla common shares per SolarCity share, which puts the value of SolarCity stock at $25.37 per share. Tesla previously said it would offer $23.56 to $25.30 per SolarCity share.
Musk has cultivated the image of a maverick since he made his initial fortune as co-founder of online payment service, PayPal, which eBay bought for $1.5 billion in 2002. He is hailed as a visionary by admirers who applaud him for shaking up the auto industry with Tesla’s sleek, electric vehicles and drawing up plans to send people to Mars on Space X’s rockets.
His detractors ridicule him as an unpredictable control freak.
Musk owns a 26 per cent stake in Tesla Motors Inc., based in Palo Alto, California, and a 22.5 percent stake in SolarCity. His motivation to pair Tesla with the San Mateo, California, solar company primarily revolves around a battery system that stores solar energy in homes and businesses.
The deal may draw more attention to the financial position of both companies. Tesla has lost $1.2 billion in the past two years alone while SolarCity has suffered losses exceeding $1.1 billion during the same span. Analysts surveyed by FactSet are predicting a 416 million loss from Tesla this year while they believe SolarCity will lose $851 million. On Monday, SolarCity said that it experienced lower-than-expected residential bookings in the first half of the year, so it’s reducing its full-year guidance for megawatts installed to a range of 900 to 1,000 megawatts. Its previous outlook had been for 1,000 to 1,100 megawatts.