Shares in Tesla Motors Inc (NASDAQ:TSLA) plummeted in pre-market trading as the electric auto maker pressed ahead with a US$3bln all-stock offer to buy out solar power company SolarCity Corp (NASDAQ:SCTY).
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The energy services provider, on the other hand, provides solar panels to Tesla’s car-charging stations.
Solar City leads the nation in rooftop solar systems for homes.
Tesla has lost US$1.2bln in the past two years, while SolarCity has suffered losses of more than US$1.1bln over the same period.
Musk, who is the chairman and biggest shareholder of both companies with stakes of 22 and 27 percent, respectively, said he has recused himself on voting his shares on the deal.
“I have zero doubt about the deal, should have done it sooner”, he said on an shareholder call on Wednesday.
According to the Tesla Blog, the SolarCity team has built its company into the clear solar industry leader in the residential, commercial and industrial markets, with significant scale and growing customer penetration.
No cash will change hands in the deal.
SolarCity is the USA market leader in residential rooftop solar systems.
SolarCity is expanding its Maryland operations with a new 20’000 square foot operations center in Upper Marlboro – bringing new jobs to the area.
The proposed exchange ratio is 0.122 to 0.131 shares of Tesla common stock for each share of SolarCity common stock. The latter has offered to acquire all of the former’s outstanding stock for $26.5-28.5 per share.
“Ideally, you want to see Tesla focus on Tesla – building Teslas and expanding the cars”, Ivan Feinseth, an analyst at Tigress Financial Partners told Reuters. Tesla, said Feinseth, will continue to need a great deal of money.
In trading, Tesla’s shares dropped 13 percent to $189.99, while stock in Solar City climbed 18 percent to $25.04.
Although he said he didn’t know for certain, Musk estimated about only about one-fourth of Tesla owners now have solar energy panels. In 2015, it launched Tesla Energy, a renewable energy storage solution with ambitious expansion plans.
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Musk said his vision about Tesla was that of a major in sustainable energy than a mere automotive company.
