Tesla is looking to buy Solar City in a deal which would be worth $2.8 billion, the purchase if completed would be done in all stock.
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Tesla’s chief executive Elon Musk said the deal, which will be paid for in Telsa shares, was a “no brainer”. SolarCity shares scaled nearly eighteen percent to $25.02.
Musk, speaking on a conference all with reporters, called the merger “an incredibly compelling solution” that would transform Tesla into “the world’s only vertically integrated energy company offering end-to-end clean energy products to our customers”.
SolarCity is one of the largest rooftop solar companies in the USA, selling or leasing its panels to homeowners, the military and big businesses including Intel, Walgreens, and Wal-Mart. It could also see Solarcity’s stock valued at up to 30% more than it is today.
Adding an unprofitable company to Tesla, despite Musk’s suggestion that a solar panel maker and a company making battery-driven cars is a ideal fit, could further strain Tesla’s finances, The Wall Street Journal said Wednesday. “It’s an obvious thing to do”. Tesla has actually lost $1.2 billion in the previous two years alone while SolarCity has suffered losses exceeding $1.1 billion during the same duration.
With Tesla vehicles, solar panels and Powerwall in place, customers could deploy and consume energy while lowering costs and minimizing a customer’s dependence on fossil fuels and the energy grid. Elon is a major shareholder in both companies.
Tesla is now riding a bigger wave after the launch and pre-sales of its Model 3 electric vehicle. It uses Tesla battery packs as part of its solar projects. Instead of just delivering a vehicle to them, or a PowerWall battery, or install a solar panel set, Tesla Motors could do all three, if the customer is interested.
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SolarCity will become cash flow positive in the next three to six months and will not have a material impact on Tesla’s future cash needs or expectation to be cash-flow positive by year-end, Musk said.
