The company said it was making 2,000 vehicles per week by the end of the second quarter, and believes it can crank that up to 2,200 vehicles by the end of the third quarter and 2,400 vehicles by the end of this year. It still needs the approval of a majority of “disinterested” shareholders of both companies, meaning Musk wouldn’t have a say.
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Kevork Djansezian/Getty Images Elon Musk, the CEO of Tesla, announces $2.6B deal with SolarCity on August 1.
“Solar and storage are at their best when they’re combined”, SolarCity said in a blog.
Tesla reported a loss of $US282.3 million in the first quarter and has had annual losses the last five years.
SolarCity shares tumbled 6.2 per cent to US$25.04 in midday trade, while Tesla dipped 0.7 per cent to US$233.18.
The all-stock deal is valued at R36 billion based on the 5-day volume weighted price of Tesla shares for the 29th of July.
Also last week, Tesla’s $5 billion battery factory in Nevada opened even though it’s only 14% complete.
Tesla is dreaming to transform it as a carbon-free energy and transport company and the merger will help in offering one-stop solar and storage experience with one installation, one service contract and one phone app. The overall cost of ownership is also expected to go down with the reduction in hardware and installation cost.
Though the deal hasn’t come as a surprise to many, Musk will have his task cut out while persuading the shareholders of both companies that the deal will boost revenues and drive shareholder value northward. CEO of Tesla and Chairman of SolarCity, Elon Musk who is also cousins with the SolarCity’s CEO-Lyndon Rive said that the deal would create a “stronger balance sheet”, for both the firms. The proposal would now value SolarCity shares at $25.37, a slight premium to Monday’s closing price of $24.72. However, Tesla shares have recovered since then.
Image: Tesla Motors headquarters in Palo Alto, California, US. In June, the government announced it would investigate Tesla’s semi-autonomous Autopilot system after a driver using the system died in a Florida crash.
The acquisition, if approved by the shareholders of both companies, would create a clean-energy, transportation and energy-storage company with a unique yet untested business model.
“We are skeptical of the benefits”, stated Barclays in a research report in June.
In a separate statement updating its 2016 operations, SolarCity said Monday that “residential bookings in the first half of the year were still lower than we anticipated” despite fresh efforts to boost sales.
Neither Tesla nor SolarCity are profitable and have incurred massive amounts of debt because the companies are spending in order to expand in what are still fairly niche industries.
SolarCity’s stock has fallen by 57 percent in the past year.
Morgan Stanley analyst Adam Jones, formerly known as one of the most bullish analysts said the risks related to the takeover outweigh any rationale.
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“See the robots! And be greeted by them!”
