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Tesla Motors Inc (TSLA) and SolarCity Merge in $2.6 Billion Deal

California based electric vehicles manufacturer, Tesla Motors Inc, has agreed a merger deal with SolarCity. The deal is worth $2.6 billion, and SolarCity was purchased with Tesla stock. The final stock exchange rate was agreed at 0.11, around 10% lower than expected.

Elon Musk is the CEO of Tesla and the Chairman of SolarCity. He owns around 20% of both firms, and many analysts and investors have suggested that Musk’s position in the companies could lead to a conflict of interest.

An article published on the Financial Times gave perspective on how the two companies would be working more closely together via the integration. It reads “Tesla executives made a renewed effort to sell the deal to Wall Street on Monday, laying out in more detail how they expected to slice $150m from SolarCity’s annual costs and sell its solar panels in Tesla’s retail stores alongside its own electricity storage systems and cars.”

The article went on to say “They also tried to persuade Wall Street that Tesla would become more efficient in how it uses capital, addressing a growing concern as the company tries to accelerate its expansion. Tesla’s ability to raise large amounts of capital cheaply has been a considerable advantage up to now, though it will face extra capital demands after a SolarCity deal, since the company is moving from installing and financing solar panels into becoming a big manufacturer in its own right.”

Tesla Motors Inc investors have been reacting badly to the idea of a merger, and the car maker’s stock has continued to fall as the deal was finalized and announced on the 01/08/2016. Tesla opened its Gigafactory (which is based in Reno, Nevada on the 31/07/2016.)

As trading stopped on the 01/08/2016, Tesla Motors Inc’s stock was down by 2.04%, trading at $230.01 per share, giving the firm a market capitalization of $34.16 billion.


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