Tesla shares getting burned after offer to buy SolarCity

Tesla shares are plunging while SolarCity shares are rising the day after the surprising news that the Elon Musk-led electric-car company has offered to buy the solar company chaired by Musk.

During a conference call Wednesday morning — the second one about the proposed deal — Musk talked “synergies” and “common sense.” Combining the Palo Alto and San Mateo companies would “accelerate the future” of energy generation, Musk said. Think of it as a one-stop clean-energy company: cars, batteries, energy, storage, solar panels.

Ravi Manghani, director of energy storage at GTM Research, agrees and called it a “natural extension,” Lou Hansen reported Tuesday.

But many investors and analysts aren’t buying it.

The proposed deal is being seen as a bailout of SolarCity, which has been struggling and whose shares had been down 60 percent so far this year. SolarCity’s CEO is Lyndon Rive, cousin of Musk.

The acquisition offer is for shares, not cash. But Tesla recently had to sell more than $1 billion in stock to raise fresh capital to help pay for its new, ambitious car-production plans amid heavy demand for the company’s upcoming Model 3 — which analysts believe should be the company’s main focus.

“Uncertainty around the acquisition and the resulting corporate structure will weigh heavily on the stock,” said Oppenheimer analyst Colin Rusch, who downgraded Tesla stock to perform from outperform.

Will shareholders approve the deal? Musk is the biggest single shareholder in both Tesla and SolarCity, and will recuse himself from the voting, which is scheduled to take place in the next few months.

SolarCity shares are up about 5 percent to $22.27.

(Updated stock price) Tesla shares are down nearly about 10 percent to almost $199 at the moment after falling to as low as $193.20 in early-morning trading. (End update)

The tanking of the stock will make things even more complicated and expensive for the electric-car company, since the deal is supposed to be a stock swap worth up to $3 billion.

[graphiq id=”7sggxdQO6Mt” title=”Solarcity Corporation (SCTY)” width=”700″ height=”464″ url=”https://w.graphiq.com/w/7sggxdQO6Mt” link=”http://listings.findthecompany.com/l/15984994/Solarcity-Corporation-in-San-Mateo-CA” link_text=”Solarcity Corporation (SCTY) | FindTheCompany” ]

 

Photo: Tesla Motors CEO Elon Musk speaks at a conference at the Paris Pantheon Sorbonne University as part of the United Nations Climate Change Conference on Dec. 2, 2015. Tesla is offering to buy SolarCity in an all-stock deal worth $26.50 to $28.50 per share. (Francois Mori/AP)

 

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