Shareholders to decide on future of Tesla, SolarCity and Musk’s vision

PALO ALTO – It’s a $2 billion question for investors to answer today — should Tesla and SolarCity hitch their futures together?

Shareholders for the two green energy companies led by Elon Musk are expected to reach a decision on a proposed merger today after a special shareholders meeting. The results will be a broad measure of investor confidence in Musk to deliver on his ambitious goals of a clean energy future.

The proposed merger brings together two businesses carrying enormous debt and promise. Musk serves as chairman for both companies. His cousins, Lyndon and Peter Rive, are co-founders of SolarCity, a leading U.S. solar installer.

SolarCity has yet to turn a profit; Tesla broke into the black last quarter after shipping a record number of vehicles. Both use tremendous amounts of cash to fuel operations.

They also have massive capital expansion projects pushing forward. Tesla is building its $5 billion Gigafactory in Nevada, and plans to nearly double the size of its Fremont factory to boost production of its new, lower-cost Model 3 sedan.

SolarCity is constructing a $750 million, government-funded solar panel factory in Buffalo, N.Y. Tesla has also teamed up with Panasonic to produce photovoltaic cells at the plant.

The proposal has drawn mixed reviews. The merger earned approval from Institutional Shareholder Services. The investment advisory company said that despite the messy corporate structure, Tesla has “taken the requisite steps to reassure its shareholders.” It believes the combined companies can handle the debt.

But investment firm Glass Lewis knocked the deal, also noting the challenges of a tangled, family leadership team. The advisors said SolarCity is in poor financial health and the acquisition amounts to a “thinly veiled bailout plan” by Tesla.

The proposal was announced in June. Musk told investors the combined company would offer a full gamut of renewable energy products in a growing market. Green consumers could find a complete solar panel system, battery storage and electric vehicles at Tesla stores around the world.

Since the announcement, Tesla and SolarCity have revealed a new, solar roof where glass shingles convert sunshine into electricity. Tesla has also promoted a series of advances and partnerships in its battery storage business.

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. (Francois Mori/AP)

 

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