By on June 22, 2016

Elon Musk + Tesla Model S Circa 2011

Founded with the intent of finding energy solutions (and profit) in the power of the sun, SolarCity’s photovoltaic energy business has grown in leaps and bounds since 2006. Now, as the company poises itself for bigger profits, a very familiar man wants to acquire the operation.

Tesla Motors published a note on its website yesterday stating its intention to acquire SolarCity. The offer, made by Tesla, would see the electric automaker trade shares with the San Mateo, California-based company, bringing the business into its fold.

Tesla founder and CEO Elon Musk is no stranger to SolarCity’s operation — he co-founded it with cousins Lyndon and Peter Rive (CEO and CTO of Solar City), and serves as the company’s chairman.

In a letter to Lyndon Rive, published on Tesla’s website, the automaker’s board of directors offered “a proposal to acquire all of the outstanding shares of common stock of SolarCity in exchange for Tesla common shares … This proposal represents a value of $26.50 to $28.50 per share, or a premium of approximately 21% to 30% over the closing price of SolarCity’s shares, based on today’s closing price of SolarCity’s shares and the 5-day volume weighted average price of Tesla shares.”

Tesla noted that both companies target similar buyers, but with different products. Aligning the two would allow them to share technology and expertise.

“We would be the world’s only vertically integrated energy company offering end-to-end clean energy products to our customers,” Tesla stated. “This would start with the car that you drive and the energy that you use to charge it, and would extend to how everything else in your home or business is powered.”

SolarCity hasn’t issued a decision yet, but its stock price rose 20 percent after news of the offer broke, sinking back to a 15-percent lift later in the day. Tesla’s stock went in the opposite direction, sinking as much as 11 percent.

As MarketWatch points out, Musk owns a 22.2 percent stake in SolarCity and a 21.3 percent stake in Tesla. In a conference call yesterday, Musk said he recused himself from board discussions on the deal to prevent a conflict of interest.

After Recode published a story saying Musk and his family stand to make $700 million through the acquisition, Musk fired back via Twitter.

“No one is ‘taking home’ anything,” said Musk. “In a stock for stock transaction, nothing comes off the table.”

The lion’s share of SolarCity’s profit comes from rooftop solar installations. Last year, the company changed its strategy, focusing on profit instead of growth. The previous five years saw SolarCity acquiring new holdings to expand its portfolio, but the company’s focus now is opening its massive solar panel factory in Buffalo, New York.

After a delay, and a huge investment from the state of New York, the factory is scheduled to open in mid-2017.

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24 Comments on “Elon Musk’s Company Wants to Buy a Company Founded and Chaired by Elon Musk...”

  • avatar

    I wonder what Tesla will be like in 10 years, given how far they’ve gotten since 2012.

  • avatar

    What a huckster. Tsla got deservedly slammed for his shenanigans.

  • avatar

    It looks a little strange at the outset, but it makes sense to merge the two companies. The Solar City half can be profitable enough to keep the Tesla half alive during its development/investment phase, and Tesla can market solar panels to is customers either in preparation for car delivery or not long afterwards.

    Elon Musk has his detractors, but he doesn’t think small, and his ventures are so extraordinary and forward-thinking that he is becoming a historical figure in our own time.

    His downfall: getting married again. One of these days she’s going to leave him and take many, many millions in lovely parting gifts.

    • 0 avatar
      SCE to AUX

      What you said.

      I’m a Musk fan from a distance, but I don’t have to work for him or be married to him.

      • 0 avatar

        SCE: Are you an ex-Spacex employee? Just curious. I am a assistant professor of mechanical engineering at a somewhat well-known university. Two of my students have gone to work for Spacex. They regale me with tales of extreme work binges and professional canings. Some of the stories they tell are incredible – I’d love to hear them all!

    • 0 avatar

      Except that SolarCity isn’t profitable. :-/

  • avatar
    Big Al from Oz

    He only would do this if more government money was coming his way.

    Like I stated domestic and now they are talking commercial enterprises in Australia will be “encourged” to adopt solar.

    Like I stated Elon Musk smells taxpayer money.

    • 0 avatar

      A nearly-free, taxpayer-built solar panel factory is probably a big inducement to this deal. Now, I wonder what SolarCity is going to do with all those panels it builds. It’s currently addicted to cheap Chinese panels.

      • 0 avatar

        Why is it that when Detroit automakers get tax breaks – not to mention government bailouts – they get a free pass from the B&B, but every mention of Tesla provokes an automatic outcry over the tax reductions offered?

  • avatar
    Old Bird

    “Tesla noted that both companies target similar buyers, but with different products. Aligning the two would allow them to share technology and expertise.”

    The same CEO (self-proclaimed powerful CEO) and you need to merge in order to share technology and expertise?

    This smells like payback to Wall Street – a net zero value-gain public transaction.

    Not that churning would be out of character.

  • avatar

    “The lion’s share of SolarCity’s profit comes from rooftop solar installations.”

    This statement implies that SolarCity is profitable. It is not.

    Tesla, which has an impressively negative cash flow, is adding another entity that is burning through cash. Only a moron would believe this is a good deal for Tesla shareholders.

    • 0 avatar

      Evidently, Wall St. agrees with you. I’m a supporter of electric cars in general, and do like Tesla. But I don’t understand Musk’s reasoning and this move really sounds premature to me.

      But as other commenters point out, there’s something going on we don’t know.

    • 0 avatar

      JD23, SolarCity can’t lose. They’ve got the contracts to supply all the military bases in the Southwest with solar panels for roof top installation on Base Housing.

      • 0 avatar

        Actually, that just means SolarCity will lose even more. Its gross profit margin is far too low to support its SG&A. It is in such poor financial condition that its interest expenses are almost as high as its gross (not operating) profits.

        • 0 avatar

          Sure, but they’re being kept alive and working with US gov’t contracts.

          You should see the lavish roof-top installations at the military bases in my area. It would water the eyes of a solar-energy fan.

  • avatar

    Musk is an absolute genius at getting taxpayers and others to pay for his dreams. Residential solar system installation is a low margin, highly fragmented business. Building out a national brand for Solar City has depended on tax credits for the customers, tax credits for the factory and massive consumer debt alongside money from gullible investors to make the whole thing go.

    There is a consistent theme to everything Musk does.

  • avatar

    This Elon Musk have a fierce creativity

  • avatar

    Yes, All with Taxpayers monies.

    Lets cut the welfare for electric autos and let these big corps. make it on their own.

    Wish him well, but seems all he gets into is something that the govt. is supporting so he can rip off the taxpayers.

    Let him make it on his own. He established now. Cut all tax breaks to all companies and sport teams, too.

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