Update: Before reading on, do you think Tesla’s aim to buy SolarCity is a good or bad idea? Chime in via the survey below.
Update: Elon is highlighting on the press call how quickly Tesla could put solar, an EV charging station, and a Powerwall together after acquiring SolarCity.
Elon highlighted the acquisition option at this stage of both companies as a “no-brainer.” Duh…. However, the bears are rushing to the microphone and claiming all sorts of other things, so be sure to view the story with whichever spin you see (glass overflowing with the elixir of life or glass being shattered and scooped into your mouth as you are forced to watch Jerry Springer).
Nope, your Model 3 is not under threat. No plans to production plans on that. (Obviously, but someone had to ask.)
At a cost of $2.5–3 billion, Tesla may be getting a sweet deal, but it’s still going to stretch the company to the point of having to offer new shares of its own to make the acquisition.
More Updates (from beyond the press call): The first person to hit the comment boards on this one wrote a great line I want to highlight: “This could easily turn Tesla into the equivalent of GM + Exxon, for the next generation. An incredible long-term play.” He, like many others, is still a bit concerned that SolarCity’s somewhat difficult financial situation could threaten Tesla. (Note that SunEdison just collapsed after biting off too much and stockholders destroyed the value of the company.)
Tesla’s stock price (after hours) has collapsed as SolarCity’s has jumped through the roof. I assume expectation is that stockholders of SCTY (like me) after this get a big boost, but Tesla needing to extend its finances even further and offer more shares (diluting existing shares) comes with a short-term (at least) downside and TSLA (which I also own shares of for long-term reasons) is taking the brunt of that from the feverish short-term traders who love riding financial roller coasters.
— Views From The Lake (@ViewsFromLake) June 21, 2016
Interesting notes on Elon financials: “Musk picked up more shares of SolarCity yesterday, putting his total at 22.2 million shares. Tesla made the SolarCity offer at a range of $26.50 to $28.50 per share. Of course, Musk owns a fair amount of Tesla shares — just north of 27.8 million, or 20.8 percent of the company.”
TSLA seemed to hit a floor at about $190/share, and SCTY seemed to hit a ceiling at about $26/share (in after-hours trading). As with spring weather, trends are subject to change at any moment.
Update: Here are some preliminary results from our survey (nearly 1,000 responses at the moment):
Initial commentary: Well, who saw this one coming? SolarCity has dominated the residential/commercial rooftop solar industry in the United States and is one of the largest solar companies in the world. As you know, of course, Tesla CEO Elon Musk is Chairman of SolarCity, and his cousins Lyndon Rive & Peter Rive are CEO & CTO of SolarCity. Tesla long ago announced plans to solarize its Tesla Supercharger stations, and it’s obvious Tesla aims to put a lot of solar panels on its record-size battery factory (Gigafactory) in Nevada. But seriously — which of you anticipated that Tesla would propose to acquire SolarCity?
As you may know, I’m an investor in both SolarCity and Tesla Motors because I think they have clear competitive advantages (and the focus on a transition to a cleantech, sustainable world, which essentially is a requirement for me). As an investor, I’m playing the long game, just assuming these companies will make it through the early stages of their industries and come out much bigger and more efficient in the end. Nonetheless, it’s been a bit concerning to watch SolarCity miss targets in recent months and its stock stumble, roll, and drop. Naturally, this must be part of the story — weather Tesla sees SolarCity as in need of help that warrants an acquisition, or just sees it as being at a great potential acquisition price, I don’t know, but the long-term point is obvious: Tesla is on the verge of turning into a titan of the cleantech industry … even more than it already was.
As is clear to anyone paying attention, another important point is that Elon Musk is passionate about addressing global warming and air pollution. It seems he’s either getting more and more concerned and vocal about these threats, or he just feels he’s reached a certain level of influence that it is good to speak out more and more about these problems. Either way, though, you have to be out of your mind to think he isn’t deeply concerned about where society is taking itself, and essentially trying his absolute best to help turn the boat around. Having a full ecosystem within one corporate roof that produces clean energy, stores clean energy, and puts clean energy into cars to propel them forward faster than your average Ferrari, Lamborghini, or Porsche is a natural fit for Elon’s aims and approach.
Anyway, though, that’s my intro. Below is the full press release Tesla Motors just sent our way. A press call just started. We’ll let you know what else comes out of it.
Image by vectoropenstock.com
Tesla Makes Offer to Acquire SolarCity
Tesla’s mission has always been tied to sustainability. We seek to accelerate the world’s transition to sustainable transportation by offering increasingly affordable electric vehicles. And in March 2015, we launched Tesla Energy, which through the Powerwall and Powerpack allow homeowners, business owners and utilities to benefit from renewable energy storage.
It’s now time to complete the picture. Tesla customers can drive clean cars and they can use our battery packs to help consume energy more efficiently, but they still need access to the most sustainable energy source that’s available: the sun.
The SolarCity team has built its company into the clear solar industry leader in the residential, commercial and industrial markets, with significant scale and growing customer penetration. They have made it easy for customers to switch to clean energy while still providing the best customer experience. We’ve seen this all firsthand through our partnership with SolarCity on a variety of use cases, including those where SolarCity uses Tesla battery packs as part of its solar projects.
So, we’re excited to announce that Tesla today has made an offer to acquire SolarCity. A copy of Tesla’s offer is provided below.
If completed, we believe that a combination of Tesla and SolarCity would provide significant benefits to our shareholders, customers and employees:
- We would be the world’s only vertically integrated energy company offering end-to-end clean energy products to our customers. 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. With your Model S, Model X, or Model 3, your solar panel system, and your Powerwall all in place, you would be able to deploy and consume energy in the most efficient and sustainable way possible, lowering your costs and minimizing your dependence on fossil fuels and the grid.
- We would be able to expand our addressable market further than either company could do separately. Because of the shared ideals of the companies and our customers, those who are interested in buying Tesla vehicles or Powerwalls are naturally interested in going solar, and the reverse is true as well. When brought together by the high foot traffic that is drawn to Tesla’s stores, everyone should benefit.
- We would be able to maximize and build on the core competencies of each company. Tesla’s experience in design, engineering, and manufacturing should help continue to advance solar panel technology, including by making solar panels add to the look of your home. Similarly, SolarCity’s wide network of sales and distribution channels and expertise in offering customer-friendly financing products would significantly benefit Tesla and its customers.
- We would be able to provide the best possible installation service for all of our clean energy products. SolarCity is the best at installing solar panel systems, and that expertise translates seamlessly to the installation of Powerwalls and charging systems for Tesla vehicles.
- Culturally, this is a great fit. Both companies are driven by a mission of sustainability, innovation, and overcoming any challenges that stand in the way of progress.
Today’s offer to acquire SolarCity is only the first step toward a successful combination of Tesla and SolarCity. We will provide a further update if and when an agreement is reached.
June 20, 2016
Mr. Lyndon R. Rive
Chief Executive Officer
3055 Clearview Way
San Mateo, CA 94402
We are pleased to submit to you and the SolarCity board of directors a proposal to acquire all of the outstanding shares of common stock of SolarCity in exchange for Tesla common shares. Subject to completing due diligence, we propose an exchange ratio of 0.122x to 0.131x shares of Tesla common stock for each share of SolarCity common stock. 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. We believe that our proposal offers fair and compelling value for SolarCity and its stockholders, while also giving SolarCity’s stockholders the opportunity to receive Tesla common stock at a premium exchange ratio and the opportunity to participate in the success of the combined company through their ongoing ownership of Tesla stock.
The board of directors of Tesla is excited at the prospect of a potential combination of SolarCity’s business with Tesla. We believe that the possibilities for product, service and operational synergies would be substantial, and that a combination would allow our companies to build on our respective core competencies and remain at the forefront of delivering innovative approaches for sustainable transportation and energy. We believe that a combination would generate significant benefits for stockholders, customers and employees of both Tesla and SolarCity.
We are committed to a possible transaction that is fair to SolarCity’s and Tesla’s respective stockholders. To help ensure that, Tesla is prepared to make the consummation of a combination of our companies subject to the approval of a majority of disinterested stockholders of both SolarCity and Tesla voting on the transaction. In addition, as a result of their overlapping directorships, Elon Musk and Antonio Gracias have recused themselves from voting on this proposal at the Tesla board meeting at which it was approved, and will recuse themselves from voting on this proposal at the SolarCity board as well. We believe that any transaction should be the result of full and fair deliberation and negotiation by both of our boards and the fully-informed consideration of our respective stockholders.
Our proposal is subject to the satisfactory completion of due diligence, the negotiation of mutually agreeable definitive transaction documents, and final approval by the Tesla board. While a transaction would be further subject to customary and usual closing conditions, we believe that Tesla is well positioned to negotiate and complete the transaction in an expedited manner. We do not anticipate significant regulatory or other obstacles in consummating a mutually beneficial transaction promptly.
In light of Elon Musk’s SEC disclosure obligations in his individual capacity as a stockholder of SolarCity this proposal will be publicly disclosed, but Tesla’s intention is to proceed only on a friendly basis.
We look forward to discussing a potential transaction with you, and hope to expeditiously enter into a definitive agreement.
The Board of Directors of
Tesla Motors, Inc.