Tesla Motors Inc (NASDAQ:TSLA) – on Thursday – won approval from the shareholders for the acquisition of SolarCity. The deal was “overwhelmingly” assented by 85% of unaffiliated shareholders, said the electric carmaker. Despite the approval, the stock swap deal, which is worth around $2bn, caps an intense year for the automaker and Elon Musk – the largest shareholder in the solar firm, says Reuters.
Challenges for Musk and Tesla
To shareholders assembled at Tesla’s Fremont facility, Musk said, “Your faith will be rewarded.” Investors have been worried by concerns that Musk may be overextended between the work of integrating SolarCity, CEO duties at SpaceX and big future goals for Tesla, notes Reuters.
Also, investors have been rattled by a federal investigation of the death of a Tesla owner, who was operating his car on Autopilot. Autopilot is a driver assistance system and has been under the radar for quite some time.
The proposed acquisition of the solar installer in June, prompted a 13% decline in Tesla’s share price. The stock has declined almost 20% for the year. Also, the shares took a hit after the victory of President-elect Donald Trump in the elections. Federal tax subsidies for the electric cars should be cut off, said Myron Ebell – one of the key Trump advisers on environmental issues.
In the coming months, the EV firm is going to face even more challenges as it attempts to make a five-fold jump in its yearly car production, and release its mass-market Model 3 sedan (with a starting price of $35,000).
Last month, Tesla Motors Inc (NASDAQ:TSLA) reported a narrow profit for the Q3. At that time, Musk said that he did not expect the firm to sell more shares to finance the release of the Model 3. Most analysts, however, expect the electric carmaker to raise capital in 2017, probably via equity.
Will SolarCity acquisition work as expected?
Musk and few more insiders did not take part in the voting of the SolarCity acquisition. Musk, however, campaigned pretty hard for the deal, remonstrating that the operations of the solar installer would add $1bn to Tesla’s revenue next year, and generate an extra $500m in cash over three years. SolarCity shareholders will get 0.110 of a Tesla Motors Inc (NASDAQ:TSLA) share for each share in the solar installer.
SolarCity had $6.68bn in total liabilities, including debt, and $259.3m in cash and cash equivalents as of September 30. In the last five years, the clean energy giant has expanded dramatically, but it still depends heavily on borrowed money to finance its no-money-down residential solar installations. The solar installer is struggling with state solar policy changes that have dabbled demand for residential solar systems in big markets including California and Nevada.