NEW YORK (Reuters) – Tesla Electric’s decision to buy SolarCity, a $ 2.6 billion solar company, has raised widespread misgivings among investors, Reuters reported on Nov. 2. Tesla and SolarCity both slumped before the final financial details of the merger were to be announced.
Tesla shares closed down 4.1%, and the price per share fell to $ 189.60. SolarCity shares fell 3.5 percent to $ 18.91 a share. Tesla has posted additional information about the acquisition through its blog and website, and a question and answer session via webcast.
Tesla CEO Elon Musk is also the chairman of SolarCity’s board of directors, the largest shareholder of the two companies. He previously said the acquisition of SolarCity is “no brain can be made,” the transaction will be to achieve non-carbon energy and change the company to pave the way.
But many investors are skeptical, since Tesla announced in June the news of the acquisition of SolarCity, the company’s market value has evaporated 43 billion dollars. Since Tesla announced the acquisition, Tesla’s share price has fallen 10% since closing Monday.
SolarCity’s board of directors approved the deal in August, and shareholders of the two companies will vote on the acquisition on November 17. Tesla’s purchase price is equivalent to SolarCity a year ago, half of the company’s price, or $ 25.37 per share value.
SolarCity debt as high as 6.34 billion US dollars, in the past five years, the scale of the rapid expansion of debt. But SolarCity relies heavily on loans to support its cash-installer solar installations. As of 2016, the company’s share price has fallen by 63%.
In the first half of this year, Tesla itself has “burned” more than 600 million US dollars in cash, and plans to increase spending in the quarter in order to support the introduction of mass-based electric vehicle Model 3. In addition, Tesla has also built a large battery factory in Nevada.
Maske, who owns 19% and 22% of Tesla and SolarCity respectively, said Tesla would not need additional funding in 2016 and said SolarCity would be able to provide cash in the fourth quarter. Tesla and SolarCity after the merger, the first year can save at least 150 million US dollars in expenditure. But Tesla is currently facing investor litigation, accusing members of the board of directors in violation of the trust agreement to approve the transaction. (Small)
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