Investors Doubt That TSLA/SCTY Deal Will Go Through
Another day, another widening of the spread between Tesla and SolarCity.
Has there been another deal in recent history that has received the negativity that the proposed deal between Tesla Motors, Inc. and SolarCity Corporation has received?
-worries about a cash crunch for Tesla
-worries that Tesla will lose its focus and miss some of its own deadlines
-worries about the incestuous relationship between Tesla and SolarCity
-questions about the numbers used by investment bankers to try to make the deal palatable for Tesla shareholders
Tesla CEO Elon Musk has called the deal a "no-brainer", though investors are clearly having their doubts.
Does the deal make sense in terms of synergies between the two companies? Will SolarCity, which is losing money hand over fist, force Tesla to dilute their shareholders by raising ever-increasing amounts of cash? Will the acquisition of SolarCity result in Tesla stretching itself too thin?
Unfortunately for Elon Musk, the Tesla CEO has already vowed not to vote his shares in the deal due to the potential conflict of interest.
This will likely make it quite difficult for Tesla to move ahead with the SolarCity deal, as investors are scratching their heads to imagine any benefits that their company will realize from the deal.
This will likely be very bad news for SolarCity shareholders, as it is extremely hard to imagine any other company emerging as a potential white knight. SolarCity's prospects as a standalone company are murky at best.
It will be interesting to see if Elon Musk can salvage the TSLA/SCTY deal at this point. It will be an embarrassing setback for the Tesla CEO if the deal does fall apart, though many TSLA shareholders will likely breathe a sign of relief if this happens.
Filed under: General Knowledge