Shares of Tesla Down 9% Since Deal Announced

Shares of Tesla are down nearly 9% after the company proposed a takeover of SolarCity after the market closed on Tuesday.

Shares of SolarCity Corporation, which spiked to over $26 after the deal was first announced, is now trading at $22.54.

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Elon Musk, who is heavily involved in both Tesla and SolarCity, has called the deal a "no-brainer".

Analysts, investors and short-sellers mostly seem to disagree with Musk's assessment of the proposed deal. Noted short-seller Jim Chanos, who was short both companies before the deal was announced, called the proposed acquisition "shameful" and an example of "corporate governance at its worst". Chanos said that SolarCity is a "company headed towards financial distress" and that Tesla's shareholders would be left to bankroll the company if the deal went through.

A number of analysts panned the deal as well, for a number of different reasons. Oppenheimer said that they expect a "robust" shareholder fight and that the deal presented "significant operational and integration challenges".

Pacific Crest Securities said that the acquisition would present a "new overhang" on shares of Tesla and that they would "not be getting involved until clarity improves".

Credit Suisse and UBS also remained cautious about the deal, with both companies offering that a Tesla/SolarCity tie-up added "complexity", "heightened capital risks" and "unneeded distractions" for Tesla and their management team.

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Given the negative reaction to the deal that has already taken place, it seems fairly unlikely that Elon Musk will be able to convince enough of his investors to vote the deal through.

Elon Musk has had a pretty enviable run over the past 4-5 years, though the proposed takeover of SolarCity by Tesla Motors seems like an embarrassing misstep.


Filed under: General Market News