vDETROIT: Tesla is making its case to shareholders that a combination with solar panel maker SolarCity Corp would be financially as well as environmentally beneficial.
In documents released on Tuesday, Tesla said SolarCity the largest home solar panel installer in the US could add $1 billion in revenue to the combined company next year. That would be more than double the $400 million revenue SolarCity reported in 2015.
SolarCity could also add $500m in cash to Tesla’s coffers over three years. In the last 120 days, the company has raised around $1 billion to fund solar projects, Tesla said. Tesla currently has around $3bn in cash.
Elon Musk, who is chairman of both companies and CEO of Tesla, announced in June a plan to combine them in an all-stock deal worth around $2.45bn. Shareholders of both companies are expected to vote on the deal on Nov 17.
“I’m pretty optimistic about where the vote’s going,” Musk told Wall Street analysts during a webcast on Tuesday.
But the merger is controversial. Neither company has achieved sustained profitability. Tesla reported a $22m profit in the third quarter, but it was the company’s first profitable quarter since 2013. SolarCity reports third-quarter earnings next week, but it lost $250m in the second quarter.
Analysts also have questioned whether the deal could delay Tesla’s first mass-market vehicle, the $35,000 Model 3, which is due out at the end of next year. Some shareholders have even sued, claiming that the merger is an attempt by Musk to use one company to bail out another. Musk owns 26.5 per cent of Tesla and 22pc of SolarCity, which is run by his cousins.
Tesla Motors Inc. shares fell 3.5pc to close at $190.79 Tuesday before the financial details were released. They fell 1.4pc in after-hours trading. SolarCity shares fell 2.7pc to $19.07. They declined 3.5pc after hours.
Tesla says the two Silicon Valley-based companies could cut $150m in costs in the first year of a merger by jointly marketing Tesla’s electric vehicles and power storage batteries with SolarCity’s solar panels.
The combined company would also have a wider reach, since Tesla has stores in the US, Europe and Asia but SolarCity mainly sells solar panels in the US.
Published in Dawn, November 3rd, 2016
