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Tesla offers to acquire Musk-led company SolarCity in a stock deal

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American automotive and energy storage company Tesla Motors has offered to acquire top industrialist and Tesla CEO Elon Musk’s solar panel installation company SolarCity. Some of Tesla’s biggest investors have signaled support for the acquisition, but share market saw the company’s stock plummeting on Wednesday, lopping more than the $2.8 billion value of the proposed deal off Tesla's market capitalization.

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Musk, who is chief executive of Tesla, also chairs SolarCity and is the biggest shareholder in both companies. He is also the CEO of rocket maker SpaceX. Musk owns a 22.2 percent stake in SolarCity, a US-based provider of energy services with over 13,000 employees. However, the has been bleeding money recently. SolarCity’s shares were at $50 in December and have since then, slipped down to around $21.

“The SolarCity team has built its company into the clear solar industry leader in the residential, commercial and industrial markets, with significant scale and growing customer penetration. They have made it easy for customers to switch to clean energy while still providing the best customer experience. So, we’re excited to announce that Tesla today has made an offer to acquire SolarCity,” the company said in a blog post on their website.

The acquisition is believed to be a stock deal, where shares of SolarCity will be exchanged for Tesla shares. The exchange would be financially sound for SolarCity as it would pay a premium of 21 percent to 30 percent on top of SolarCity’s current market value of $2.14 billion. The deal will go through only after SolarCity board approves it. Musk and Antonio Gracias, who are on the boards of both the companies, will abstain from the voting process.

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