Last week, Tesla announced that it was pursuing an acquisition of SolarCity, the troubled solar-panel leasing company that’s run by Tesla CEO Elon Musk’s cousin, Lyndon Rive.
And on Monday, SolarCity said that it formed a committee of independent directors to evaluate the deal.
That’s because Musk is the largest single shareholder of both companies, and is the Chairman of SolarCity.
Holy conflict of interest!
Actually, Musk and Rive have said that they will recuse themselves from voting on the deal.
Anyway, SolarCity is a $3-billion bite for Tesla, in an all-stock transaction that would add — brace yourself — over $3 billion in debt to Tesla’s balance sheet.
If this looks like a SolarCity bailout — the solar-panel leasing company has seen its market cap, now $2.25 billion, sawed in half since last year — that’s because it is.
The deal might looks outwardly vexing, and the post-announcement analysis has suggested that Tesla is doing something wrong here. It’s not though. It’s actually following through on promises Musk has made over and over again for the for the past half decade. If you’ve been paying attention, you could have seen this one coming, although you probably thought Tesla and SolarCity would become closer partners, not that Tesla would take charge.
So why is Tesla doing this?
It certainly doesn’t seem to be in order to enhance shareholder value. Tesla stock dived when the news broke.
What shareholder value?
But it’s never been clear that Tesla cares much about shareholder value.
Rather than please investors or vindicate the ratings and target prices of Wall Street analysts, the electric automaker is playing a longer game. The stock just helps it get there, by providing a way to raise capital, as it did recently and also last year, and to be used as a form of supercurrency to sustain Musk’s vision of a world freed from fossil-fuel dependency.
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