Tesla, SolarCity shareholders prepare to vote on merger

Shareholders of Tesla Motors and SolarCity are scheduled to vote Thursday on whether the luxury electric auto maker should acquire the rooftop solar giant in a $2.23-billion deal.

Shareholders approved Tesla Motors’ $2.6 billion acquisition of SolarCity in a special meeting November 17 in California.

What’s more, some shareholders and analysts questioned whether taking on a mission to get Tesla into the home solar panel market was wise given the challenges facing the company’s automotive division.

Tesla and SolarCity leapt an important hurdle Thursday: getting shareholder sign off for the prosed acquisition of the latter by the former.

The all-stock deal was worth $2.6 billion when the companies approved it in August, but their shares have fallen since, so the value of the deal has dropped. It did, however, “raise a concern that the weak governance structure at the company undermined the credibility of the claim by Tesla that the acquisition of SolarCity made sense”, he said. Investors were suspicious of Tesla adding more debt to its books and were uncertain why Tesla had to buy SolarCity. Last month, he unveiled what would be the combined companies’ first product: Glass solar roof panels that look like traditional roof tiles. Critics pointed to SolarCity’s solvency-the company lost $768 million past year and is $3 billion in debt-as well as Musk’s involvement in both companies.

In the start of November, Mr. Musk put the ball in the investor’s court, forecasting that SolarCity could add $1 billion of extra revenue to Tesla next year, notwithstanding it having been loss-making until now. Meanwhile, it says Tesla itself is in its best financial shape ever, putting it in a good position to execute on the acquisition.

Tesla (TSLA) shares, which closed up 2.5% at $188.66, rose 1.4% in after hours trading. There is also a projection that the joint companies could achieve $150m in cost savings. The real-estate mogul has vowed to relax environmental regulations and tapped Myron Ebell, a climate-change sceptic, to head of his Environmental Protection Agency transition team. Gordon Johnson, an analyst at Axiom Capital Management Inc., downgraded seven solar companies Tuesday, citing his expectation for less favourable renewable energy policies from Trump’s administration.

Some conservative activists are now calling on the incoming Republican Congress to end tax incentives for installing solar panels or buying an electric auto. SolarCity stockholders will receive 0.11 shares of Tesla for each share they now own.

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