The Tesla-SolarCity merger has been in the air since the past few months. There has been a lot of debate over how the deal would benefit Tesla, SolarCity, the companies shareholders or everyone. There has been strong voice from amongst Tesla shareholders against the deal, and the merger has been pending ever since it was first announced. However, as per advisory firm Institutional Shareholder Services, all the involved parties should now vote in favor of the deal.
The ISS backs its statement with several compelling arguments. The firm said that, not only would Tesla — which has a market capitalization of over $30 Billion — would be the perfect fit for SolarCity, which has been burning through cash at like fire through hay — pun intended. On a serious note though, SolarCity is actually running through cash rather quickly. Its cash stockpile had plunged to less than $150 million, as compared to over $400 million last year.
The deal would also help solve energy issues. Tesla is all for new and innovative methods of producing and using energy, while SolarCity is all for producing new methods of energy generation. The technologies of the two companies should complement each other pretty well.
Meanwhile, Tesla shareholders have been surprisingly vocal against the merger. The company has been at the sword point of several lawsuits from its on shareholders, who have been alleging that the Tesla-SolarCity merger is being propelled simply because Chairman Elon Musk and other Tesla insiders hold stakes in both the companies. Musk for example, holds over 20 percent shares in both Tesla and SolarCity.
And despite ISS’s arguments in favor of the deal, there shareholder’s concerns are not entirely unfounded either. SolarCity had been in troubled waters before Elon Musk went and offered to acquire it.
Meanwhile, Musk has been trying hard to assuage all fears and doubts over the topic. According to Musk, SolarCity will add almost $1 billion in revenue to the combined entity in 2017. He also said that SolarCity will also bring almost $500 million in cash to Tesla’s balance sheet over the next few years. However, many other shareholders are not able to see eye to eye with Musk’s optimism.
Elon Musk has chosen to abstain himself from the voting process, however, his significant presence in both the companies may tilt the votes in favor of the deal. However, it may just turn out to be a close thing — Tesla shareholders have been pretty vocal about their discontent, and some have even brought lawsuits against the company. We should know more about the topic, once the issue goes to the vote before stakeholders of both the companies, on the 17th of November.