Tesla’s Share Price Drops over Acquisition Offer for SolarCity

Published Date : Jun 21, 2016

Tesla Motor’s shares fell significantly after it was revealed that electric car manufacturer Palo Alto offered the acquisition of SolarCity through a deal worth US$2.8 bn. Elon Musk, the CEO and co-founder of Tesla is also the chairman and co-founder of SolarCity. He has stated that the bid is quite obvious to create an integrated new energy company that focuses on the solar power. His vision for such a new company includes the manufacturing of electric cars, batteries, and assembly, storage, and delivery of solar energy systems to businesses and homes. According to Musk, such an arrangement would improve the setup efficiency by offering a car charger, a battery pack, and installing solar panels all at once.

SolarCity has been trying to Reduce Cost since Last Fall

However, investors are wary about the futility of such acquisition deals. As a result, investors are pulling out of the company by selling shares. On Tuesday, Tesla’s shares plunged a steel low to US$194 per share. On the other hand, SolarCity’s shares witnessed phenomenal hike since March. In the solar energy sector, SolarCity is one of the biggest residential solar companies. Last fall, Lyndon Rive, the CEO of SolarCity announced that the company will slow down its installation growth to reduce costs. The balance sheets of both the companies reveal that they are losing money. However, Tesla is far more financially sound than SolarCity. As a result, the deal is being look at sceptically by the investors.

In the electric car manufacturing space, Tesla has been one of the pioneering companies and is stressing more on low-priced models. The high tech luxury electric cars developed by the car manufacturer have a starting price tag of US$67,000. The low-priced models are expected to be launched by the end of 2017.