Whenever a large corporation completes a huge deal, the best way to gauge whether the shareholders of the company are in favour of the deal or not is by checking the movement of the stock price in reaction to the announcement. Tesla Motors Inc. CEO Elon Musk today announced that the company is on course to acquire energy services company SolarCity Corp. but even though Musk sounded esctatic at the proposed deal, the stock price of the company slid 11% in reaction to the news. It is quite clear that the shareholders of the company are not quite happy at the acuisition.
Musk, who owns shares in both the companies, stated, "I have no doubt about this - zero. We should have done it sooner." He went on to say, "As a combined automotive and power storage and power generation company, the potential is there for Tesla to be a trillion-dollar market cap company," The fact that Musk owns shares in both companies has certainly made this $2.86 billion deal a slightly unconventional one and the shareholders do not seem too keen either.
A report on Bloomberg in relation to the deal however, did not sound quite optimistic about this deal, "Elon Musk's Tesla Motors Inc. just made an offer to buy Elon Musk's SolarCity Corp. for as much as $2.86 billion. The mind boggles. Musk is the largest SolarCity shareholder, already owning 23 percent of the company, so he would personally profit by as much as $140 million from his shares. On the other hand, he's also the largest shareholder of Tesla, a much bigger company, which fell about 11 percent in late trading after the deal was announced. That cost him about $715 million, so on net he's down about $575 million. Not a great start. So why is he doing it? There's basically two ways to look at it: Either Musk, 44, is bailing out a beleaguered company that's run by his cousin, Lyndon Rive, or he's consolidating a clean-energy empire at rock-bottom prices. Or both. "