Shares in Tesla Motors Inc (NASDAQ:TSLA) plummeted in pre-market trading as the electric car maker pressed ahead with a US$3bln all-stock offer to buy out solar power company SolarCity Corp (NASDAQ:SCTY).
The deal would see Elon Musk merge two of his corporate interests, as he owns a 21% stake in Tesla as well as a 22% stake in SolarCity.
Investors weren’t buoyed by the prospect of Musk paying a significant premium for a company where he is chairman and largest shareholder.
Shares tumbled 13% before the US market open, wiping more than US$4bln off of Tesla’s market value, which overshadowed SolarCity’s US$500mln share price jump.
Despite the less-than-positive reaction, Musk was adamant that the deal would be beneficial for everyone involved.
“My personal opinion is that obviously this is something that should happen, like it’s a no-brainer,” he said in a conference call on Tuesday evening.
SolarCity is run by Musk’s first cousins, Lyndon and Peter Rive, and is the market leader in residential solar panel installations in the US.
If the deal goes through, SolarCity will adopt the Tesla brand and sell its solar panels alongside Tesla’s PowerWall home batteries.
The sale needs shareholder approval, with Musk refusing to take part in the vote.
“This would only move forward if there is a majority vote of the non-me shareholders in both companies,” Musk said.
Both companies have been burning cash heavily over recent years.
Tesla has lost US$1.2bln in the past two years, while SolarCity has suffered losses of more than US$1.1bln over the same period.
Shortly before US market open, Tesla shares were down US$25, or 10%, to US$220, while SolarCity shares were up US$2.80, or 13%, to trade at US$24.