This morning SolarCity and Tesla filed forms with U.S. regulators that set November 17 as the date for shareholders of both companies to vote on their merger. Following anti-trust approval in late August, this is the final step before the acquisition can go forward.
Of course, this is only if the acquisition is not stopped by shareholder lawsuits. Last month SolarCity revealed that no less than four lawsuits had been filed by shareholders, with some attempting to block the deal, and that number has since increased to seven. Delaware courts have since consolidated the suits, which Tesla has dismissed as “without merit”.
However, what cannot be dismissed is widespread skepticism. “This is not your typical, clean acquisition,” Mercom Capital CEO Raj Prabhu told pv magazine. “People are asking: Is this is good deal, or is this a bailout?”
One of the central questions is the wisdom of vertical integration. Elon Musk has maintained that the deal will provide benefit to both businesses, with the joint proxy statement declaring that “Tesla and SolarCity both believe that this is an opportune time to combine in order to operate more efficiently and fully integrate our products, while providing customers with an aesthetically beautiful and simple one-stop solar and energy storage experience”.
However, observers have noted that the trend in many businesses for the past few decades has been towards specialization in one part of the value chain or area of technical expertise, and that vertical integration has been out of vogue since the 1980’s.
Another concern is the large losses that SolarCity has been posting, as it continues to pursue growth at the expense of profitability.
A central aspect of the deal remains the same, in that SolarCity shareholders of note will receive one Tesla share for every 9 SolarCity shares they own. However as the value of Tesla stock has fallen, the 11 million shares which are set to be awarded are currently worth around $2.2 billion, down from $2.6 billion.