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Elon Musk Merging Tesla (TSLA) with SolarCity (SCTY)
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Wednesday, June 22, 2016
Tesla Motors (TSLA - Free Report) is moving to purchase SolarCity following the announcement Tuesday, which would bring together two of Elon Musk’s biggest brainstorms for roughly $2.8 billion. The CEO of the premier electric car and lithium-ion battery manufacturer and Chairman of U.S. residential solar power firm plans to bring SolarCity under the Tesla umbrella. Immediate react among investors was not good at Tesla, which fell 10 percent, but great for SolarCity, which shot up 20 percent.
In recent quarters, though Tesla has presented many big questions for investors, it has been the far stronger growth play; SCTY found itself floundering last quarter, partly based on its highly competitive industry, which has made better inroads in China than the U.S. lately. For Musk, it’s pretty easy to see the synergies, both with the two businesses and his investment in both firms, which, combines, would give Musk a 40+ percent stake in the combined company.
Musk is not likely to be thrown by a near-term hit to Tesla stock; he’s lived through these things before. What remains to be spelled out is whether these synergies presented in merging SolarCity with the Tesla green-energy keystone will kickstart the company into leadership roles in both EVs and clean energy to households, and whether those businesses can help exellerate the forward U.S. growth story.
If this was merely a play to salvage what was left of Musk’s flagging solar enterprise, then this will probably reflect negatively on the first quarterly report to include SolarCity, whether it be when the company reports next month or beyond. That said, even in this tempestuous presidential election season we are not hearing much anti-green energy sentiment, which may mean all of Wall Street is now fully on-board with the industry, indicating more widespread growth down the road.
Is it a move to rescue Musk's solar power enterprise, or are there big synergies behind this move only he can see right now?
In the trickle of quarterly earnings data we’re seeing this week, FedEx (FDX - Free Report) outperformed estimates, but took a big hit on pensions, and the stock was trading down. Adobe Systems (ADBE - Free Report) missed on its quarterly revenue expectations.
Votes are being cast on a referendum regarding whether citizens of Great Britain wish to remain part of the European Union (EU). You may have heard of it — it’s moniker sounds like it comes straight from a top advertising firm: Brexit. Votes aren’t expected to be fully counted until overnight tonight in the U.S., so we don’t expect the big market impact to register until ahead of the bell tomorrow.
Most polls have consistently held that Britain will remain (in mid-single digits), but there have been other reads that flip the script. Most economists on both sides of the pond insist that a “Leave” vote from the EU would disrupt business as usual in Great Britain, the EU, here at home and elsewhere in the world. A vote to remain is seen as a near-term positive for markets here and abroad.
Mark Vickery Senior Editor
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Elon Musk Merging Tesla (TSLA) with SolarCity (SCTY)
Wednesday, June 22, 2016
Tesla Motors (TSLA - Free Report) is moving to purchase SolarCity following the announcement Tuesday, which would bring together two of Elon Musk’s biggest brainstorms for roughly $2.8 billion. The CEO of the premier electric car and lithium-ion battery manufacturer and Chairman of U.S. residential solar power firm plans to bring SolarCity under the Tesla umbrella. Immediate react among investors was not good at Tesla, which fell 10 percent, but great for SolarCity, which shot up 20 percent.
In recent quarters, though Tesla has presented many big questions for investors, it has been the far stronger growth play; SCTY found itself floundering last quarter, partly based on its highly competitive industry, which has made better inroads in China than the U.S. lately. For Musk, it’s pretty easy to see the synergies, both with the two businesses and his investment in both firms, which, combines, would give Musk a 40+ percent stake in the combined company.
Musk is not likely to be thrown by a near-term hit to Tesla stock; he’s lived through these things before. What remains to be spelled out is whether these synergies presented in merging SolarCity with the Tesla green-energy keystone will kickstart the company into leadership roles in both EVs and clean energy to households, and whether those businesses can help exellerate the forward U.S. growth story.
If this was merely a play to salvage what was left of Musk’s flagging solar enterprise, then this will probably reflect negatively on the first quarterly report to include SolarCity, whether it be when the company reports next month or beyond. That said, even in this tempestuous presidential election season we are not hearing much anti-green energy sentiment, which may mean all of Wall Street is now fully on-board with the industry, indicating more widespread growth down the road.
Is it a move to rescue Musk's solar power enterprise, or are there big synergies behind this move only he can see right now?
In the trickle of quarterly earnings data we’re seeing this week, FedEx (FDX - Free Report) outperformed estimates, but took a big hit on pensions, and the stock was trading down. Adobe Systems (ADBE - Free Report) missed on its quarterly revenue expectations.
Votes are being cast on a referendum regarding whether citizens of Great Britain wish to remain part of the European Union (EU). You may have heard of it — it’s moniker sounds like it comes straight from a top advertising firm: Brexit. Votes aren’t expected to be fully counted until overnight tonight in the U.S., so we don’t expect the big market impact to register until ahead of the bell tomorrow.
Most polls have consistently held that Britain will remain (in mid-single digits), but there have been other reads that flip the script. Most economists on both sides of the pond insist that a “Leave” vote from the EU would disrupt business as usual in Great Britain, the EU, here at home and elsewhere in the world. A vote to remain is seen as a near-term positive for markets here and abroad.
Mark Vickery
Senior Editor