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Did Internet Rumors Predict Tesla's (TSLA) Bid For SolarCity (SCTY)?

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Shares of SolarCity are up over 8.5% in morning trading Wednesday following the news that Tesla Motors (TSLA - Free Report) has submitted a $2.8 billion bid to take over the company. Tesla’s bid confirms rumors which first picked up months ago suggesting Elon Musk was interested in the solar energy producer.

Musk is already SolarCity’s chairman and largest shareholder. According to a filing in February, Musk recently added an additional 569,680 shares, worth about $10 million, to his holdings. Musk’s cousin Lyndon Rive is the current SolarCity CEO.

Back in March, rumors began to swirl that Musk was interested in buying SolarCity and taking the company private again. While these rumors were unfounded at the time, many investors saw the idea as a potentially beneficial move for the struggling SolarCity. Without shareholders to worry about, SolarCity could take new measures to solve its debt management and cash flow issues.

While today’s bid certainly confirms the fact that Musk is interested in the solar company, it appears that the offer is taking a bit of a different form than these earlier rumors suggested. Instead of Musk buying the company himself and taking it private, this move would see Tesla take over SolarCity and incorporate its technology into Tesla’s business.

In fact, in the statement that Tesla released today, the electric vehicle manufacturer clearly marked its intent to market SolarCity’s technology with its own existing technology.

“We would be the world’s only vertically integrated energy company offering end-to-end clean energy products to our customers. This would start with the car that you drive and the energy that you use to charge it, and would extend to how everything else in your home or business is powered,” Tesla said. “With your Model S, Model X, or Model 3, your solar panel system, and your Powerwall all in place, you would be able to deploy and consume energy in the most efficient and sustainable way possible, lowering your costs and minimizing your dependence on fossil fuels and the grid.”

In its offer letter, Tesla proposed an exchange ratio of 0.122x to 0.131x shares of Tesla common stock for each share of SolarCity common stock. This represents a value of $26.50 to $28.50 per share, about 20% to 30% higher than SolarCity’s previous closing price.

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