Tesla CEO Elon Musk is betting that electric car buyers want home solar panels in addition to batteries.
In fact, he’s betting nearly $3 billion on the idea.
On Tuesday, Musk announced that Tesla [NYSE: TSLA] would acquire SolarCity, one of the nation’s largest residential and commercial solar power providers. The all-stock deal would be for roughly $26.50 to $28.50 per share for SolarCity.
Musk already has a cozy relationship with the solar panel provider. His cousin, Lyndon Rive, is also co-founder and CEO of SolarCity, and Musk is already chairman. The Tesla CEO didn’t specifically outline how management would look if the acquisition were approved by shareholders of both companies.
In announcing the deal, Musk called the relationship between them a “no brainer” and envisioned a future for the two companies where a Tesla car buyer could purchase a Powerwall energy storage battery and solar panels at the same time—one stop shopping for sustainable energy.
Pending approval, Musk said SolarCity could be renamed to reflect its relationship with Tesla.
It’s unclear how many Tesla car buyers would be interested in solar panels, Musk said during the call, but only roughly 1 percent of U.S. households have solar panels installed on their roofs.
“It’s hard to ignore the giant, constant nuclear reactor in the sky consistently creating power all the time, with almost universal access,” Musk said.
Initial reaction to the announcement was tepid. Analysts wondered if Musk would leverage too much to buy SolarCity in the all-stock deal. Buying the company would require another stock issue and could dilute Telsa shares further. Musk dismissed the idea that the friendly takeover bid was a "bailout" for SolarCity.
Tesla shares sank in Tuesday’s trading, and opened Wednesday down nearly 10 percent.
Musk and Tesla held another conference call just before the market opened Wednesday to assure investors that the acquisition by the energy company/automaker was “quite obviously the right move.”
In raising money to help develop and build the Model 3, Tesla sold hundreds of millions of dollars in stock last year, which many believed would put the nascent automaker on the brink of financial ruin.
Since then, Tesla has accepted deposits for hundreds of thousands of Model 3 cars.
Musk said the SolarCity deal wouldn’t delay or hinder production of the Model 3, which is rumored to begin next year.