Elon’s Empire

Tesla/SolarCity deal goes through at $2.6 bil

Update to an item from three weeks ago: Elon Musk has successfully consolidated his two major investments. Although the merger of Tesla and SolarCity is practical from a certain standpoint, many feel a great risk is being taken by the energy efficiency pioneer. Announcement of the deal on August 1st was almost immediately followed by share drops for both stocks, which had already been jittery for weeks at the proposal.

For Musk, the idea is a no-brainer, as he’s said himself…and it certainly makes sense from his perspective to bring together two things he has creative control over, which are also related in their goals of energy conservation. The deal is worth a total of $2.6 billion dollars (insert Dr. Evil voice).

The “Master Plan” referred to a few weeks back and over the years by Musk has been incrementally put into effect, and this is a main artery. Musk has long since championed the utilization of solar energy, and he’s by far the most successful electric car engineer, making the luxury vehicles competitive and monetarily comparable with their gas and diesel counterparts. This gives him an opportunity to create an integrated renewable energy company.

Does Elon Musk's most recent business move heighten his status as renewable energy hero, or is it merely a fantasy?

Does Elon Musk’s most recent business move heighten his status as renewable energy hero, or is it merely a fantasy?

SolarCity’s property, including unfinished projects, makes it the largest solar panel-powered project on the planet. The company has been in the news repeatedly leading up to today due to a number of difficulties with overextension and stock volatility. Since the merger (which still needs full approval from shareholders to be officially finalized) operating expenses have jumped.

Certain investors and businesspeople on the outside are wary of the merger due to the vacuum of control that could be created. While Musk was active in both companies, his positions were greatly different and will now have to be compromised in some way. However, others such as Pavithra Mohan of Fast Company, contend why it makes sense for all three parties involved:

“Musk called the acquisition a “no-brainer” when it was first announced, which makes sense when you consider he owns a 22% stake in SolarCity, as the company’s largest shareholder, and counts its CEO and CTO as family. (Lyndon and Peter Rive are Musk’s cousins.) Since he suspected investors would have concerns about the acquisition being a conflict of interest, Musk said he would not be voting on the proposal, both as a board member and shareholder.”

An additional challenge Mr. Musk will face is shaping a market that is practically nonexistent right now: that of installed batteries for homeowners. While energy conserving batteries have climbed steadily in electric automobile application as well as in the aided powering of facilities, the homeowner market saw only 450 purchases last year. Only about 450 U.S. homeowners installed batteries to save homemade electricity last year, according to GTM research, which tracks renewable energy markets. About 250 U.S. commercial property owners installed batteries, and suppliers installed larger battery packs for about two-dozen utility projects, GTM estimates.


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