Tesla Stock May Face an Uphill Ride
Tesla Motors Inc (NASDAQ:TSLA) is not just an electric car company now. The company has moved closer to achieving its future vision of being a clean energy company as it gets ready to sell energy generation, energy storage, and clean energy transportation products to its customers under one roof.
Tesla stock gained about 2.6% in the trading session on Thursday, whereas SolarCity Corp (NASDAQ:SCTY) stock ended up by almost three percent.
Shareholders of Tesla overwhelmingly approved Tesla’s acquisition of SolarCity. Excluding the votes of Musk and other affiliated shareholders, more than 85% of shares voted were cast in favor of the acquisition. With SolarCity’s shareholders also having approved the acquisition, the transaction will be completed in the coming days. (Source: “Tesla’s Acquisition of SolarCity Receives Shareholder Approval,” Tesla Motors Inc, November 17, 2016.)
With the shareholders’ approval, Elon Musk has moved closer to the goal of making Tesla the world’s only integrated sustainable energy company. The shareholders approved Tesla’s $2.1-billion all-stock offer to merge and build one company that would enable customers to power their cars and homes with clean energy.
TSLA stock had taken a beating since the plan to acquire SolarCity was proposed by Musk in June. Many analysts saw this as a bailout of SolarCity by Tesla, as the solar roof installer had been facing financial troubles.
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However, in a detailed statement issued at the beginning of this month, Elon Musk explained how SolarCity would add more than $500.0 million in cash to Tesla’s balance sheet over the next three years. But no announcement could stop the slide in TSLA stock.
More than the impact of Trump’s policies, the immediate cause of concern is the economics of the residential solar market. However, Musk believes his SolarCity engineers when they say that the cost of a roof covered with the newly launched tiles may be less than that of a traditional roof.
Musk said, “the basic proposition will be: Would you like a roof that looks better than a normal roof, lasts twice as long, costs less and, by the way, generates electricity?” (Source: “Tesla, SolarCity Merger Gets Shareholder Approval,” The Wall Street Journal, November 17, 2016.)
As the company plans to begin volume production of its new solar shingles in the summer of 2017, the focus will be on how successful Tesla’s positioning as a one-stop shop for consumers turns out to be. TSLA stock will remain subdued for a while until better news comes along.