SolarCity Stock and Tesla Stock Should Merge; Here’s Why
Elon Musk obviously has a full plate, but in his spare time, he should consider merging SolarCity Corporation (NASDAQ:SCTY) with Tesla Motors, Inc. (NASDAQ:TSLA). After all, Musk is a big investor in SCTY stock and Tesla is his baby, so he has the power to do so.
Plus, it makes perfect sense to merge the two companies, because SolarCity and Tesla are actually two sides of the same coin. Elon Musk doesn’t believe in half measures. The guy is obsessed with solving problems by building great companies and that’s why he’s rich.
Musk isn’t exactly an investor. The only real investment he ever makes is in himself, probably because he can influence the outcome. His first startup was called Zip2, which he launched with his brother. Together, they created software that “[provided] business directories and maps to media companies and local e-commerce merchants.”
That was in 1995. By 1999, Elon and Kimball Musk sold the company for $307 million. Next, Elon set his sights on mobile payments by forming PayPal Holdings, Inc. The ultimate sale of PayPal in 2002 netted him a personal profit of $165 million.
Since then, Musk has poured his capital into three things: Tesla Motors, SpaceX, and SolarCity. He is currently the active CEO of both Tesla and SpaceX and serves as chairman of SolarCity.
SCTY Stock Would Surge
Musk doesn’t help run SolarCity’s day-to-day operations. Two cutting-edge companies seem like more than enough to deal with, but I’m suggesting he brings SolarCity under his direct control as well. A merger would benefit everyone.
After all, the goals of Tesla and SolarCity are intertwined. Tesla is aiming to popularize cars that run on renewable energy and SolarCity is a provider of renewable energy. Think about it: even if everyone drove a Tesla, wouldn’t they still be using fossil fuels indirectly? By plugging into a power outlet at their homes, Tesla drivers would likely be drawing on power that is generated from non-renewable sources. However, if that home had rooftop solar panels, then the customer controls the entire process of energy consumption. That would be Elon Musk’s ultimate dream.
Unfortunately, only one half of that plan is going well. Over the last two years, Tesla stock rose by 81.12%, while SolarCity stock declined nearly 37%. The by-product was that Elon Musk’s net worth is much more concentrated in Tesla than before.
The discrepancy has a lot to do with a glut in the energy market. Traditional fuels got really cheap last year and have reduced the price allure of alternative energy. At the same time, SolarCity’s losses were rapidly growing.
Tesla Could Save SolarCity Stock
Tesla has also started to sell a battery pack called the “Powerwall.” The battery is designed to hang in a garage and store energy gathered by solar panels. Could it be any clearer?
I hate the word “synergy,” but it really does apply to SolarCity and Tesla. Elon Musk could make both companies more profitable by integrating their product lines. By doing so, he could likewise more easily achieve his goal of reforming energy consumption. There is such an obvious overlap between Tesla and SolarCity that I wonder why it isn’t talked about more.
If anyone in Palo Alto is listening right now, maybe we’ll see a Tesla-SolarCity merger before long.