Tesla stocks dip on solar news.
Musk calls proposal a ‘no-brainer,’ but shares sink 10%
SAN FRANCISCO — Tesla stock plunged Wednesday, effectively devaluing the Elon Muskled company’s currency and casting doubts on its plan to buy SolarCity.
Tesla Motors, the electric-car maker, offered Tuesday to buy rooftop solar provider SolarCity, another company that heavily involves Musk, in a stock swap worth $2.8 billion.
But investors sent Tesla stock down as much as 12% when markets opened. It closed down $22.95, or 10.5 percent, Wednesday at $196.66.
Because the deal involves a swap of Tesla shares for SolarCity shares, a significant drop in Tesla stock effectively makes the deal more expensive for Tesla.
Oppenheimer & Co. analyst Colin Rusch downgraded Tesla’s stock after the deal was announced because “uncertainty around the acquisition and the resulting corporate structure will weigh heavily on the stock.”
“We believe investors are likely to view this transaction as a bailout for SolarCity and a distraction to Tesla’s own production hurdles,” Rusch said in a note to clients.
Musk, chairman of both companies, defended the deal, calling it a “no-brainer” and asserting “zero doubt” about it. The idea is to combine the solar business with Tesla’s battery storage and electric-car business, so homebuyers can charge their Teslas with all products from the same company.