Shares of Tesla (TSLA) are plummeting by 20 points in pre-market trading on Wednesday after the automaker offered to acquire beleaguered solar energy project contractor SolarCity (SCTY) for 0.122 to 0.131 shares of Tesla stock for each SCTY share, valuing the deal at around $2.8 billion, or $26.50 to $28.50 per SolarCity share.
Tesla said the proposal “offers fair and compelling value for SolarCity and its stockholders, while also giving SolarCity’s stockholders the opportunity to receive Tesla common stock at a premium exchange ratio and the opportunity to participate in the success of the combined company through their ongoing ownership of Tesla stock.”
Tesla also said the offer is 21% to 30% above the close of SCTY shares yesterday, and that “the possibilities for product, service and operational synergies would be substantial, [as] a combination would allow [both] companies to build on [their] respective core competencies and remain at the forefront of delivering innovative approaches for sustainable transportation and energy.”
According to a re/code report, Tesla CEO Elon Musk personally owns 22% of SolarCity’s, or 22.2 million shares. The report notes that at the low end, the deal brings the Musk family’s total gains — SolarCity CEO Lyndon Rive and his brother Peter, the company’s CTO, are Musk’s first cousins — to more than $700 million. At the high end, more than $750 million.
Investors doesn’t seem to agree with the deal as TSLA continues to nosedive to a fresh 3-month low, now down $24.61, or 11.17%, at $195. SolarCity shares are up $2.64, or 12.36%, at $23.85. Short interest currently accounts for 49% of the stock’s available float.