Tesla Motors (NASDAQ:TSLA) acquires Grohmann Engineering for an undisclosed figure.
The German engineering firm specializes in automated manufacturing processes. Tesla plans to use the company's location in Germany as a base for Tesla Advanced Automation Germany.
"We believe the result will yield exponential improvements in the speed and quality of production, while substantially reducing the capital expenditures required per vehicle," reads a company blog post on the development.
The transaction will need to be cleared by German regulators before closing.
SolarCity (SCTY +8.5%) is sharply higher as proxy firm ISS backs its pending merger with Tesla (TSLA +1.4%), saying shareholders of the companies should vote in favor of the proposed $2.3B deal.
TSLA would be able to bridge the funding gap with cash-burning SCTY, the deal is a necessary step in its push to become an integrated sustainable energy company, and TSLA is giving minority shareholders enough of a voice to overcome governance concerns, ISS says.
For SCTY shareholders, the offer represents a 14% premium over the stock price on June 21, the last trading day before the proposal was announced, and gives them TSLA stock which is easier to trade, ISS says.
Tesla (NASDAQ:TSLA) has “potential short-term upside” given upcoming product announcements that may “set up a ‘yes’ vote for the SolarCity (NASDAQ:SCTY) merger, Barclays analyst Brian Johnson writes in note.
Upside may be followed by “downward drift as investors contemplate cash needs” of the combined company.
TSLA will need to fund $5B-$8B in capex as it combines its stationary power business with SCTY, another $2B in capital for the auto unit, plus cash for working capital and operating lease obligations, Rusch maintains.
Rusch is not keen on the merger plans, believing investors will be "concerned with visibility into the business" and that the way the merged company reports the performance of its varying units will be critical to convincing investors to stay aboard.
Oppenheimer has a Neutral rating on TSLA, with lack of disclosure as one of the reasons, despite the company's potential to be a "transformative technology company" that could deliver "outsized returns for investors."
The companies say each SCTY share will receive 0.11 TSLA share upon completion of the proposed merger, unchanged from previous SEC filings; on June 21, when TSLA's plans to purchase SCTY were announced, the notional value of a SCTY share, based on 0.11 TSLA share, was $24.16.
Jim Chanos slams Tesla's (TSLA -1.2%) proposed merger with SolarCity (SCTY -4.9%) as "crazy" and "the height of folly" while outlining his short positions in the stocks at CNBC's Delivering Alpha conference.
Chanos calculates that the combined company would burn through $1B every quarter and "constantly need access to capital markets," and says he is baffled by TSLA's reluctance to give SCTY financing while the merger is pending.
Chanos contrasts the Elon Musk approach with Amazon's Jeff Bezos, saying "This is the anti-Amazon. What made Amazon great... is that they didn't need capital."
Axiom Capital analyst Gordon Johnson reiterates his Sell rating and $7 price target on SolarCity (SCTY -3.3%), and believes Tesla (TSLA -0.8%) shareholders are "less inclined" to approve the merger of the two companies.
According to Johnson, the joint form S-4 filed by the two companies suggests that TSLA “failed to consider whether another solar company was a “better fit" and that Evercore declared SCTY "the most attractive asset for Tesla in the solar energy industry" after no more than three weeks of due diligence.
Johnson also believes TSLA is being shut out of the debt market and likely will need to tap the equity market with another $3B capital raise over the near-term.
The investment bank that advised SolarCity (NASDAQ:SCTY) on its $2.6B sale to Tesla (NASDAQ:TSLA) made a "computational error" in its analysis that discounted the value of the solar company by $400M, according to a new regulatory filing.
Despite the mistake by Lazard, the companies agreed it would not change their view of the deal.
SolarCity has until September 14 to actively seek other acquisition proposals, at which time its "go-shop period" ends.
After a month of due diligence and negotiations, Tesla (NASDAQ:TSLA) and SolarCity (NASDAQ:SCTY) are likely to announce an all-stock merger today that was previously valued at about $2.8B, Reuters reports.
The agreement is expected to include a go-shop provision, allowing SolarCity to solicit bids from other potential buyers before bringing the offer to a shareholders vote.
Calling the bid for SolarCity (NASDAQ:SCTY) "ill-timed," now former bull Bill Selesky from Argus downgrades Tesla (NASDAQ:TSLA) to Hold from Buy. Tesla is also removed from Argus' Focus List.
Should it happen, the deal, he says, pushes out the time needed for Tesla to generate a GAAP operating profit.
"While we believe that Tesla has made significant strides in addressing issues concerning high manufacturing costs, contracting gross margins and production shortfalls, we also believe that the proposed acquisition of SolarCity adds a new level of meaningful risk to the operations at Tesla Motors."
TSLA's 1.6% premarket gain is about inline with the averages. SCTY +3.05%
Two additional SolarCity (NASDAQ:SCTY) board members are recusing themselves from making decisions regarding Tesla's (NASDAQ:TSLA) offer to buy the solar power firm since they sit on the boards of both companies.
The announcement by Musk relative Peter Rive and Tesla CTO JB Straubel means the majority of SolarCity's seven-person board will be sitting out the vote on whether to be acquired by Tesla.
"A shameful example of corporate governance at its worst," says Jim Chanos, commenting on Tesla's (TSLA -10.5%) offer to buy SolarCity (SCTY +3%).
He notes SolarCity's bonds yield 20%, suggesting a company in financial distress. The hundreds of millions in cash it is burning through each quarter will now be a burden Tesla owners will have to bear.
Consider this, he says: The combined market drop today is greater than the equity value of the deal itself - meaning Tesla shareholders think SCTY stock is essentially worthless.
"Finally, it is hard for me to believe that this deal was not being contemplated when Tesla, and Mr. (Elon) Musk himself, sold shares just a few weeks ago."
Chanos, of course, is short the stock of both companies.