June 22, 2016
Tesla (TSLA: $220) announced a buyout offer for Solar City (SCTY: $21). Tesla is down to $193 in afterhours trading and Solar City is up to $24, after hitting $25. For what it’s worth, Elon Musk, who is the chairman of SolarCity, CEO of Tesla and the largest shareholder of both companies, described the deal as a "no brainer." He said that the company could sell customers an electric car, a home battery and a solar system all at once.
We are not here to comment on done deals. Solar City is done. We’ve said many times we think Solar City is worth more than $50 a share. Now we will never know if it would have gotten there. We’ll have to look through the windshield wipers of Tesla now. However we will comment on what Tesla will look like after the buyout. We think Tesla got a good deal on price and value. We just aren’t convinced Tesla needs a solar panel company. They need to concentrate on electric AUTOMOBILES.
BMR Take: Sell Solar City, as the deal may fall apart for any variety of reasons. Buy Tesla for the fabulous company it is, with its 400,000 pre-orders for the Model 3; the $400,000 million in the bank from the $1,000 deposits the buyers all made; its great leader; its future as the first successful new car company in decades. We will bring you more information in the weeks ahead. For the time being, we would hold Tesla here and would add to our position if we had the funds. In a few weeks and months we expect Tesla to be significantly north of $200 a share again.