What Does the SolarCity Deal Mean for Tesla’s Investors?



Tesla-SolarCity merger

Previously, we looked at how despite the visible positive change in Tesla’s (TSLA) financials, its stock traded on a negative note this year. Tesla’s bid to acquire SolarCity could be another reason for the losses on Wall Street. On November 17, 2016, Tesla and SolarCity investors approved and finalized the merger. In this part, we’ll take a look at what it means for Tesla investors.

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On June 21, 2016, Tesla revealed its intentions to acquire SolarCity (SCTY)—an energy services provider in the US. On June 22, 2016, Tesla stock closed at $196.66 with a massive loss of 10.5% during the session.

According to Tesla’s official blog, with this deal, the company intends to become the “world’s only vertically integrated energy company offering end-to-end clean energy products.” It implies that Tesla wants to offer a variety of sustainable energy-based products under one brand.

Note that Tesla’s decision to enter the energy products business makes it different from other mainstream auto companies (VCR). These mainstream auto companies include General Motors (GM), Ford (F), and Toyota (TM).

What does it mean for Tesla investors?

Investors’ concern about Tesla diverting its focus from the Model 3 production plan could be a primary reason behind the fall.

It doesn’t sound like a bad idea to have all of these energy products under one roof. However, was it the right time for Tesla to shift its focus from Model 3 production to other products?

In the next part, we’ll explore Tesla’s current energy product range.


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