LOST GOLDEN TOUCH?
The quiet support was drowned out by criticism as the stock fell.
This deal feels like (Musk) has lost his Midas touch. I also feel like Musk is trying to do too much,” said well-known investor Jeffrey Gundlach, chief executive at DoubleLine Capital, which does not hold Tesla shares.
Investors who short Tesla, betting that shares will fall, pointed to the conflict of interest and raised financial concerns about uniting two money-losing companies which both regularly raise cash to support their expansion.
“When a company’s executives misunderstand modern corporate finance and technology strategy, they can make profound miscalculations and errors of judgment,” Salome Gvaramia, chief operating officer of Devonshire Capital, which has a short position in Tesla, said in a statement.
SolarCity shares have fallen more than 50 percent this year in a highly competitive market, fanning criticism that a Tesla deal was meant to save SolarCity.
Some analysts noted that SpaceX has bought SolarCity bonds, giving it and Musk incentive to support SolarCity.
Short-seller Jim Chanos of Kynikos Associates blasted Tesla’s proposed acquisition of SolarCity, describing it in a statement as a “brazen” bailout” and “shameful example of corporate governance at its worst.”
Musk said SolarCity would post positive cash flow in the next three to six months and would not have a material impact on Tesla’s future cash needs or expectation to be cash-flow positive by year-end. Costs for both companies would go down significantly after the merger, he said, without giving specifics.
Share lending data suggested short sellers were increasing their bets against both companies. Interest rates to borrow Tesla shares rose to 5 percent on Wednesday from 1.5 percent early in the day, according to S3 Partners, a financial analytics firm. Hardly any SolarCity shares were available for borrowing.
Author: Ross Kerber and Tim McLaughlin