Yes, says Axiom Capital’s Gordon Johnson who writes that a Senate investigation into solar company tax incentives could derail Solar City’s (SCTY) merger with Tesla Motors (TSLA). He cites this Wall Street Journal article on the investigation by Brody Mullins, Ianthe Jeanne Dugan, and Richard Rubin, which details why it might be a problem:
In its 2015 annual report, Solar City said that if the government determines that misrepresentations were made, “the Department of Justice could bring a civil action to recover amounts it believes were improperly paid to us.”
Solar City received about $501.2 million in credits through Dec. 31, 2015, so even a 5% adjustment downward “would obligate us to repay up to $25.1 million to our fund investors,” the company wrote.
In Johnson’s words, this is “yet another risk to the Tesla/SolarCity deal closing.”
Shares of Tesla Motors gained 2% to $200.42 today, while SolarCity rose 1.2% to $17.10.
