Elon Musk didn’t become a billionaire without brass, and this week he floated one of his most outrageous bets: an offer by his taxpayer-subsidized Tesla Motors to buy his taxpayer-subsidized SolarCity. Tesla shareholders and Wall Street analysts are howling, but didn’t they always know they were buying a business model that depended on the kindness of politicians?
The electric-car maker offered to acquire the solar panel company at a more than 20% premium over SolarCity’s previous share price in an all-stock transaction. “Tesla customers can drive clean cars and they can use our battery packs to help consume energy more efficiently,” the company said in a blog post, “but they still need access to the most sustainable energy source that’s available: the sun.”
The ostensible plan is to set up a one-stop shop so folks buying $85,000 Teslas don’t have to walk across the street to buy solar panels, among other “synergies.” Mr. Musk predicted, with his typically modest ambition, that the merger will lead to a Tesla valuation of $1 trillion, or about 34 times what it was Wednesday.
He may need one of his SpaceX rockets to get there. Tesla shares fell 10% Wednesday, or more than the $2.8 billion value of SolarCity, as investors asked why one money-losing company would be better off buying another money-losing company. SolarCity was once a darling of the green energy set, but its shares have fallen more than 50% in the past year as its political advantage ebbs.