Tesla is reporting Q2 this week, and big things have happened lately. On Monday we can see that Tesla`s share price is falling, so why is the shares falling this time? CEO Elon Mush have made a deal with SolarCity.
Tesla and SolarCity are both cash-burning companies, and the agreement to merge gives Tesla`s shareholders more risk. The shareholders at SolarCity will receive 0,11 Tesla shares for each SolarCity shares if the deal goes through.
I used the terms «goes through» because the deal is not done yet. This is why investors should be cautious about this deal right now. The deal must be approved by a majority of shareholders in both firms.
Elon Musk and Tesla said on Monday that SolarCity and Tesla can offer residential, commercial and grid-scale integrated solar and energy storage products. These products will «improve the way that energy is generated stored and consumed,» Tesla said.
Tesla also said on Monday that combining Tesla and SolarCity could save $150 million or more in its first full year after closing.
The deal was first announced in late June, and this is a $2,6 billion deal. We have super-humans on this planet and Elon Musk is one of them. What is he thinking with this acquisition? He will try to create a company that sells solar panels, batteries, and electric cars under the same umbrella.
Tesla has spent a lot of time and money on producing its Model S and Model X cars, and now they are spending a lot of time and money on its Gigafactory outside of Reno, Nevada. Elon Musk has earlier said that he thinks Tesla and SolarCity could create a trillion-dollar company.
The deal is expected to be close in Q4 this year if the deal is approved by regulators and independent shareholders.
Tesla have underperformed the S&P 500 so far in 2016. While S&P 500 is up 6%, Musk`s company is down 4%. Tesla is down about $2% on Monday, while SolarCity have plummeted about $7%.
The company reported a loss of 48 cents in the same period last year, and analysts reports an adjusted loss of 56 cents this time, which is much more than last time.
The sales are expected to reach $1,60 billion in the quarter, compared with $1,20 billion in the same period last year, but they are still burning cash.
Tesla will report Q2 earnings on Wednesday after the market closes.
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