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At least overlapping directors are withdrawing and leaving the decision to disinterested board members and eventually shareholders of both companies. Based on the market reaction, though, the obvious interpretation is that the offer looks like a way to prop up SolarCity’s stock at the expense of the higher-flying Tesla.
In arguing for the deal, Tesla envisions a one-stop, clean-energy shop selling cars, batteries and the power of the sun. And yet it’s hard to see any reason to buy all three from one place, even though Tesla claims that its drivers are “naturally interested” in going solar. Any design and manufacturing overlap — in batteries, say — probably affords only marginally better financial benefits than the “shared ideals” Tesla also is touting.
In reality, each company faces unique problems. SolarCity is burning cash as it struggles to find as many customers as quickly as it had hoped. Tesla, meanwhile, is trying to meet the ambitious goal of producing 500,000 vehicles a year by 2018. With capital expenditures approaching $2 billion last year, it’s no surprise the carmaker is also cash-flow negative. Whether there are unspoken motives or it’s the overwrought creation of an excitable mind, combining the two is the wrong sort of innovative engineering.
Commentary by Jeffrey Goldfarb, the U.S. editor at Reuters Breakingviews. Follow him on Twitter @jgfarb.
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