On Tuesday, Tesla Motors made an offer to purchase SolarCity for $2.8 billion in Tesla stock. The stock market reacted immediately. Tesla stock was down more than 10% on Wednesday. It stayed down on Thursday. Lots of analysts have had a lot to say about the deal, none of it good.
On CNBC’s Squawk Box, analyst Jim Cramer — no fan of Tesla — said “The Kool-Aid tasted really good in Jonestown before it really hit ya.” He was suggesting that Musk’s gambit should be a wake up call to the Tesla faithful who think Elon walks on water and can do no wrong.
“Tesla was obviously desperate to save SolarCity. [It] had an existential crisis, that last quarter was the worst I’ve ever seen,” says Cramer. “The quarter was ‘so bad’ that the analysts themselves were in open rebellion. All I can say is that SolarCity would have gone even lower if he hadn’t made this bid.”
Bob Lutz was his usual cranky self. On CNBC’s Closing Bell, Lutz riffed further on the Jim Jones theme. “People finally are beginning to figure it out. They’ve drunk the Elon Musk Kool-Aid. They’ve drunk it long enough and nothing’s working,” Lutz said. “This deal makes zero sense. It’s going to further put a huge amount of financial pressure on Tesla, which is already in financial trouble.”
The criticism must have stung Musk. He hastily arranged a conference call with analysts before the market opened Wednesday, telling them that the combination of Tesla Motors and SolarCity would be a trillion dollar enterprise one day.“I have no doubt about this – zero. We should have done it sooner.” He said the idea had been discussed with major investors several times over the years. “This idea has been bandied about with some of our largest shareholders, institutional shareholders. Yeah, there have been discussions.”
Musk is known for bold financial dealings that polarize investors. Some think Musk can do no wrong. Others think he is a charlatan who bamboozles people with his lofty pronouncements. The proposed purchase of SolarCity is just another in a long line of Musk financial maneuvers that many market watchers simply don’t understand. No one has ever forced anyone to buy shares of Tesla Motors. Most people who have are quite glad they did.