BUFFALO, N.Y. (WIVB) – Tesla Motors has made an offer to buy SolarCity, in an all-stock deal for $2.6 billion. Elon Musk who heads both companies says he wants to create a one stop shop for cleaner energy.
How might this deal affect the success of the SolarCity project at RiverBend in Buffalo? Market watchers say, it is going to depend largely on the merger, and as of Monday Wall Street did not seem to be buying it.
Tesla makes high performance electric cars, and will soon be the world’s largest manufacturer of lithium ion batteries, in Reno, Nev. to run them. Solar City is the parent company of the $485 million project at RiverBend, that would be the largest manufacturer of solar panels in North America.
Musk, a billionaire entrepreneur is the majority shareholder for both companies, and briefly commented on the pending sale, “We’re really excited about what’s happening.”
But investors are not so optimistic. Musk, who founded Tesla, has turned a $3 billion company into a $31 billion company, but investment advisor Anthony Ogorek says Solar City is losing money in the hundreds of millions.
“It is certainly a bailout. How else would you look at it? Stocks are down 47% this year for a reason.”
Ogorek, president and CEO of Ogorek Wealth Management in Williamsville, likens SolarCity’s financial health to a hospital patient.
“Financially speaking, SolarCity is hemorrhaging enough cash that they really should have been taken from RiverBend, and put down in the Medical Campus.”
But Ogorek says Musk is putting Tesla’s own financial health in jeopardy–with the Giga Factory in Reno that will become the largest structure in the world to build those lithium ion battery packs, and by raising the production schedule of its Model 3 Teslas 10-fold by next year.
What does all this mean to RiverBend, and the hundreds of jobs projected there? Ogorek is withholding judgment, “At the end of the day, those jobs are not going to be there if the business plan of the company is not viable.”
At the end of the day for the NASDAQ, SolarCity shares were down 7%, and Tesla shares took a 2% slide. Officials for both companies predict they might close the deal by the end of the year, but Ogorek said Tesla shareholders have a lot more to lose if the deal goes through.