“I have zero doubt about this,” Musk told shareholders in a conference call held before the market opened at 9:30 a.m. Eastern time. “Arguably we should have done it sooner.”
On Tuesday, Musk made public an offer for his car company, Tesla Motors, to buy his solar company, SolarCity, using Tesla stock. The buyout put a more than 30 percent premium on the value of SolarCity. Tesla shares spiraled downward in after-hours trading, while SolarCity shares shot up.
Musk’s majority stake in both companies (he owns 19 percent of Tesla stock and 22 percent of SolarCity stock) meant that he legally had to make the proposal public rather than doing the deal behind closed doors, the Wall Street Journal reports. Because of his conflict of interest, he has agreed to recuse his vote.
Wednesday morning’s conference call was an attempt to convince shareholders that the buyout is a good idea.
“I think it’s easy to get so mired in the details,” Musk said, “but the right thing is to sort of look up into the future and see where does this head? What are the macro trends? Does this match where the tides of history are going?”
Investors, both on the call and in the market, didn’t seem to agree wholeheartedly with Musk’s existential thoughts (at one point in the call, Musk went so far as to ask, “why should companies exist at all?”). Tesla stock started down 11 percent when Musk started speaking, and 30 minutes after the markets opened, they were down a little more than 8 percent.
Musk’s case for the acquisition
Musk repeatedly used the word “synergy” to describe why the merger should happen.
“These synergies are very common sense,” Musk said. He emphasized that, if the merger goes through, a customer could buy Tesla’s PowerWall, an electric car charging infrastructure, and solar panels all in one go. “Obviously, it’s more efficient to do it as a single sell.”
SolarCity bleeds cash even more than Tesla does, but Musk said that shouldn’t be a problem because SolarCity will have a positive cash flow within three to six months. Of course, Musk also said in the past that Tesla would have a positive cash flow by the end of 2016, but that was pushed back during the Tesla shareholder conference call in May.
Musk said that if SolarCity needed cash then Tesla would provide it, but he doesn’t think that would happen. And for all the confidence that the tired-sounding Musk had (if Musk was in California, where Tesla is based, the call would have started at 4:30 a.m. local time), he avoided citing specifics on why the two companies should get together from a business standpoint other than that he believes the two belong together.
“This is what the world needs,” Musk said in a grand, existential valuation of his companies. “This is Earth’s solution.”
What’s more, Musk said time and time again that people will start buying more solar panels from SolarCity soon because its panels are more aesthetically pleasing. People aren’t likely to be avoiding a SolarCity purchase because it doesn’t look good, but everyone already knows that Musk is a sucker for sexy looking technology.
In short, Musk believes the two companies are meant to be together. He went so far as to say that the PowerWall and residential solar systems have to be designed together, and if the buyout doesn’t happen, it would hurt the companies. That proclamation is something for shareholders to keep in mind when the vote on the acquisition happens in the next few months, because again, Musk isn’t going to vote on it.
“We’re trying to have the non-weird future get here as fast as possible.”