It is important for a business to be thinking long-term. As we all know, that is Elon's real strength. But the financials of this deal make little sense to me and many investors view this decision as reckless. Tesla is a cash burning company- they had to do another large capital raise just last month. SolarCity is a cash burning company with considerable debt. When Tesla buys SolarCity they must fund the day to day cash burn and also assume SolarCity's multi-billion dollar long-term debt burden. With the Model 3 ramp-up Tesla already has massive cash requirements. SolarCity will add fuel to the cash bonfire.
I never know what to think when people bring up "investor concerns" in cases like this. I mean, I get that investors are owners. But, Tesla is public and the stocks (are there bonds?) are liquid. This company has both stated and demonstrated a big appetite for very high risk-reward. If investors don't like it, they can take their win and get out of Tesla.
This is (in some sense ;-) the opposite to the criticism in your earlier comment. Tesla is doing what Musk said they'd do, take lots of risk and try to lead a shift away from fossil fuel. So far we've seen a surprisingly good car and a very promising looking battery, some charging stations… Now he says he's adding solar, with it more risk and more potential. Damned as a liar if he's doing some financial engineering while talking visionary risk taking. Damned as a loose cannon if he does what he said before (presumably) you bought the stock and pursuing some massively risky vision.
I mean… hmmm… there are lots of companies you can invest in. One way they differ is in risk-reward potential. I think it works better if/when CEOs can decide on strategy and investors can decide to buy/sell shares. Catering to investors that want to hold but also to moderate the company's strategy encourages herding, averaging out of strategies.
I'm not an investor in Telsa so I guess I don't have a dog in the fight. But… I have to say I'm excited to see a CEO (seemingly) not driven by bad incentives take big risk. I think investors in Tesla should be the most risk tolerant ones.
Judging by the stock price today, I think that may be exactly what happened, but only just a bit. Stock is down 8%, some investors have decided to get out of tesla.
