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Tesla’s Plan to Buy SolarCity Leaves many Questions

More change to come for SolarCity & Tesla-this company’s individual parts are doing some amazing things on their own, but just imagine how such a big company would handle integration into one company

After Tesla’s announcement on Tuesday of a $2.8 billion offer to acquire SolarCity, Tesla’s stock was down more than 8 percent early Wednesday morning, more than the total market capitalization of SolarCity itself.

The market is ascribing a negative value to this possible acquisition. Solar City is a maker of solar energy products, basically home and business solar panels. Tesla is a maker of battery-powered cars, though some view the company’s battery-making component as its bigger future.

To Elon Musk, the chairman of SolarCity and the chief executive of Tesla, putting together these two different businesses is “blindingly obvious” and a “no-brainer.” A blog post on the Tesla website explained the reasons: And SolarCity is hardly a growth business these days. Both companies are burning cash. SolarCity went through $2.6 billion last year, while Tesla spent $2.2 billion. SolarCity’s business model is struggling as cheap energy shakes up the solar market. So the acquisition is being viewed not so much as a “no-brainer” but as a bailout of SolarCity by Tesla, one that may sink both companies.

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