- REUTERS/Brendan McDermid
Tesla CEO and SolarCity Chairman Elon Musk thinks the proposed merger of Tesla and SolarCity could be a game-changer.
While this is to be expected – why propose the takeover if you don’t think it’s a good idea for the businesses? – the proclamation that Musk made during a conference call to explain the merger may raise a few eyebrows.
When asked about the premium that Tesla, an electric carmaker, has proposed to pay in stock to acquire SolarCity, a manufacturing and distributor of residential solar panels, Musk responded with a grand proclamation about the future of a possible combined company.
“I think when people, as we’re down the road, not even far down the road, next year, but particularly as you go further into the future, there numbers are going to seem like a very small, very small number,” Musk said.
“When I think of a combined automotive and power-storage and power-generation company and the potential for Tesla to be a $1 trillion company in market cap.”
That’s right, $1 trillion.
Currently, Apple has the largest market capitalization (the value of the company as determined by the number of shares outstanding multiplied by the price of the shares) of any company in the world, at more than $520 billion. Tesla’s market cap as of 10:30 a.m. ET on Wednesday was just a bit under $30 billion. SolarCity’s stood at just over $2 billion.
Critics are skeptical of the deal for a number of reasons – both companies burn massive amounts of cash, and SolarCity’s business has looked worrisome for a few quarters – but Musk appears to think that these short-term issues will give way to a massive opportunity.
Musk has long had a desire to usher in the clean-energy future, and it appears he believes that not only will this deal create a company that would make that possible, but it would become a massive force.
To be fair, Musk also believes that the deal makes sense in the short-term as well, helping to integrate the firm into the first “vertically integrated energy company offering end-to-end clean energy products to our customers” and grow the potential customer bases for both firms.
Given these benefits, Musk believes that the possible premium that Tesla would pay in any deal for SolarCity is worth the benefit in the end.
While Musk has expressed faith that the deal will get done, he has decided to recuse himself from the vote to determine whether the deal will be approved.
So far, Tesla investor reaction has been negative, with the stock dropping a little over 8% since the deal was announced.