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Why Tesla and SolarCity Shares Are Already Slipping This Afternoon

November 1, 2016, 7:15 PM UTC
Photograph by Heiko Junge — AFP/Getty Images

Shares of Tesla Motors and SolarCity tumbled on Tuesday ahead of expected financial details from the electric carmaker on a pending $2.6 billion merger that has been met with widespread investor skepticism.

Shares of Tesla (TSLA) were down 4.1% in afternoon trading to $189.60 and shares of solar panel installer SolarCity (SCTY) were down 3.5% at $18.91.

Tesla was due to post additional information about the acquisition on its blog and website after the market close, followed by a question and answer webcast at 5 p.m. EDT (2100 GMT).

Tesla Chief Executive Elon Musk, who is chairman of SolarCity and the largest shareholder in both companies, has described the deal as a “no brainer” that paves the way for a carbon-free energy and transportation company.

But many investors have not shared that opinion, and Tesla lost about $4.3 billion of its value with a share sell-off after the deal was first announced in June.

Shares of Tesla, as of Monday’s close, are down 10% since the deal was made public.

SolarCity’s board agreed to the deal in August. A vote by shareholders of both companies is planned for Nov. 17.

Tesla’s offer, which represents about half of SolarCity’s value a year ago, values SolarCity at $25.37 a share.

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SolarCity, which has $6.34 billion in liabilities, including debt, has expanded dramatically in the last five years, but it relies heavily on borrowing money to finance its no-money-down residential solar installations.

The company’s stock has fallen 63% so far in 2016.

Tesla itself has burned through over $600 million in cash in the first half of the year, and plans to increase spending this quarter in order to fund the launch of its mass-market Model 3 sedan, along with a massive battery factory in Nevada and other plans.

Musk—who owns 19% of Tesla and 22% of SolarCity—said last week Tesla will not need to raise additional funds in 2016 and said it was possible SolarCity could be a cash contributor in the fourth quarter.

The combined Tesla-SolarCity could save at least $150 million in the first full year, helped by combined sales forces, and consolidating manufacturing and key technologies. Musk has said.

Tesla faces shareholder lawsuits alleging board members breached their fiduciary duty in approving the deal.