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On Tuesday, Elon Musk the owner of Tesla Motors offered to buy SolarCity the solar installation company in an all stock deal for $2.8 billion.
Shares of Tesla plunged by over 13% during Tuesday after hours trading, amounting to a market value loss of more than $4.3 billion, which is more than the value of what was offered to purchase SolarCity.
SolarCity shares were up over 18% during the same period.
Musk, who is the SolarCity chairman, the Tesla CEO and the both companies’ largest shareholder, called the proposal a no brainer during his phone conversation with the media.
The company could sell electric cars to their customers, a home battery and a home solar system in just one visit, said Musk.
Rather than make three trips to install a car charger, battery pack and solar panels it can be integrated into one visit making this deal an obvious thing that should be done.
Tesla investors however did not see it that way, as they pummeled the company shares. An analyst on Wall Street said that ideally an investor wants Tesla to focus on Tesla things such as building Tesla electric cars.
He added that the feeling might be that the purchase of SolarCity would take from its focus as well as possibly straining Tesla financially, which going forward will be continually in need of large amounts of cash.
SolarCity is carrying over $6.25 billion worth of liabilities, including its debt.
Executives at Tesla said the company’s predictable cash flow in payments for solar systems, services its debt.
Although it is the market leader in the U.S. for residential solar systems for rooftops, SolarCity is regularly posting losses for the quarter and its stock has dropped close to 60% in 2016.
Investors have pummeled the stock as they see it business model being too complex in an industry that has become more and more competitive.
Musk announced that Tesla was not aware of the number of customers the electric car company has that already have solar panels. However, it guessed that the majority of them would at least be interested in solar systems.
Tesla described this deal in one of its blog posts as a way of expanding the markets of both companies.
The SolarCity solar systems will be sold using the name Tesla, which is looking to expand its own target market with its Model 3 $35,000 electric car that will begin its deliveries next year.