SolarCity (SCTY)


I’ve been surprised by the poor quality of the press coverage of the acquisition of SCTY proposed by Tesla (TSLA), the lead dog in the Elon Musk empire, of which SCTY is also a member.

Two points:

–it shouldn’t come as a shock, as it apparently has to some writers, that Elon Musk controls both firms.  This dual ownership presents potential conflicts of interest, although the existence of a separate quote for SCTY allows that firm to link stock-based compensation of the employees of SCTY directly with the performance of SCTY shares, rather than those of a bigger entity.  That’s not necessarily bad.  (Years ago, when Fox went public, the fact that Fox executives held options on the parent, News Corp, and not Fox, told me where the advantage would lie in parent/subsidiary negotiations.)

TSLA/SCTY’s is a common relationship, especially outside the US, with plusses and minuses that are well-documented and well-known, with, apparently, the exception of US financial writers.

–equally common is the behavior of stocks involved in an all-stock acquisition.  Most often, there’s downward pressure on both stocks as a result of the arbitrage I talked about in yesterday’s post.  Wouldn’t know that from the financial press, though.


I don’t have a strong opinion about whether the combination will be good or bad.  But at least I know what the issues are.  The sad state of reporting on TSLA/SCTY shows how far the financial press has been hollowed out.


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