Error or success: Why investors do not like Ilona Mask's business development plans



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Tesla company has never been deprived of investor love, which was expressed, of course, in the number of millions invested in it. However, in a short time, huge investments may stop - today we will talk about why the Wall Street novel and one of the most talented entrepreneurs of our time, Ilona Mask, can end.

What is the problem: the merger of Tesla Motor and SolarCity


The reason lies in the purchase proposal put forward by Tesla to SolarCity, which is developing solar power systems. It was created in 2006 by Peter Reeve and Lyndon Reeve - cousins ​​Ilona Mask. The largest shareholder and chairman of the board of directors of SolarCity is Ilon Mask, founder and CEO of Tesla Motors. He owns 19% in Tesla and 22% in SolarCity.

Analytical company Zacks suggests that Musk wants to acquire SolarCity in order to consolidate its assets.

A potential buyer offered to purchase SolarCity shares at prices ranging from $ 26.5 to $ 28.5 per share, which is about a third more than their market price. Immediately after the announcement of the purchase, Tesla Motors Inc shares lostin price more than 10%. Shares of SolarCity amid news of a possible merger rose by no more than 3%. Prior to this, the capitalization of the American manufacturer of solar panels has more than doubled.

Pros and cons


“I, like many other specialists in the market, express doubt that the deal will have a positive effect on companies. Many investors are seriously worried that the deal will only worsen the financial situation of the two companies, which is not the strongest one anyway. After all, at the moment, both firms are unprofitable, ”said Albert Fried & Co, an expert in support of mergers and acquisitions of mergers and acquisitions, and Sachin Shah .

In general, analysts perceive the idea of ​​combining the two companies Mask dual. SolarCity needs money to finance its business. Similarly, Tesla Motors also needs cash, which expects to achieve self-sufficiency not earlier than 2020. “When you read this news, your hands are stretching to sell shares. Mask buys a company headed by his brother, and immediately loses 10% of the value of the shares, in addition to the 20% that he has already lost since March, ” wrote Nikolay Davydov, general manager of the Gagarin Capital investment fund, on his Facebook.

However, according to some other experts, the merger of the technological and energy empire Ilona Mask makes economic sense. Manufacturers as a result of the transaction can combine technology, and Tesla drivers will be able to use solar energy to charge their cars.

In any case, the decision on the acquisition will be made at a meeting of shareholders of both companies by voting. Mask will abstain from voting.

“In place of the Mask, I would weigh everything well again. The decision to merge the two companies may cause irreparable financial damage, ”continues Shah.

Learn from mistakes


Be that as it may, Musk is not afraid to make wrong decisions and make mistakes, as evidenced by his speech at the annual meeting of shareholders of Tesla, which was held on June 1, 2016.

For three and a half hours, while the event lasted, Ilon Musk, CTO of the company, JB Strobel, and other managers, openly discussed the numerous problems the company faced and the mistakes they made at one or another stage of their development. At the meeting, Musk admitted that the mistakes made over the past years were due solely to "stupidity" and not to any "low motives."

For example, Musk told that in 2008, he decided to replace suppliers and start purchasing batteries in Thailand from the manufacturer of electric grills. He was attracted by the low price. However, technically it was impossible, and Tesla was forced to start producing batteries on its own.

He made another mistake when he tried to use AC Propulsion for Lotus automibil. However, the idea suffered a failure, due to the fact that the "stuffing" just did not have enough space, and the body had to be increased. In the end, Tesla was able to use only 6-7% of the original AC Propulsion technology.

Mask explained that he decided to discuss the failures of Tesla, because he wants entrepreneurs who create something new to know that they have the right to make mistakes and can learn from their mistakes.

Whether the decision to merge Tesla and SolarCity will be another mistake of Ilona Mask or not - only time will tell.

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