SolarCity, which went public in 2012, saw last year's revenue fall 36 percent to $255 million while its net loss narrowed to $375.2 million from $768.8 million a year earlier. Combined, SolarCity and Tesla could burn almost $5 billion in cash a year, meaning the $1.8 billion in combined cash the companies had on hand at the end of the first quarter may "soon be used up," the New York Times reports.
Other analysts are even more pessimistic. Relative to other companies in their sectors, Tesla and SolarCity both underperform, making the acquisition "terrible economics," said Forbes. The publication quoted an Oppenheimer & Co. analyst calling the acquisition a "bailout" for SolarCity.
Tesla is looking to complement its electric-vehicle growth with access to a company that last year installed 272 megawatts of solar panels, bringing its cumulative total to 1.9 gigawatts. The idea is to offer a broadened green-transportation program in which owners of Tesla can recharge their vehicles grid-free at home by using solar energy. Tesla says such an acquisition would also complement the March 2015 launch of Tesla Energy, which makes Powerwall and Powerpack stationary energy-storage systems.
Additionally, Musk says the combined company could eventually be worth a trillion dollars, and that SolarCity could be cash-flow positive within three to six months, according to Automotive News. Musk is making a big bet as both companies' largest shareholder, as his net worth would at least temporarily fall by $575 million with the acquisition, according to Bloomberg News.
While Tesla has touted the vertical integration benefits of buying SolarCity, Forbes points out that SolarCity's services would just as attractive to Tesla owners without the merger taking place. Tech Crunch noted that SolarCity would likely operate independently for the foreseeable future as Tesla ramps up Model 3 development and its Gigafactory development while calling the acquisition a "hedge" on future battery technology.