Tesla CEO and SolarCity chairman Elon Musk thinks the proposed merger of Tesla and SolarCity could be a game-changer.
While this is to be expected — why propose the takeover if you don’t think it’s a good idea for the businesses — the proclamation that Musk made during a conference call to explain the merger may be a bit eyebrow raising.
When asked about the premium that Tesla, an electric carmaker, has proposed to pay in stock to acquire SolarCity, a manufacturing and distributor of residential solar panels, Musk responded with a grand proclamation on the future of the a possible combined company.
“I think when people, as we’re down the road, not even far down the road, next year, but particularly as you go further into the future, there numbers are going to seem like a very small, very small number” Musk said.
“When I think of a combined automotive and power storage and power generation company and the potential for Tesla to be a $1 trillion company in market cap.”
That’s right, $1 trillion.
Currently, Apple has the largest market capitalisation of any company in the world (the value of the company as determined by the number of shares outstanding multiplied by the price of the shares) at roughly $533 billion. Tesla’s market cap as of 10:30 a.m. ET on Wednesday was just a bit under $30 billion. SolarCity’s stood at just over $2 billion.
There are a number of reasons that critics are sceptical of the deal, both companies burn massive amounts of cash and SolarCity’s business has looked worrisome for a few quarters, but Musk appears to think that these short-term issues will give way to a massive opportunity.
Musk has long had a desire to usher in the clean energy future, and it appears that he believes that not only will this deal create a company that will make that possible, but it will becomes a massive force.
To be fair, Musk also believes that the deal makes sense in the short-term as well, helping to integrate the firm into the first “vertically integrated energy company offering end-to-end clean energy products to our customers” and grow the potential customer bases for both firms.
Given these benefits, Musk believes that the possible premium that Tesla will pay in any deal for SolarCity is worth the benefit in the end.
While Musk has expressed faith that the deal will get done, he has decided to excuse himself from the vote to determine if the deal will be approved.
So far, Tesla investor reaction has been negative with the stock dropping a little over 8% since the deal has been announced.