On the same day last week that Elon Musk’s Space-X lost a loaded rocket to a launch pad explosion at Cape Canaveral, investors fled the two more mainstream companies the visionary entrepreneur is trying to merge into a single solar-storage-automotive mega-business.
Tesla shares tumbled 5.3% in one day, the San José Mercury News reports, while SolarCity plunged 9.1%, prompted by news in the Wall Street Journal and other outlets suggesting the merged company’s cash resources can’t live up to Musk’s ambitions.
In June, Musk announced his intention to merge Palo Alto-based Tesla Motors, of which he is CEO, and San Mateo-based SolarCity, which is run by his cousin and on whose board he sits. (Musk is also CEO of Space-X).
But “neither company is profitable,” Rob Enderle, an Oregon-based high tech market researcher, told the Mercury News. Tesla lost US$1.13 billion on its US$4.57 billion in revenue in the year to June, the paper reports. SolarCity brought in $537.7 million—but lost $94.9 million.
“The cash problem is pretty serious for Tesla,” Enderle said. Musk “is going to have to raise quite a bit of cash to keep the combined companies going.”
Tesla has said it will try to bring in to $2.89 billion through new stock sales.