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.
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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.