Mergers, Unicorns and Vampires

TeslaCity.

The thing about the proposed Tesla/SolarCity merger is that it is good corporate governance. I mean, yes, Elon Musk is a co-founder and biggest shareholder and chief executive officer of Tesla, and yes, Elon Musk is the biggest shareholder and chairman of SolarCity (and his cousin is the CEO), and yes, he's the one who wants to merge them, and yes, they are both burning through lots of cash, and yes, he has done some unconventional things to keep them afloat, and yes, it's all very awkward. But the actual all-stock merger deal announced Monday has the best protections that minority shareholders could hope for. The deal is less generous to SolarCity than Musk had originally proposed, after independent directors of both companies negotiated and came to what they thought was a fair price. It requires the approval of both sets of independent shareholders, Tesla's and SolarCity's; Musk has essentially recused himself from voting. SolarCity has 45 days to shop itself and try to find a higher bidder, and while that go-shop is somewhat hampered by Musk's 22.5 percent stake in SolarCity, he's agreed to vote his shares for a higher offer if the board recommends it and other shareholders agree. The deal even cancels Musk's cousins' stock options for some reason. Given (1) two companies both more or less controlled by one guy, and (2) that guy's expressed belief that merging those companies is the right thing to do for both of them, you can't really expect a better process or outcome than this.