Robbins LLP: Acquisition of SolarCity Corporation (SCTY) by Tesla Motors, Inc. (TSLA) May Not Be in Shareholders’ Best Interests
Robbins LLP is investigating the proposed acquisition of SolarCity Corporation (NASDAQ: SCTY) by Tesla Motors, Inc. (NASDAQ: TSLA). On August 1, 2016, the two companies announced the signing of a definitive merger agreement pursuant to which Tesla will acquire SolarCity. Under the terms of the agreement, SolarCity shareholders will receive 0.11 shares of Tesla common stock for each share of SolarCity common stock, with an equivalent value of $25.83 based on Tesla’s last closing price on July 29, 2016.
Is the Proposed Acquisition Best for SolarCity and Its Shareholders?
Robbins LLP’s investigation focuses on whether the board of directors at SolarCity is undertaking a fair process to obtain maximum value and adequately compensate its shareholders.
As an initial matter, the $25.38 merger consideration represents a premium of only 16.3% based on SolarCity’s 30 day average closing price on June 20, 2016, the last closing price before the proposal was announced. This premium is significantly below the average one month premium of nearly 23.69% for comparable transactions within the past three years. Further, there were ten analysts with a target price above $25.38 as of June 20, 2016, the last trading day before the proposal was announced, including the target price of $50.00 set by an analyst at Raymond James on May 10, 2016, the target price of $46.00 set by an analyst at Stifel on May 10, 2016, and the target price of $38.00 set by an analyst at Credit Suisse on May 9, 2016. In the last three years, SolarCity traded as high as $88.35 on February 26, 2014, and most recently traded above the merger consideration – at $27.03 – on July 29, 2016.
On May 9, 2016, SolarCity reported strong earnings results for its first quarter 2016. SolarCity reported revenue of $123 million for the three months ended March 31, 2016, an 82% increase from the same period of the prior year. SolarCity has also beaten analyst estimates for revenue for the past four quarters.
In light of these facts, Robbins LLP is examining SolarCity’s board of directors’ decision to sell the company now rather than allow shareholders to continue to participate in the company’s continued success and future growth prospects.
SolarCity shareholders have the option to file a class action lawsuit to ensure the board of directors obtains the best possible price for shareholders and the disclosure of material information.
SolarCity shareholders interested in information about their rights and potential remedies can contact attorney Darnell R. Donahue at (800) 350-6003, or you can complete the form below and we will contact you directly.