Elon Musk had the perfect response to the biggest criticism of the Tesla-SolarCity merger

Advertisement

Elon Musk

Alex Wong/Getty Images

Merging to escape a conflict.

Tesla and SolarCity made their official merger announcement on Monday. The next steps are for the government to approve the $2.6-billion all-stock deal, and for the shareholders of both companies to vote on it.

Advertisement

The deal is controversial, for three main reasons:

1. Elon Musk owns about 20% of both companies, and it CEO of Tesla and Chairman of SolarCity

2. SolarCity's financials this year have been a wreck: the company has lost 50% of its market cap, so this looks like a bailout

3. Tesla already has a lot of contend with this year in its car business - and it doesn't really need to be adding SolarCity's $3 billion debt to the the balance sheet

Advertisement

Of these, the first has been explicitly addressed by Musk, who has recused himself from voting on the deal. On a call with analysts on Monday, he joked that if a better offer came through, he'd have to go along with it, taking Tesla out of the running for the acquisition.

But he also addressed the conflict-of-interest issue.

"The conflicts of interest," he said, in response to an analyst's question, "are if we don't merge."

That's actually a good point. Musk said in his recently published "Master Plan, Part Deux" for Tesla that the car maker and SolarCity should have been under the same roof all along. And if Tesla were to bind itself up with SolarCity's business without merging, then it would appear as if Musk were using one company to prop up the other.

Musk seemed baffled and somewhat amused that observers haven't yet figured this out.

Advertisement

NOW WATCH: This scientist thinks Elon Musk is wrong about the threat of artificial intelligence