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Teslas Bid for SolarCity - Case Study Questions

1. Does Teslas acquisition of SolarCity make strategic sense? As a shareholder of Tesla, would you support the deal based on the information provided in the press release and if not, what additional information would you want to see before deciding? Comment on the strategic rationale for the acquisition? Are there any synergies to be gained from the acquisition? What are the financial risks to Tesla and what financial burdens, if any, would Tesla confront post acquisition? Please provide support for your answers.

2. Using the fiscal year financial data from 2012 to 2015, determine how the acquisition would affect Teslas liquidity risk, financial leverage, and profitability, based on the computed ratios provided in the Excel template? What do the trends in the liquidity, leverage, and profitability ratios indicate for both Tesla and SolarCity, including the combined company ratios? Focus your analysis on the current ratio, quick ratio, interest coverage, debt-to-equity, debt-to-total assets, and leverage (total assets-to-total equity) ratios.

3. What is the impact of the sale of Zero Emission Vehicle (ZEV) Credits Sales on Teslas financial performance in 2016Q3? Would you consider this revenue stream to be transitory or a sustainable component of the companys core earnings? Would you consider the ZEV Credit Sales to be abnormally high for 2016Q3? What would be the impact to earnings before taxes (EBT) and Net Income if ZEV Credit Sales were excluded or adjusted to more normalized levels?

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