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November Is Election Month For Elon Musk's Tesla-Solar City Merger, Too

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Elon Musk will learn next month whether his plan to merge electric-car maker Tesla Motors with solar power provider SolarCity Corp. has won shareholder support with the companies saying Wednesday that votes on the matter are due November 17.

The combination of the companies that's expected to cost about $2.6 billion has received mixed reviews from investors and equity analysts. Musk, SolarCity's chairman and a top investor in the company that's run by his cousins Lyndon and Peter Rive, argues that a merger creates significant synergies.

"A combined Tesla and SolarCity will be able to provide the first-ever opportunity to generate, store and consume energy entirely sustainably, through a suite of integrated products that add aesthetics and function while reducing cost," Tesla said in a blog post. "By leveraging SolarCity’s installation network and Tesla’s global retail footprint, we can do this in a way that is seamless for our customers and that we expect will create significant value for our shareholders."

Yet SolarCity's increasing cash needs, combined with Tesla's aggressive plans for capital investments in its auto and battery plants and as it prepares to launch the $35,000 Model 3 electric sedan, led Goldman Sachs to downgrade shares of the carmaker last week to "neutral" from "buy."

"We now see incremental risk to the business related to management’s deployment of capital for M&A, and further believe that any delay in the company’s timeline to launch its new Model 3 will be detrimental to shares," Goldman analyst David Tamberinno wrote in an Oct. 6 research note explaining the move.

Tesla said in Securities and Exchange Commission filings on Oct. 7 and Oct. 11 that seven shareholder lawsuits have been filed to block the SolarCity merger. Tesla rose 0.7% today to $201.51 in NASDAQ trading, but has fallen 16% this year. SolarCity rose 3.2% on Wednesday, though the shares are down 61% since the start of the year.

A rejection of the plan would be a blow to Musk, who also runs aerospace company SpaceX. Last month, Musk outlined his vision for colonizing Mars with a new generation of SpaceX rocket and engine, even as the company continues to investigate a mysterious explosion that destroyed a Falcon 9 rocket and its payload during a routine pre-launch test.

To entice shareholders and the public, Tesla said it will unveil a "a solar roof product, which along with Powerwall 2.0, will show the kinds of products that the combined company will be able to create" on Oct. 28. Palo Alto, California-based Tesla said it will also issue updated financial information on plans for the combined company on Nov. 1.

"These events will create a clear picture of how a combined Tesla and SolarCity will make solar and storage as compelling as electric vehicles – an achievement that would advance our mission of accelerating the world’s transition to sustainable energy," the company said.

Tesla is to release third-quarter results on Oct. 26.

The company had indicated through filings in recent months that it was likely to raise additional funds through issuing new shares or debt before the end of the year. Musk tweeted on Oct. 9 that that was not the case.

“Would also like to correct expectations that Tesla/SolarCity will need to raise equity or corp debt in Q4. Won’t be necessary for either,” Musk wrote today. In response to a question from a Twitter follower about whether such a sale would happen in early 2017, Musk replied: “Probably not then either.”