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SolarCity was undervalued by investment bankers in Tesla’s planned takeover

Tesla has a planned takeover of SolarCity for $2.6 billion in an all-stock deal. However, the investment bank that advised on the deal, Lazard, has apparently made a “computational error” by accidentally discounting SolarCity by $400 million.

“Despite the mistake by Lazard, the companies agreed it would not change their view of the deal.”

Just like that, the companies are going for forge forward anyways, even though it “should have” been valued at $3 billion rather than $2.6 billion, a more than 13% discount to the former?

Granted, had Tesla waited until after SolarCity reported earnings it likely could have bought the company for even less than what it’s paying now, but that’s beside the point.

The error isn’t surprising given that SolarCity did not weave the easiest financial web to navigate, but it is surprising that an investment banker would make such a mistake given the high profile nature of the deal.

Doubt has started to creep into the merger discussion, as SolarCity shares continue to move lower and lower, widening the spread of the deal. Remember, Elon Musk is a major shareholder in both companies and part of the move lower in SolarCity is caused by the roughly 5% decline in Tesla Thursday.