Ask Matt: Can SolarCity survive without Tesla?

Q: Can SolarCity survive without Tesla?

Q: Can SolarCity survive without Tesla?

A: SolarCity (SCTY) shareholders breathed a sigh of relief when Tesla (TSLA) offered a rich premium for their stock. There’s no question the company’s future would be much less sunny without Tesla.

Late Tuesday, Tesla offered between $26.50 and $28.50 a share for SolarCity, which is a rich premium to the stock’s closing price of $21.19 that day. Investors pleased with the offer pushed the shares up 69 cents, or 3.3%, to $21.88 a share Wednesday. Getting the deal done, given resistance by Tesla shareholders and potential conflict of interest questions between the companies, won’t be easy. But one thing is for sure, SolarCity needs more cash to keep operating in one form or another. The company ended the first quarter with just $361.7 million in cash and investments, while it carries a heavy load of $2.6 billion in long-term debt. It’s not just the balance sheet that’s constrained. The company burned $193.1 million from operations in the first quarter, which doesn’t even include the $459.6 million in cash consumed from capital expenditures. SolarCity’s cash won’t hold out long at that burn rate. SolarCity needs to raise another $2 billion this year, says Credit Suisse analyst Patrick Jobin in a note to clients.

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USA TODAY markets reporter Matt Krantz answers a different reader question every weekday. To submit a question, e-mail Matt at [email protected] or on Twitter @mattkrantz.

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