Musk aims to combine Tesla and Solar City amid financial difficulties

In an effort to save his solar energy company Solar City, Elon Musk has proposed combining it with his electric car company Tesla Motors Inc. which would allow the two companies to become one larger entity with a more diversified portfolio.

Both companies are currently facing financial difficulties due to their high operating costs and Tesla recently disclosed a securities filing revealing that it will have to pay $422 million to its bondholders during the third quarter. To make this payment, the company will be raising funds from various sources that it has used to fund its operations in the past, such as equity offerings or further bond sales. A portion of the money raised will also be used to fund its acquisition of Solar City.

It was also revealed that 15 different institutional investors had already decided against acquiring Musk's home solar company or increasing its equity. Solar City is currently having a difficult time raising the funds it requires to continue to operate from public markets.

Last year the company had $421 million at its disposal and now its cash reserves have declined to $146 million as of June 30. The company has few liquid assets available to it at the present moment and an acquisition by Tesla or any other firm is desperately needed to meet its operating costs.

Musk originally proposed combining Tesla and Solar City back in June in order to save money and expand the offerings of his electric car company to include batteries, solar energy and heavier vehicles. The move would also eliminate the conflicts of interest that exist between the two companies when doing business together and may help spur innovation.

Tesla will likely be combined with Solar City as its proposal has caused potential investors to back away from the deal, with the last of which to do so citing that “it did not believe that it was in a position to make an acquisition proposal within the range of Tesla's original proposal.”

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Anthony currently resides in South Korea where he teaches and experiences Korean technological advances first hand.