      Musings on Markets · 2016-09-06
      · 3558d
    

Valuation Malpractice in the Tesla-SolarCity Merger: Investment Banking at Its Worst

A critical analysis of the investment banking valuations by Evercore and Lazard for Tesla's 2016 acquisition of SolarCity. The author identifies multiple valuation failures and conflicts of interest, including inconsistent growth assumptions, inappropriate discount rates, and the fundamental conflict created by Elon Musk's control of both companies.

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Metrics in this report

Evercore Success Fee

5.25$ million

fixed

Additional compensation upon deal completion

Lazard Success Fee

0.4%

percentage

Of SolarCity equity value upon deal completion

Perpetual Growth Rate Range - SolarCity

1.5-3%

range

Lazard valuation assumptions

Post-Deal Stock Price Decline - SolarCity

24%

approximate

Market reaction following deal announcement

Post-Deal Stock Price Decline - Tesla

8%

approximate

Market reaction following deal announcement