Musk has proposed that his electric car developer Tesla acquire solar panel installer SolarCity for $2.8 billion. He's the principal stakeholder of both, but has disqualified himself from the talks and said the deal will require support from a majority of "non-me shareholders."
That could be a problem because there's a ton of overlap between the two investor groups, whose holdings in Tesla are worth many billions more than their stakes in SolarCity. While SolarCity shareholders should love this deal — it represents a premium of up to 35 percent above where the stock was trading on Monday — those same investors fear that a merger could wreck their Tesla shares.
Investors voting with their wallets will need answers before getting behind Musk, the celebrated tech entrepreneur. It's a classic battle between Silicon Valley idealism and Wall Street pragmatism.
"Musk may learn that engineering electrons is easier than engineering elections," said Joseph Grundfest, a law professor at Stanford University and senior faculty member at the Rock Center for Corporate Governance.
Tesla shares plunged 10 percent Wednesday to $196.66, following the Palo Alto, California-based company's offer to purchase SolarCity for $26.50 to $28.50 a share. SolarCity, based 15 miles north in San Mateo, rose 3.3 percent to $21.88, closing well below the bid price, suggesting that Musk faces plenty of skepticism from the public markets.