Musk’s Double or Nothing Bet on Off-The-Grid Dream

In his willingness to borrow heavily to turn his dreams into reality, Elon Musk has shown himself to be a gambler like no other Silicon Valley entrepreneur. But his proposed combination of Tesla Motors and SolarCity appears to be a double or nothing bet.

Partly, that’s because it combines two companies that are burning through cash—a combined $1.1 billion in the first quarter—while carrying heavy debt. Between them, Tesla and SolarCity owe more than $6 billion. That makes for a financially tenuous combination.

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Plenty of details need to be worked out before the deal occurs. One issue is that both SolarCity and Tesla can be required to repurchase a large portion of their debt with cash upon certain “fundamental changes,” according to public filings, although it’s unclear precisely what might trigger the requirements. If a merger triggered such a repurchase, the companies would have to refinance much of their debt, which could be costly.

—Alfred Lee contributed

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