At $25.83 per share, SolarCity's shareholders will get 0.11 Tesla shares for each SolarCity one.
A major merger in green power and automobile manufacturing saw Elon Musk's Tesla Motorsbuy his other green company, panel manufacturer SolarCity.
The downgrade comes on the back of the news regarding the San Mateo, California based solar power systems provider's merger with the high-end electric auto maker Tesla.
Tesla has this week confirmed that the electric automotive company will buy SolarCity the solar panel installer for $2.6 billion.
While Musk is chief executive of Tesla, chairman of SolarCity and the biggest shareholder in both companies, a merger agreement was not certain because SolarCity had formed a special committee to review Tesla's offer independent of the influence of Musk and other executives close to him.
"We can't do this well if Tesla and SolarCity are different companies, which is why we need to combine and break down the barriers inherent to being separate companies". "Tesla is getting ready to scale our Powerwall and Powerpack stationary storage products and SolarCity is getting ready to offer next-generation differentiated solar solutions".
"By joining forces, we can operate more efficiently and fully integrate our products, while providing customers with an aesthetically attractive and simple one-stop solar + storage experience: one installation, one service contract, one phone app", Tesla said today in a blog post.
Shares in Tesla rose US0.09 to US234.80 in morning trading in NY, but SolarCity's stock fell US1.39, or 5.21%, to US25.31. And if the deal is done, the combined Tesla-SolarCity may require to raise more capital by next year.
SolarCity has 45 days to seek an alternative suitor in a provision known as a "go-shop" period.
Mr. Musk said it is "valid" to question his large personal borrowings and the financial shuffling between SolarCity, SpaceX, and Tesla. (Lyndon and Peter Rive are Musk's cousins.) Since he suspected investors would have concerns about the acquisition being a conflict of interest, Musk said he would not be voting on the proposal, both as a board member and shareholder.
The takeover bid values SolarCity's shares at $25.37 each, markedly lower than the range discussed in June.