NEW YORK (TheStreet) -- Shares of SolarCity (SCTY) are surging 13.03% to $23.95 in pre-market trading on Wednesday after Elon Musk proposed combining his electric-car company Tesla (TSLA) with the solar energy company, which Musk also founded.
The all-stock deal values SolarCity at as much as $2.8 billion.
Following the announcement after Tuesday's market close, Oppenheimer removed its "outperform" rating and $26 price target on shares of SolarCity. The firm noted that the offer range of between $26.50 and $28.50 a share is a "fair price" for the company's value. The offer represents a premium of 21% to 30% over Tuesday's closing price of $21.19.
The deal "provides the capital resources SCTY needs in order to finance its projected capex," Oppenheimer noted.
"We believe this acquisition would alleviate some of the financial concerns at SCTY and yield operational synergies for the SCTY platform including improved brand position, additional customer outreach, and improved engineering talent," the firm said. "We believe these benefits are now reflected in shares."
Oppenheimer added that the Tesla shareholder vote on the acquisition could prove "somewhat messy," given the negative reaction by investors.
Tesla stock is down 11.21% to $195 in pre-market trading.
Separately, TheStreet Ratings team rates the stock as a "sell" with a ratings score of D.
SolarCity's weaknesses include its generally high debt management risk, poor profit margins, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.
You can view the full analysis from the report here: SCTY
TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this article's author.