Elon Musk received mixed news from proxy advisory firms on Friday, Nov. 4, as one group recommended approval and one recommended rejection of Tesla Motors Inc.'s (TSLA) planned $2.6 billion acquisition of SolarCity Corp. (SCTY) .
Institutional Shareholder Services recommended shareholders back the plan at a Nov. 17 vote, while Glass Lewis & Co. came out against the deal.
The opinions of these advisory firms are seen as significant because more passive mutual funds and other institutional investors often rely on ISS and other proxy advisory services when deciding how to vote. In Tesla's case top holders Fidelity Management & Research, owner of 13.69%, T. Rowe Price Associates, 7.07%, and Vanguard Group Inc., 3.29%, would be expected to look closely at the recommendation.
Musk and other insiders have recused themselves due to conflicts and Tesla has a relatively small retail investor base - perhaps less than 10% of the total - meaning the vote will come down to large institutional holders. A third proxy firm, Egan-Jones Ratings Co., as of press time had not published any public comments.
Tesla's planned deal for SolarCity has come under criticism in the months since it was announced due to the companies' cross ownership, SolarCity's financial troubles and the lack of obvious synergies between a solar panel maker and an automaker. Tesla has an ambitious agenda even without M&A, including bringing its more affordable Model 3 to market, and Oppenheimer analysts have estimated the company could need to raise upwards of $12.5 billion by the end of 2018 to fund both SolarCity and Tesla's plans.