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Tesla Shareholders Should Back SolarCity Merger, ISS Says

  • Automaker can bridge SolarCity funding gap, advisory firm says
  • Report says vote gives minority investors enough of a voice

Shareholders of both Tesla Motors Inc. and SolarCity Corp. should vote in favor of the proposed $2.3 billion deal that would merge the companies, advisory firm Institutional Shareholder Services said.

Tesla, with a market value of about $30 billion, would be able to bridge the funding gap with cash-burning SolarCity, and the deal is a necessary step in the electric-car maker’s push to become an integrated sustainable energy company, ISS said in a report Friday. The firm also said Tesla gave minority shareholders enough of a voice to overcome governance concerns. Both companies have scheduled votes on Nov. 17.

The proposal to merge the two companies has been controversial since it was announced in June and Tesla shares fell 10 percent that day as some stockholders worried that the solar-panel installer’s debt and cash situation would be a burden on the carmaker. There were also corporate governance...