Could Tesla's SolarCity deal be Elon Musk's downfall?

As Musk dreams of one trillion dollars, the market questions his common sense...

SpaceX, Elon Musk, business

Jae C. Hong / AP

Tesla's shares plunged by over 10% on Wednesday, taking a $3bn chunk of the advanced technologies company's market value with it, as people scratched their heads over founder Elon Musk's latest move.

With Musk already the main investor in rooftop solar panel manufacturer SolarCity, he issued a statement early in the week revealing that Tesla had made an offer to acquire SolarCity outright.

The note led with a 'sustainability' mantra and explained that the combination would create "the world's only vertically integrated energy company offering end-to-end clean energy products."

For Musk, it was a "no-brainer".

In the wake of the announcement, the majority of analysts and investors weren't quite buying what Tesla was putting out, however, as people voiced concerns over shady motives and conflicts of interests.

Essentially, rather than being a practical pairing of two totally in-tune companies, it was being viewed as a rescue attempt for a stuttering SolarCity that could drag Tesla down with it.

Deutsche Bank analysts were quick to retort that this was "not a 'no-brainer' for us."

They stated:

"While there are clear overlaps between the companies (Tesla's battery packs, and even their vehicles can efficiently store the energy produced by SCTY's solar installations; Tesla stores could sell Solar/Battery/Vehicle packages), we note most shareholders in Tesla, and most Tesla customers were not planning to engage in building an 'energy solutions company'."

Speaking on CNBC, investment manager Jim Chanos declared SolarCity to be "a company headed towards financial distress. It is burning hundreds of millions in cash every quarter, a burden that now Tesla shareholders will have to bear."

Oppenheimer analyst Colin Rusch also viewed the bid as amounting to a "bailout", downgrading Tesla shares and writing:

"While we remain bulls on the solar industry, we do not view this acquisition as the best and highest use of [Tesla's] capital and human resources."

Whether Musk was really thinking of his clients was also questioned, due to the fact he currently controls 21% of Tesla and 22% of SolarCity.

Not only that, his cousins Lyndon and Peter Rive are the CEO and chief technology officer of SolarCity respectively.

Eddy Elfenbein, editor of The Crossing Wall Street blog, told CNBC's Power Lunch that it would only serve to remove the aura people place around Musk:

"They see him as a visionary, they see him as being different from a standard businessman and somebody who is going to change the world, and when he does this he seems just like a regular businessman."

As the week has progressed, however, a small number of Tesla's investors have backed the plan.

Reuters reported today that Joe Dennison, a portfolio manager with Zevenbergen Capital Investments (which has about 600,000 Tesla shares), believes the potential $2.8bn deal is a "natural evolution" for the company.

He said:

"We expect it to go through and believe that most investors who actually own the stock understand management's long-term vision for the company."

As for the man himself, he seemed bullish on a conference call explaining his thinking:

"When I think of a combined automotive and power-storage and power-generation company... The potential for Tesla [is] to be a $1 trillion company in market cap."

You can't say he isn't thinking big.