Tesla Motors proposed buying SolarCity for as much as $2.8 billion in stock this week, seeking to combine electric cars, household batteries and rooftop solar panels under one company while confronting investors with the conflicts and financial risks created by Elon Musk’s leadership of both enterprises.

The preliminary offer values SolarCity at $26.50 to $28.50 a share, a premium of roughly 21 to 30 percent over Monday’s closing price. Tesla would exchange 0.122 to 0.131 of its shares for each SolarCity share, according to the proposal filed with the Securities and Exchange Commission.

Musk is Tesla’s chief executive and largest shareholder and SolarCity’s chairman and largest shareholder. His cousins, Lyndon and Peter Rive, run SolarCity. Musk called the combination a “no-brainer,” arguing that customers should be able to buy clean electricity generation, storage and transportation through one integrated provider. Wall Street’s initial verdict was skeptical: Tesla shares fell sharply after the proposal, while SolarCity shares rose but remained below the indicated offer.

One clean-energy company from roof to road

The industrial logic begins with the home. SolarCity installs panels that generate electricity; Tesla’s Powerwall battery can store it; a Tesla vehicle can consume it. Today those products are marketed and installed by separate companies. A merger could create a single sales channel, coordinate hardware and software, and reduce the friction of multiple contracts and installation visits.

Tesla laid out that thesis in its announcement of the offer, saying the combination would expand the companies’ markets while lowering costs. The company envisions customers managing energy production and use as one system, with Tesla stores becoming a showcase for cars, batteries and solar equipment.

The proposal extends Musk’s view of Tesla beyond automobile manufacturing. The company introduced stationary battery products last year and is building a vast battery factory in Nevada. Its first-quarter regulatory filing describes heavy investment in the Model 3, battery capacity and service infrastructure. Adding solar would make Tesla a broader energy company before it has completed the difficult transition to mass-market vehicle production.

The financial burden behind the strategic fit

SolarCity is the largest U.S. residential solar installer, but its growth depends on continuous access to capital. The company pays upfront for equipment and installation, then recovers money over years through leases and power-purchase agreements. That model creates valuable long-term contracts but consumes cash as the business expands.

SolarCity’s 2015 annual report recorded large operating losses and substantial debt. The company has also faced slowing installations and rising customer-acquisition costs. Tesla, meanwhile, is spending aggressively to launch the lower-priced Model 3 and expand production. Combining two capital-hungry businesses may increase financing pressure even if their products fit together.

Reuters calculated the proposed value at roughly $2.6 billion to $2.8 billion. Because payment would be in Tesla stock, the final value will move with Tesla’s share price. SolarCity shareholders would gain exposure to Tesla’s vehicle business, while Tesla shareholders would absorb the solar installer’s debt and cash requirements.

The market reaction points to a concern that Tesla is being asked to support SolarCity at a vulnerable moment. Musk rejects that interpretation, saying the strategic timing is now right because Tesla’s Powerwall is ready to scale and because joint selling can reduce costs. Investors must decide whether those operating benefits can arrive before financing needs intensify.

Overlapping boards demand an unusually careful process

The personal and financial ties surrounding the offer make governance central. Musk has said he will recuse himself from votes at both companies. Other directors with connections to the businesses are also expected to abstain, leaving independent board members to evaluate terms and negotiate.

The process matters because a transaction can be strategically plausible and still transfer value unfairly between shareholder groups. SolarCity’s board must determine whether Tesla’s stock offer adequately compensates its owners; Tesla’s independent directors must establish that acquiring SolarCity is better than contracting with it or pursuing other solar partnerships.

A later joint proxy would disclose negotiations and fairness opinions, but the current proposal remains preliminary. SolarCity has not accepted it, and due diligence could change the exchange ratio or end talks. The Tesla offer letter says completion would require approval by a majority of disinterested shareholders of both companies, an added safeguard given Musk’s positions.

Execution risk meets a widening ambition

Tesla has nearly 400,000 reservations for the Model 3, a level of demand that gives it an opportunity to move from a luxury manufacturer to a mass-market producer. It also creates an exacting production challenge. The company has advanced its target for reaching 500,000 vehicles annually, requiring rapid expansion in factories, suppliers, service and quality control.

SolarCity brings a different operating system: local permitting, roof-by-roof installation, financing and long customer contracts. Integrating that network while Tesla accelerates vehicle production could distract management. A contemporaneous analysis by Wired noted both the proposed clean-energy chain and the $2.6 billion in long-term debt carried by SolarCity.

There are also regulatory and market dependencies. Solar economics vary with state rules, utility rates, tax credits and net-metering policies. Electric-car demand depends partly on incentives and charging infrastructure. A combined company could diversify across those markets, but it could also concentrate several policy-sensitive businesses inside one balance sheet.

Utility-sector reporting by Utility Dive described the offer as a $2.5 billion to $3 billion transaction, reflecting the moving value of Tesla shares. The breadth of that range captures a defining feature of the proposal: Tesla is offering a volatile equity currency for a company whose own future depends on long-duration cash flows.

Musk’s argument is that energy generation, storage and transportation are converging and that separate corporate structures now impede the product. The skeptical case is that Tesla is assuming new debt and execution risk just as its automobile ambitions demand unprecedented focus. The independent boards and shareholders will now have to judge whether one integrated clean-energy company is an inevitable next step—or an expansion that arrives too early.