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Elon Musk had the perfect response to the biggest criticism of the Tesla-SolarCity merger

Elon Musk
Elon Musk

(Elon Musk.Alex Wong/Getty Images)

Tesla and SolarCity made their official merger announcement on Monday. The next steps are for the government to approve the $2.6 billion all-stock deal and for the shareholders of both companies to vote on it.

The deal is controversial for three main reasons:

1. Elon Musk owns about 20% of both companies and is CEO of Tesla and chairman of SolarCity.

2. SolarCity's financials this year have been a wreck: The company has lost 50% of its market cap, so this looks like a bailout.

3. Tesla already has a lot to contend with this year in its car business — and it doesn't really need to be adding SolarCity's $3 billion debt to the the balance sheet.

Of these, the first has been explicitly addressed by Musk, who has recused himself from voting on the deal. On a call with analysts on Monday, he joked that if a better offer came through, he'd have to go along with it, taking Tesla out of the running for the acquisition.

But he also addressed the conflict-of-interest issue.

"The conflicts of interest," he said in response to an analyst's question, "are if we don't merge."

That's actually a good point. Musk said in his recently published "Master Plan, Part Deux" for Tesla that the carmaker and SolarCity should have been under the same roof all along. And if Tesla were to bind itself with SolarCity's business without merging, then it would appear as if Musk were using one company to prop up the other.

Musk seemed baffled and somewhat amused that observers haven't yet figured this out.

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