ECONOMY

New support for Tesla-SolarCity combo.

The proposed merger of electric car maker Tesla and SolarCity just got a big thumbs up from a prominent proxy advisory firm and shares in both companies shot up more than ten percent in afternoon trading.

Institutional Shareholder Services issued separate reports Friday recommending that shareholders of both companies vote for the proposed merger on Nov. 17.

Elon Musk, who is chairman of both companies and CEO of Tesla, announced in June a plan to combine them in an all-stock deal worth around $2.45 billion.

ISS said in its report to SolarCity shareholders that the offer of .11 shares for each share of Tesla represented a 14 percent premium before the deal was announced. ISS also said a merger would help SolarCity's "substantial financing needs."

The merger is not without critics, who note that neither company has achieved sustained profitability. Tesla reported a $22 million profit in the third quarter, but it was the company's first profitable quarter since 2013. SolarCity reports third-quarter earnings next week, but it lost $250 million in the second quarter.

Some shareholders have sued, claiming that the merger is an attempt by Musk to use one company to bail out another. Musk owns 26.5 percent of Tesla and 22 percent of SolarCity, which is run by his cousins.

Tesla made its case for the merger in a webcast Tuesday, saying SolarCity could add $1 billion in revenue to the combined company next year. That would be more than double the $400 million revenue SolarCity reported in 2015.

SolarCity — the largest home solar panel installer in the U.S. — also could add $500 million in cash to Tesla's coffers over three years, the company said. In the last four months, the company has raised around $1 billion to fund solar projects, Tesla said. Tesla currently has around $3 billion in cash.

"I'm pretty optimistic about where the vote's going," Musk told Wall Street analysts Tuesday, adding that it would be "frustrating" if shareholders don't approve the deal.

ISS also said the merger would help Tesla in its quest to become an integrated sustainable energy company, but some analysts wonder whether the deal could delay Tesla's first mass-market vehicle, the $35,000 Model 3, due out at the end of 2017.

Shares of SolarCity rose nearly 10 percent in afternoon trading. Tesla shares were up similarly but settled, up about 2 percent in the afternoon.