TSLA Tesla Inc

Tesla Motors Inc. disclosed in a regulatory filing Monday that its proposed merger with SolarCity Corp. could be delayed by shareholder lawsuits, adding to the volatility for cash-strapped SolarCity, which is selling assets and cutting costs as it seeks to survive until the deal can close.

The lawsuits, filed by two individuals and two pension funds earlier this month, claim that the members of the Tesla board breached their fiduciary duties in connection with the proposed merger, and that certain insiders would be unjustly enriched by the companies' combination, according to a regulatory document Tesla filed Monday.

SolarCity is chaired by Elon Musk, Tesla's chief executive, who owns about 20% of the shares in both companies.

It was unclear whether the lawsuits might delay Tesla's planned shareholder vote on the merger, which the company had earlier said it planned to schedule this week. The plaintiffs are the City of Riviera Beach Police Pension Fund, the Arkansas Teacher Retirement System, Ellen Prasinos and P. Evan Stephens.

"Simply because someone uses litigation to try to delay an acquisition does not mean it will be successful," Tesla said in an emailed statement. "At this point, it is not yet known if anyone will even end up pursuing such a request. If anyone does, Tesla will oppose it."

SolarCity shares have plummeted by two-thirds this year and closed Friday at $17.50—a significant discount to the implied price of about $22 a share of its $2.4 billion deal with Tesla—as some analysts question whether the transaction will happen.

The home solar-panel installer has lost money each year since it went public in December 2012, and its sales and other costs have consistently outpaced its revenue. It spent $438 million on sales, administrative and research costs this year through June, about 42% more than revenue. It was down to $146 million in unrestricted cash as of June 30, from $362 million at the end of March.

As it seeks to survive as a stand-alone company until its merger with Tesla—and possibly beyond if the deal doesn't go through—SolarCity is selling more solar panels to homeowners for cash, rather than its traditional business model of leasing the panels and retaining ownership.

It is planning to sell more shares in solar panels it owns to other investors, as it did earlier this month when it raised $305 million in a cash equity transaction with Quantum Strategic Partners Ltd., the hedge fund of billionaire investor George Soros. And it has laid off employees and contractors, shut sales offices and overhauled its sales and marketing department, said SolarCity Chief Executive Lyndon Rive.

"Our cash balance at the end of Q3 will be higher than the end of Q2, and our end-of-Q4 cash balance is scheduled to be higher than the end of Q3," Mr. Rive said in an interview last week, prior to Tesla's regulatory filing. The company declined to say how many people it had let go, or how much it hoped to raise in asset sales.

SolarCity is currently selling about 30% of the panels it installs on home rooftops for cash, up from 10% earlier this year and less than 5% last year. It aims to boost that number to half or more by the end of this year.

The company's strategy to sell more panels for cash "will generate a larger amount up front to fund the growth and working capital the company needs," Mr. Rive said. A typical six-kilowatt home solar array sells for about $18,840, on average, according to GTM Research.

SolarCity's cash crunch comes at a difficult moment for the home solar industry: some analysts are forecasting that the rapid growth the sector has enjoyed in recent years is slowing.

Bloomberg New Energy Finance is predicting 0.3% growth in the home solar market in 2017, blaming a nationwide drop in conventional power prices and reductions in state solar incentives.

GTM Research and the Solar Energy Industries Association predict 19% growth next year, down from an expected 23% increase this year and 66% in 2015.

SolarCity has lowered its forecast for the volume of panels it plans to install this year to 900 to 1,000 megawatts, down from 1,250 megawatts earlier this year.

Lynn Jurich, Chief Executive of Sunrun Inc., said she expects the residential solar market will grow at least 20% for the next several years, driven by falling equipment prices and growing consumer demand for clean energy.

"That growth rate would be the envy of many industries," she said.

SolarCity is banking on synergies with Tesla that it believes will cut its costs. But some analysts are questioning whether the deal will be completed.

Thomas Burnett, head of research at Wall Street Access, a brokerage firm that provides research to investors who wager on mergers and acquisitions, now estimates the odds are "no better than 50-50," compared with his estimate in July of 80% odds the deal would be approved.

While SolarCity is focused on completing the deal with Tesla, it will explore finding another strategic partner if the deal doesn't pan out , and believes it can find one, said SolarCity board member Nancy Pfund

"As a leader in a huge market that is growing very quickly, SolarCity has always been of interest to a lot of different companies," she said. "People look to SolarCity for leadership and financing in the distribution solar revolution."

Tim Higgins contributed to this article.

(END) Dow Jones Newswires

September 19, 2016 12:35 ET (16:35 GMT)

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