Tesla and SolarCity are cash-strapped amid a merger proposed by billionaire entrepreneur Elon Musk, who heads both firms.

In a securities filing Wednesday, Tesla disclosed that it needs to pay $422 million to its bondholders in the third quarter. The automaker also revealed that it plans to raise new capital by the end of the year, in part to support SolarCity, Musk's home-solar business.

Over the past few weeks, as many as 15 institutional investors -- including a private equity firm and several financial counterparties -- have declined to either acquire SolarCity or inject fresh capital into the business, the filing revealed. SolarCity's cash declined to just $146 million on June 30, down from $421 million one year prior, the company had previously reported.

Musk's proposal to combine the two companies is controversial, to say the least. Skeptics say the deal is simply a way to bail out the ailing solar company, though Musk has insisted that he foresaw Tesla having some role in solar energy back in 2006, when he was growing the startup. He hopes to reduce conflicts of interest between the two companies, and bought up half of SolarCity bonds as a "show of faith," he told the Wall Street Journal.

"SolarCity needs emergency funds to keep operating, and without the debt they issued to insiders they wouldn't be able to cover their working capital," suggests Gordon Johnson, a managing director at Axiom Capital Management.

SolarCity has generated just $1.5 billion in revenue over the past decade, while racking up more than $3 billion in debt.

Published on: Sep 1, 2016