Institutional Shareholder Services, which is an influential voice among institutional investors like Fidelity, gave its blessing for shareholders to vote for the merger. And institutional investors are a key voting block, as I highlighted here, and could swing the vote either way. What investors are speculating today is that this will make the merger more likely, which has pushed SolarCity's shares closer to the price of 0.11 times Tesla's shares.
With Tesla's share trading at $189.56 as of this writing, the conversion price for SolarCity's shares is $20.85, fairly close to where shares traded at their peak today. That indicates that the market thinks the deal is very likely as investors bet on the arbitrage opportunity between shares.
What should be noted is that SolarCity investors have a lot less upside holding shares after today. If the deal goes through, the stock won't move much higher. But if it doesn't, shares could plunge well below where they're trading now, something the stock does when the merger appears less likely. As shares approach the 0.11 ratio with Tesla, it may be time to take some shares off the table.