Speculation Around Tesla and SpaceX Merger Gains Momentum

There’s a lot of buzz among investors and analysts regarding a possible merger between Elon Musk’s two prominent companies, Tesla and SpaceX. This chatter gained traction after SpaceX’s recent IPO surpassed $1 trillion in market valuation, which is notably higher than Tesla’s, sparking discussions about the potential consolidation of these entities under Musk’s leadership.

As the marketplace reacted to SpaceX’s $85 billion IPO, which propelled its value ahead of Tesla’s, the question of a merger has become increasingly relevant. Many are speculating whether Musk might combine these ventures into a massive conglomerate that covers everything from rockets to electric vehicles, AI, and even social media.

When asked about the possibility of a merger, SpaceX President Gwynne Shotwell acknowledged it but noted that the primary objective remains the aggressive growth plans for SpaceX. “It might actually simplify things for Elon,” she mentioned, hinting at the operational benefits of such a move.

On the investor front, some have reacted positively to merger speculation. Dan Ives, an analyst at Wedbush Securities and a long-time supporter of Tesla, suggested in a recent note that a merger could happen as early as next year. He believes it might provide Musk with more control over the AI landscape.

Similarly, Ross Garber, a veteran Tesla investor who sometimes critiques Musk, expressed favorable views on a potential merger. He pointed out that while SpaceX garners much attention, Tesla has been overshadowed, which could be detrimental to its shareholders. “Are they better together or apart? I think they’re better together,” he reflected.

Notably, the two companies already have considerable overlap. They’ve exchanged employees and executives, and Tesla maintains a 1% stake in SpaceX through its investment in xAI, which was spun off into SpaceX. Also, SpaceX has become a major customer for Tesla, securing large orders of batteries and Cybertrucks in the past year alone.

Collaboration extends further, with both companies working together on projects like an orbital data center and a substantial chip manufacturing facility aimed at producing components for Tesla’s robotaxis and robots. Shotwell reiterated on IPO day that synergies between Tesla and SpaceX are undeniable.

However, it’s worth noting that while a merger could streamline operations, both companies face challenges. Tesla’s recent efforts toward self-driving technology and robotics have met with hurdles, and its stock price has dipped about 10% this year. Meanwhile, SpaceX, despite its higher valuation, reported significant losses primarily due to the hefty investments required for its AI projects.

This financial disparity raises concerns for Tesla investors. They might worry about dilution of their stake in case SpaceX needs further funding. Additionally, SpaceX’s soaring valuation has eclipsed other major companies like Amazon and Meta, leading some Tesla shareholders to advocate for delaying any merger until SpaceX stabilizes post-lockup period.

Yet not all Tesla investors are on board with merging. Mike Garland, New York City’s assistant auditor for corporate governance, expressed unease over the potential lack of autonomy between both companies’ boards. He articulated concerns that Musk could view Tesla as a financial resource for SpaceX. Garland’s office, which oversees pension funds that include Tesla stock, is expected to scrutinize merger details closely.

On the other hand, Garber indicated that investor disapproval might not deter Musk from pursuing a merger to reinforce his corporate empire. “Investors seem to understand that Elon has control,” he observed, noting that many are likely willing to sacrifice some ownership in exchange for potential future gains.