Key Takeaways
- Reports indicate Elon Musk is considering combining Tesla with SpaceX ahead of the latter’s anticipated IPO.
- The transaction could utilize SpaceX’s post-IPO shares as acquisition currency for Tesla, valued at approximately $1.65 trillion.
- The merged company would achieve a valuation near $3.4 trillion, though current combined profitability remains negative under GAAP accounting.
- Current Tesla investors would experience ownership dilution while adopting SpaceX’s more restrictive corporate governance framework.
- Wedbush’s Dan Ives estimates an 80% likelihood of merger completion; prediction markets indicate 52% probability by May 2027.
Shares of Tesla (TSLA) finished trading at $435.79 on May 29, declining 1.43% amid mounting speculation regarding a possible combination with SpaceX.
On May 27, CNBC disclosed that discussions are underway between Tesla and SpaceX regarding a potential merger. Sources indicate Tesla staff members anticipate a transaction will “ultimately occur,” with the matter being discussed freely within the organization.
Dan Ives from Wedbush Securities assessed the transaction probability at 80%, suggesting the operational integration blueprint has already been established. Prediction platform Kalshi currently reflects 52% odds of completion before May 2027.
SpaceX is positioning itself for an IPO anticipated in mid-June, targeting a market capitalization around $1.75 trillion. Tesla’s current market value stands at approximately $1.65 trillion — remarkably similar figures.
Should SpaceX pursue an acquisition of Tesla at these valuations, the company would require close to double its existing share count. The resulting combined enterprise would command roughly $3.4 trillion in market value, positioning it as the fifth-largest publicly traded corporation worldwide, trailing only Apple, Alphabet, Nvidia, and Saudi Aramco.
The financial fundamentals present significant challenges. Tesla generated $3.9 billion in GAAP net income during the trailing twelve months, representing a dramatic decrease from $15 billion recorded in 2023. Meanwhile, SpaceX reported a $4.94 billion net loss for the previous year. Combined on a pro-forma basis, the merged entity would currently operate at approximately $1 billion in annual GAAP losses.
Cash Flow Challenges Compound Concerns
Liquidity dynamics introduce additional complications. SpaceX experienced a $14 billion free cash flow deficit last year, driven primarily by substantial investments in AI infrastructure. Tesla is simultaneously accelerating its capital expenditure program, with a minimum of $22.5 billion allocated for the current year’s remaining months.
Both enterprises bring considerable financing requirements — neither currently produces sufficient operational cash to independently fund expansion initiatives.
Musk’s track record with related-party mergers raises concerns among some market participants. Tesla’s 2016 acquisition of SolarCity for $2.6 billion in equity was widely interpreted as a financial rescue. More recently, xAI acquired X (formerly Twitter) for $45 billion, followed by SpaceX’s purchase of xAI at a $250 billion valuation — a series of deals that consistently favored Musk over minority stakeholders in the acquired entities.
Columbia Business School professor Michael Ewens informed Yahoo Finance that any potential Tesla-SpaceX transaction would likely be structured as a stock deal, considering SpaceX’s financial position. This introduces uncertainty: “If it were cash, Tesla shareholders would have much less to worry about.”
Potential Consequences for Tesla Investors
SpaceX’s planned IPO governance framework substantially favors Musk. His Class B shares provide 10 votes per share, granting him 85% voting control. Additionally, SpaceX does not mandate independent board representation and requires arbitration for shareholder disputes.
Tesla investors would retain voting rights on any merger proposal — Musk controls approximately 20% of Tesla, falling short of absolute control. However, should the transaction proceed, their proportional ownership in the combined corporation would diminish, and they would assume SpaceX’s governance provisions.
University of Colorado law professor Ann Lipton suggested that Tesla shareholders might approve a combination if it ensures Musk’s focus is no longer divided between two publicly traded enterprises. “They would lose their control, but investors in Musk companies do not seem to value that much,” she observed.
Investors contemplating exit strategies should consider Columbia’s Ewens’ caution: Tesla shareholders harboring reservations may encounter difficulties liquidating positions post-merger if the transaction closes near the SpaceX IPO, potentially facing lockup restrictions or declining SpaceX share values following initial trading volatility.
David Trainer, CEO of research organization New Constructs, has indicated that a merged SpaceX-Tesla entity would require approximately $500 billion in profits and $2.2 trillion in revenue by 2035 to substantiate current market valuations — roughly double the already aggressive projections SpaceX confronts independently.
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