The possibility of a merger between Tesla Inc. and SpaceX has been discussed by Elon Musk, and prediction market traders are now betting that the deal will close by next year. This has sparked interest among Tesla shareholders, who are wondering how the merger would affect their stock.
The Bear Case: A 28% Haircut
According to Gary Black of The Future Fund, a merger could result in a 28% dilution for existing Tesla holders. This could lead to the combined entity trading at a lower valuation, closer to $2.25 trillion than $3 trillion. Black notes that institutional investors are not keen on the idea of a TSLA-SPCX combination, preferring pure plays over conglomerates. He also mentions that conglomerates often gravitate towards the lowest common multiple.
The Bull Case: A $450 Billion Reprice
On the other hand, Tesla retail shareholder advocate Alexandra Merz argues that a true merger-of-equals would reprice the lower-valued side upward, potentially adding $450 billion to Tesla’s valuation. Longtime Tesla investor Ross Gerber has also expressed his support for the merger, calling the combined company a potential “Berkshire Hathaway of AI”. He believes that the two businesses are so intertwined that combining them makes the most sense.
Kalshi Odds Just Crossed 55%
The Kalshi contract on a Tesla and SpaceX merger being announced before May 2027 is currently trading at 55%, up from around 26% earlier this year. This surge in odds came after reports that Musk has been discussing a combination with close colleagues. Wedbush analyst Dan Ives puts the odds of a merger at 80% to 90% by the first half of 2027, while Musk biographer Walter Isaacson has also suggested that a merger is likely.
The Cap Tables Are Already Bleeding Together
The merger may be further along than it seems. Tesla has already invested $2 billion in xAI, which was later absorbed by SpaceX. This means that Tesla is already a SpaceX shareholder. The two companies are increasingly operating like divisions of the same conglomerate, with joint projects such as the Terafab semiconductor plant on the Giga Texas campus. SpaceX has also spent approximately $890 million on Tesla products, including Megapack batteries and Cybertrucks.
Upcoming IPO
SpaceX is expected to begin trading on the Nasdaq in mid-June under the ticker SPCX, with a target valuation of $1.75 trillion to $1.8 trillion. This would make SpaceX the larger party in any potential merger, surpassing Tesla’s market cap of approximately $1.6 trillion. As the situation continues to unfold, investors will be watching closely to see how the merger affects the valuations of both companies.