Elon Musk revealed that SpaceX and Tesla have appointed special committees of independent directors to explore a merger, a deal considered almost inevitable because he controls both companies. The following day, Tesla shares rose 3.4 %, while SpaceX gained 7.8 %, adding $155 billion to its market capitalization. An immediate merger would be slightly accretive to SpaceX’s earnings per share, but a 30 % premium would take the combined valuation to $4.12 trillion and require SpaceX to issue shares equal to 92 % of its current outstanding stock. To deliver a competitive return by 2035, SpaceX would then need to generate about $550 billion in profits on nearly $3 trillion in revenue, even as Tesla’s profits decline and its free cash flow remains negative. The merger would therefore primarily benefit Tesla shareholders by monetizing their holdings at the company’s elevated valuation, while penalizing current SpaceX shareholders, who would surrender nearly half their company for modest earnings and even greater funding needs.
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