The odds are growing stronger that SpaceX (SPCX) and Tesla (TSLA) will merge their businesses.
According to a Bloomberg news report, this deal might happen by next month. Why might CEO Elon Musk want this share-exchange deal?
SpaceX is not listed on the S&P 500 (IVV), while Tesla (TSLA) is. The merger might force S&P Global to include the merged firm on the index. That would force passive ETFs to hold the combined firm. The market capitalization would be in the $3.5 trillion range ($1.9 trillion for SpaceX and $1.5 trillion for Tesla).
Shareholders would get operational synergies. Tesla already demonstrated a sports car prototype that used SpaceX’s thrusters. Underneath that, the firms could share autonomous driving software, robotics, and energy storage. More importantly, Tesla would have access to SpaceX’s AI data center plant in Texas.
Risks
Regulators might stop the deal. They might cite national security concerns. Tesla, which has operations in China, might have vulnerabilities. It might fail to protect its knowledge in sensitive U.S. defense and national security.
Tesla shareholders might not get the best price for their shares. Instead of waiting for the stock to rise in the next few years, it would have to sell at a prevailing valuation.
The merger is appealing. It would merge a big company (SpaceX) with the fast-growing Tesla. More specifically, Tesla’s self-driving software, robotaxi, and robotics are growth engines. Its EV business is not.
