Tesla-SpaceX Merger Mania Strikes Wall Street Ahead of Earnings

Coming into Monday trading, Tesla stock was down 21% this year. (Mario Tama/Getty Images)

Key Points

• RBC analyst Tom Narayan wrote that Tesla investors would accept $480 per share in a potential merger with SpaceX.
• Barclays analyst Dan Levy wrote that a Tesla-SpaceX merger could be announced before Tesla’s annual general meeting by Dec. 6.
• A combined Tesla-SpaceX could control the entire AI value chain, from chips to software to hardware.

Tesla – SpaceX merger fever is infecting Wall Street, with analysts projecting the timing and price of what would be the biggest M&A deal in history.

Speculation about a merger has run rampant for months —for some obvious reasons, including Elon Musk. He is the driving force behind both companies and the architect of their AI strategies. SpaceX has foundational AI models, data centers, and digital products such as the chatbot Grok. Tesla is building physical AI products including self-driving cars and humanoid robots.

Recently, Barclays analyst Dan Levy wrote recently that a merger could be announced before Tesla’s annual general meeting, which will take place no later than Dec. 6.

On Friday, RBC analyst Tom Narayan wrote that Tesla investors would accept $480 per share. At recent levels, SpaceX investors would end up owning 52% of the combined company. “While we have no knowledge of a transaction or potential timing, we continue to see compelling long-term growth potential and meaningful synergies from a combination,” he added.

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Those synergies include controlling the entire AI value chain. Tesla and SpaceX are already working on a semiconductor manufacturing facility, Terafab, to ensure adequate supply of chips. A combined Tesla-SpaceX could control everything from the chips to software to the hardware running software.

To be sure, SpaceX investors would be giving something up. Narayan values SpaceX stock at $225 a share. At that price, SpaceX shareholders would own 68% of the combined company. At current SpaceX prices, and $480 a share, Tesla shareholders would get a 15% premium to Narayan’s intrinsic Tesla value.

Any deal of that size would require a shareholder vote. Musk controls SpaceX and owns a lot of Tesla stock, but it’s likely a majority of non-Musk shares would be required for the deal. Tesla and SpaceX didn’t respond to a request for comment about merger plans.

Merger mania hasn’t helped Tesla stock lately. Shares were down 0.5% in premarket trading Monday at $353. (The $480 price is a 36% premium to that.) S&P 500 and Dow Jones Industrial Average futures were up 0.5% and flat, respectively.

Tesla stock dropped 7.3% last week amid a broader selloff in AI-related technology stocks. The Nasdaq Composite fell about 4.5%.

Shareholders hope for a turn this week. Both Tesla (on Wednesday) and SpaceX (on Tuesday) report third-quarter results. Investors will want good news. They will also want to hear from Musk, trying to pick up what they can about his thoughts regarding a Tesla-SpaceX merger.

Write to Al Root at allen.root@dowjones.com

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