I Wouldn't Buy Tesla Stock Betting on a SpaceX Deal. Here's Why.

The boards of Tesla (NASDAQ:TSLA) and SpaceX (NASDAQ:SPCX) have each set up a special committee of independent directors to weigh a combination, Elon Musk, the CEO of both companies, said during SpaceX's third-quarter earnings call on Oct. 20. Neither committee has agreed to terms. And Musk said he can't join the talks because he's a conflicted party.

SpaceX is worth about $2 trillion on the market, versus almost $1.5 trillion for Tesla. Tesla stock, near $377 as I write, is about 23% under its record close of $489.88 in December 2025.

So, would a merger be good for Tesla stock? I think it depends almost entirely on the price Tesla shareholders get. And at today's prices, the deal looks less appealing than SpaceX's growth makes it seem.

Image source: The Motley Fool.

SpaceX is growing much faster

Showing how far apart the two companies have drifted, SpaceX's third-quarter revenue climbed 161% year over year to $14.6 billion. That's a step up from 92% growth in the second quarter, when revenue was $7.8 billion.

SpaceX's operating income (profit from the business before interest and taxes) swung to $2.8 billion, after the company lost money on that line in both the year-ago quarter and the second quarter.

Tesla's results went the other way. Its third-quarter revenue was flat at $28.0 billion, and its operating income fell to $718 million, 56% below the year-ago quarter. Its operating margin slipped to 2.6% from 5.8%. And net income shrank 43% year over year to $787 million.

At current market values, Tesla shareholders would own around 43% of a combined company, if neither side got a premium. Going by the third quarter, that slice would bring about twice the operating income Tesla made on its own.

The second quarter tells a different story. On these results, the same slice would have carried only around a quarter of Tesla's operating income.

Put another way, I think the case that a deal adds profit for Tesla shareholders hangs on one quarter.

SpaceX's $4.4 billion in third-quarter net income also got help from around $1 billion in other income and a tax benefit. In the first nine months of 2026, the company still lost $413 million.

A much bigger spending bill

A combined company would also carry SpaceX's capital spending. SpaceX spent $48.1 billion on property and equipment in the first nine months of the year, mainly for its artificial intelligence business, versus around $13.0 billion at Tesla.

The gap shows up in free cash flow (cash from operations minus capital spending). Tesla produced around $1.9 billion of it in those nine months, but SpaceX's number was about negative $35 billion.

For a Tesla shareholder's 43% slice of the combined total, that positive cash flow becomes around $14 billion of spending above what the companies brought in.

Sure, SpaceX can pay for it, with about $90 billion in cash and marketable securities at the end of September. Management also forecast first-quarter 2027 revenue of $33 billion to $37 billion, over twice the third-quarter total. But Tesla shareholders might be signing up for a piece of that bet whether it pays off or not.

Would a deal make Tesla stock a buy?

Tesla stock already trades at over 400 times earnings, a price that assumes its newer businesses pay off. Using annualized third-quarter revenue, Tesla trades at around 13 times sales, versus about 34 times sales for SpaceX.

A deal at market prices wouldn't make either stock cheaper. It could only blend them, at around 21 times annualized sales -- more than Tesla shareholders pay per dollar of sales today. Any premium paid to SpaceX shareholders could cut Tesla shareholders' slice further.

Tesla shareholders do have a real say. Musk said Tesla would need approval from a majority of all its shares, not just the ones that vote.

At SpaceX, a deal would also need approval from its controlling shareholder, according to its quarterly filing. Musk has over half of SpaceX's voting power.

In the end, a merger could give Tesla shareholders a piece of a business growing far faster than their own. But at today's prices, they'd also be swapping a company that produces cash for a minority stake in one that spends tens of billions more than it brings in.

Is that a good deal for Tesla stock?

I don't think so, and I wouldn't buy shares hoping for one. The terms will settle it, and there aren't any yet.

Daniel Sparks has clients with positions in Tesla. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.