Analyst Says SpaceX and Tesla Merger Probability Rises to 90%, Musk Has Not Ruled Out Merger Possibility

TradingKey - On July 22, Eastern Time, Deepwater Management analyst Gene Munster stated that the probability of a merger between SpaceX ( SPCX) and Tesla ( TSLA) merging is on the rise. After the topic of a merger was formally discussed during Tesla's second-quarter earnings call, Munster raised the probability of the two companies merging in the coming years from 80% to 90%.

Munster posted on X that he was surprised that the topic was "seriously discussed" during the earnings call. He then stated: "While Tesla shares may drop tomorrow, the long-term outlook remains positive. Musk continues to ramp up capital expenditures, FSD adoption is accelerating, Robotaxi is steadily progressing, safety is prioritized over scaling, and the probability of a SpaceX-Tesla merger has also ticked up slightly."

[Munster's post on X, Source: X]

During the Q&A session of the earnings call, when directly asked by an analyst about the possibility of a merger, Musk gave a positive response. Musk stated: "As you can see from SpaceX's extensive cooperation in many areas, there is more and more business overlap between the two companies, especially regarding Terafab." He added that specific details of a merger cannot be discussed on an earnings call, noting that "this must go through the proper procedures."

The Terafab mentioned by Musk is an AI semiconductor manufacturing project jointly launched by Tesla and SpaceX, aimed at addressing computing power shortages for robotics and data centers. Jointly funded by both companies, it is viewed as a link that could drive a future merger.

Currently, SpaceX has adopted Tesla's battery energy storage systems to power its AI data centers, Tesla has integrated SpaceX's Grok AI assistant into its vehicles, and Cybercab directly features SpaceX's Starlink technology.

These collaborations are not Musk's first attempt to integrate his companies. In 2016, Tesla acquired SolarCity to merge it into its energy business. Although the merger cleared antitrust reviews, it sparked a major shareholder lawsuit, which ended in 2022 with a ruling in Musk's favor.

On Wall Street, JPMorgan ( JPM) believes a merger has a foundation, citing that "operational integration is already quite deep." However, in the face of international politics and multinational regulation, actual implementation is too complex and carries huge risks. Meanwhile, Stifel stated that most investors believe a SpaceX-Tesla merger is a matter of 'when,' not 'if.' Nevertheless, Musk's voting power in SpaceX far exceeds his power in Tesla, and a merger would introduce governance complexities for Tesla's public shareholders.

On July 23, as of press time, Tesla's stock price fell over 5% in pre-market trading to around $353.41. Second-quarter profits missing expectations, coupled with free cash flow turning negative, was the direct reason for the pre-market drop.

[Source: Futu]