Barclays Says a SpaceX Merger Is Now "a Key Part" of the Tesla Bull Case. Here's Who Actually Wins if It Happens -- and Who Pays.

In Space Exploration Technologies' (NASDAQ: SPCX) recent third-quarter conference call, CEO Elon Musk was asked about the possibility of the company being merged with Tesla (NASDAQ: TSLA) -- his other trillion-dollar company. Musk responded by saying he thought merging the two companies was a good idea and confirmed that each company had formed a special committee to explore a potential combination of the businesses.

Long-running speculation that a potential merger between SpaceX and Tesla could be on the horizon has seemingly been confirmed, and it has now become an important part of the broader bullish case for Tesla. In a recent analyst note, Barclays highlighted the potential implications of a merger for Tesla shareholders.

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Being acquired by SpaceX could benefit Tesla shareholders

SpaceX currently has a market capitalization of roughly $2 trillion. Meanwhile, Tesla has a market cap of roughly $1.55 trillion. SpaceX's larger size makes it more likely to be the acquirer in a potential merger with Tesla, and the companies' respective financial profiles, along with current difficulties securing large loans at favorable interest rates, suggest that an acquisition would be largely or entirely funded through stock. Musk's role as CEO of both companies and compensation-based incentives also suggest that SpaceX acquiring Tesla in a stock-heavy deal is the most likely outcome.

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In Barclays' recent coverage of Tesla, lead analyst Dan Levy upgraded his rating on the stock from equal weight to overweight and raised his one-year price target from $370 to $450 per share. Not coincidentally, the analyst's price target of $450 per share matches his expectation for the equivalent value at which Tesla would be acquired in an all-stock deal.

At a buyout price of $450 per share, Tesla shareholders would receive a valuation premium of roughly 20% over the stock's current price. In other words, they would receive about 3.1 shares of SpaceX stock for every share of Tesla they currently own, based on each company's share price at the time of this writing.

In addition to clearing regulatory hurdles, a potential buyout hinges on approval from Tesla's shareholders. A deal would need to clear a 50% affirmative approval threshold. This means that investors who did not participate in the vote would have their equivalent voting shares tallied as "no" votes when determining whether the acquisition would proceed.

Musk currently controls roughly 20% of Tesla's voting power and could likely muster significant support from institutional investors. However, he would still likely need meaningful support from retail investors to close a deal. With that in mind, an even greater valuation premium may be offered to Tesla shareholders.

If an acquisition eventually goes through, buying Tesla stock today could be a way to purchase SpaceX stock at a substantial valuation discount. On the other hand, the heavy dilution stemming from the new stock offerings needed to fund a potential deal makes the outlook for SpaceX stock after a deal more difficult to predict. As it stands, a potential deal looks more heavily weighted in favor of Tesla shareholders.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.