SpaceX and Tesla (TSLA), will they merge...? "If materialized, a $3.5 trillion valuation is targeted"

▲ Tesla (TSLA), SpaceX (SPCX), Artificial Intelligence (AI), Robot/AI generated image

The potential merger between Elon Musk's space company SpaceX and electric vehicle manufacturer Tesla (TSLA) has emerged as a major topic on Wall Street. If the merger of the two companies materializes, a super-large company with a value exceeding $3.5 trillion would be born.

In a report on September 29 (local time), Barron's pointed to the market's growing anticipation of a merger between the two companies as the reason behind the recent sharp increase in the stock correlation between Tesla and SpaceX. For the past several weeks, the two stocks have moved in the same direction for about two-thirds of trading days, showing a close synchronization. Statements from major investors also fueled the merger rumors. Ron Baron, founder and CEO of Baron Capital, expressed his support for a merger, stating to Musk, "I will support any decision you deem better." Baron Capital holds approximately $25 billion in SpaceX equity and $5 billion in Tesla stock.

Musk's technology convergence strategy, encompassing artificial intelligence (AI) and next-generation hardware, is cited as the core justification for the combination. With SpaceX integrating AI startup xAI as a subsidiary, and then collaborating with Tesla to build the semiconductor manufacturing facility Terafab and jointly pursue the digital Optimus project, business boundaries have already blurred. It is observed that the construction of in-orbit data centers and the explosive growth of satellite internet Starlink, when combined with Tesla's autonomous driving and robot ecosystem, will create powerful synergies. Baron predicted that Starlink's annual revenue could reach $1 trillion within the next 10 years, and its user base could surge from the current 15 million to 300 million.

However, skepticism and opposition from the market regarding the proposed $3.5 trillion merger, which would be the largest ever, are also considerable. Gary Black, co-founder of Future Fund, warned of the risk of shareholder value erosion, stating that Tesla shareholders might contribute about 55% of the total profit in the merged entity but only receive 40% ownership. Legal experts also pointed out that the merger would have to overcome fierce proxy battles during the shareholder meeting approval process and strict scrutiny from antitrust regulatory authorities.

Expectations for technological integration synergy and conflicts of interest among shareholders regarding the share exchange ratio are in a tight standoff. If the merger scenario between the two companies materializes, coinciding with SpaceX's IPO plans, it is expected to bring about a major tectonic shift in the global tech industry landscape.

[Article Key Summary]

-The deepening synchronization of SpaceX and Tesla (TSLA) stock prices has fueled rumors of a super-large merger valued at $3.5 trillion.

-Major shareholder Ron Baron has expressed support, and AI and data center-centric synergies are anticipated, but concerns about shareholder value dilution are also strong.

-The share exchange ratio and antitrust regulatory review have been identified as key challenges that will determine the success of the future merger.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*