1 Analyst Puts The Odds Of A Tesla And Spacex Merger At 8…

Here’s a closer look.

The SpaceX logo next to the Tesla logo.

Image source: The Motley Fool.

The case for a combination

The argument for merging starts with the extent of overlap between the two companies. Musk increasingly pitches Tesla as an artificial intelligence (AI) and robotics company — think self-driving software and the Optimus humanoid robot — even though most of its revenue still comes from selling cars. SpaceX brings satellite internet through Starlink and launch capacity, and its February acquisition of Musk’s AI start-up xAI added the Grok chatbot.

Ives frames a tie-up as Musk’s clearest path to controlling more of the AI ecosystem under one roof.

A path to a merger seems plausible. Tesla invested $2 billion in xAI in January. When SpaceX absorbed xAI a month later, that stake converted into nearly 19 million SpaceX s, worth about $2.6 billion at the IPO price. And the two are also jointly building a chip-making plant in Austin, known as Terafab, meant to supply processors for Tesla’s robots and SpaceX’s satellites a.

Additionally, a merger between the two companies could help settle the case once and for all that Tesla is more than just a car company. Rather than Tesla holders owning a car company trying to become an AI company, they would hold a slice of an operation spanning electric vehicles, robotics, rockets, satellite internet, and AI.

The bull case is essentially that the market would stop valuing Tesla mainly on its car sales and start treating it as one pillar of a multitrillion-dollar Musk empire.

Why it may not play out the way bulls hope

But SpaceX’s own leadership sounds far more measured than the headline odds.

“Right now I’m focused on keeping the lights on here,” said SpaceX president and chief operating officer Gwynne Shotwell in a CNBC interview on the day of the IPO. She allowed that the two businesses long-term goals but stopped well short of calling a merger imminent.

The betting markets offer a more conservative view, too. As of this writing, prediction platforms put the near-term odds of a deal well below Ives’s 80% — in the range of 25% to 40% for a combination this year.

Additionally, there’s the issue of who would set the terms for such a merger. Musk holds more than 80% of the voting power at SpaceX through a dual-class structure, yet he owns only about a fifth of Tesla. That gap matters. A merger would be a related-party transaction with Musk on both sides of the table, and any deal would almost certainly be built largely around the company he controls outright.

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Then there’s price. Tesla s trade at about 370 times earnings as of this writing, a valuation that already assumes the company will succeed in autonomy and robotics on its own. And a merger ly wouldn’t help. It would add SpaceX’s own unproven, money-losing space and AI ambitions to an already expensive stock.

So where does this leave Tesla investors? I think the honest answer is that a merger is a real possibility, but not a sure thing — and that the more important question isn’t whether it happens but on whose terms. Because Musk controls SpaceX and only a minority of Tesla, any combination would ly look less a merger of equals and more SpaceX absorbing Tesla.

Whatever the case, investors should make their investment decisions today based on each company’s underlying fundamentals relative to the price they are paying, not because of merger prospects. Because one thing is certain: It’s unclear what a merger or acquisition could look , and under what terms it would happen.