The Case Against A Spacex And Tesla Merger
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NASDAQ · As of 4:00 PM ET 10/29/26
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Key data points
Market capMarket cap calculated using publicly traded s outstanding only. Does not include unlisted, private, or dual-class non-traded s. Implied market cap may vary.$1.59T
Day’s range$400.50 – $406.98
52wk range$297.38 – $498.83
Volume22.9M
Avg volume36.6M
Gross margin19.29%
The argument over the conglomerate discount is admittedly subject to change, as conglomerates once commanded a premium. However, that’s not the case now, and until it changes, there’s no strong reason to believe a merger will lead to an immediate market-valuation rerating of the merged entity. On the contrary, the opposite could occur.
Different risk profiles and capital profiles
The argument from specific risk and capital profiles is the strongest. Tesla is on the cusp of beginning a multiyear journey to scale its robotaxi service and generate a long stream of recurring revenue from robotaxi/Cybercab. Investors can disagree on its profit potential amid competition, but robotaxi/Cybercab is baked into the valuation, and if you are holding the stock, you presumably believe in the potential of autonomous driving.
While it will obviously require significant upfront capital investment to build out the network, Tesla has the resources to do so and create a company with significant long-term cash flows. The same argument, albeit a few more years out, applies to Optimus. Tesla does not need SpaceX to achieve its own goals.
In contrast, SpaceX operates in a high-risk sector that requires even more massive capital investment. Moreover, while Starlink is currently SpaceX’s profit generator, its revenue driver is the Super Intelligence business. The former is effectively funding growth in the latter.
SPCX – Space Exploration Technologies
$143.89-$1.34 (-0.92%)
NASDAQ · As of 4:00 PM ET 10/29/26
Key data points
Market capMarket cap calculated using publicly traded s outstanding only. Does not include unlisted, private, or dual-class non-traded s. Implied market cap may vary.$1.95T
Day’s range$141.03 – $144.95
52wk range$104.83 – $225.64
Volume68.4M
Avg volume101.5M
Tesla is moving toward becoming a company with a long-term stream of recurring revenue, scaling robotaxi/Cybercab and, in time, Optimus, and a play on physical AI. In contrast, SpaceX is a business that requires massive, ongoing, and uncertain capital expenditures and is a play on AI infrastructure.
Regarding the uncertainty of capital expenditures, consider orbital data centers and SpaceX. Their depreciation rate is ly to be high because they realistically can’t be serviced in space and, unterrestrial data centers, which can replace servers and chips, will ly last only as long as their graphics processing units (GPUs) remain useful. A high depreciation rate implies higher maintenance capital spending.
Tesla hasn’t released value from robotaxi/Cybercab yet
To understand this argument, consider how private equity might run Tesla. Their typical model is to generate value from the investment and sell the asset only once the business is firing on all cylinders, and it can optimize the price.
If you believe Tesla will evolve into a company generating billions of recurring revenue from its Cybercab fleet and then from Optimus, it makes sense to hold the asset, at least until the company proves the doubters wrong and releases value from the robotaxi rollout. At which point, Tesla holders will be in a stronger position to demand a healthier premium for the business.
Image source: Getty Images.
What it means to investors
Again, while it’s true that we don’t know what kind of offer or what deal it will be, or even if there will be a proposal at all, the reality is the value of Tesla will key off of its current market price, and if you think it’s undervalued and/or want to wait until the company releases value from robotaxi, then an offer now is unly to lead to a favorable outcome for you.
All told, in a merger, Tesla investors would dilute their claim on cash flows from robotaxi, EVs, and robotics (physical AI) in favor of using that cash to support space exploration and cloud computing (AI infrastructure). This creates a merged company with a significantly different risk and capital-allocation profile from Tesla, and they might not get full value for their Tesla s until robotaxi scales.
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About the Author
Lee Samaha is a contributing Stock Market Analyst at The Motley Fool covering industrials, electricals, energy, materials, transportation, and infrastructure stocks. Prior to The Motley Fool, Lee was a Civil Engineer and Investment Manager. He holds a Bachelor of Civil and Structural Engineering from Southampton University and a Certificate in Investment Management from Chartered Institute for Securities & Investment. Lee first cut his investing teeth on The Motley Fool bulletin boards (commonly referred to as the “Fool Boards,”) and he’s infinitely grateful to all of the investors he learned from in this powerful investing community.
Stocks Mentioned
Tesla
NASDAQ: TSLA
$403.30
(-0.23%)-$0.92
Motley Fool Stock Advisor’s Latest Pick
—% Avg Return
Space Exploration Technologies
NASDAQ: SPCX
$143.89
(-0.92%)-$1.34
Honeywell Technologies
NASDAQ: HON
$222.14
(+1.31%)+$2.88
Johnson Controls International
NYSE: JCI
$158.27
(+0.58%)+$0.92
3M
NYSE: MMM
$177.36
(+2.64%)+$4.56
Danaher
NYSE: DHR
$236.98
(+1.24%)+$2.91
Emerson Electric
NYSE: EMR
$170.74
(+1.81%)+$3.03
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
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