Key Points
SpaceX plans to go public as soon as tomorrow.
A SpaceX-Tesla merger seems inevitable.
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Earlier this month, I predicted a merger between Tesla (NASDAQ: TSLA) and SpaceX. The dots were easy to connect.
A merger would be complex, I argued, but it would in a single stroke eliminate the conflicts of interest shareholders have sometimes leveled at the company because of Elon Musks's interconnected holdings.
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Musk has a long history of intertwining his business operations. Consider that SpaceX currently owns no shares of Tesla. But when you search SpaceX's 370-page initial public offering (IPO) prospectus, Tesla is mentioned more than 80 times. Not only is SpaceX a major buyer of Tesla products -- purchasing everything from its Cybertrucks to its Megapack battery packs -- but both SpaceX and Tesla own a stake in xAI, Musk's artificial intelligence (AI) start-up.
The shared interest in xAI alone could trigger a merger.
"While a company launching rockets based on contracts with the government may not seem to have a lot in common with an EV manufacturer, both of the businesses are increasingly focused on AI and the talent and computing resources necessary to build AI infrastructure and services," a recent CNBC report noted. "More than three-quarters of SpaceX's $10.1 billion in capital expenditures in the first quarter were tied to AI, and Tesla said in its latest earnings report that capex will roughly triple this year, topping $25 billion."
That same report revealed that SpaceX and Tesla employees are already expecting a merger, likely because their operations are already highly intertwined. "The two companies already have a laundry list of shared resources, and Musk has discussed with colleagues the possibility of folding the companies together," the report concludes.
Only one question remains: When would the merger occur? If the SpaceX IPO is successful, the answer becomes obvious.
This is when Tesla and SpaceX will merge
I believe the Tesla and SpaceX merger will occur based on two potential timelines.
If the SpaceX IPO is a success -- as measured by the company's ability to sell all of its allotted shares at its intended price -- and the company is able to maintain a valuation near or even above its IPO price, I expect a merger announcement within the calendar year. There are simply too many incentives for this not to be the case. The combined capitalization of both companies would enable the merged entity to pursue AI dominance on a larger scale than either could achieve separately.
Musk already has a track record of moving quickly. One month after Tesla invested in xAI, SpaceX and xAI formally merged. For regulatory reasons, a Tesla-SpaceX merger may not close by the end of 2026. But the intention of doing so could be made public within six months under this scenario.
Image source: Getty Images.
But what if the SpaceX IPO fails to impress? What if the shares struggle in the months to come, perhaps mightily? In this scenario, I'm not sure Musk has as many incentives to combine both entities. Shareholder pushback may be greater in this scenario, especially given that there would likely be less blind faith in Musk's vision. Musk owns a controlling stake in SpaceX, but he does not hold a controlling share of Tesla. If SpaceX struggles, it's unlikely that Tesla shareholders would want to come to the rescue.
In recent years, Tesla shareholders have already created trouble for Musk. There was a very public dispute over the appropriateness of Musk's giant $46 billion pay package. Then, according to CNBC, "Musk diverted a $500 million shipment of Nvidia chips, which are essential for powering artificial-intelligence technology, away from Tesla and to his social-media platform, X," which is wholly owned by SpaceX.
Tesla and SpaceX are already tied at the hip. They're collaborating on orbital data centers, terrestrial data centers, factory robotics, an AI agentic platform, and much more. With a track record of merging business interests, a Tesla-SpaceX merger has likely crossed his mind. But the timing and execution will be up to Tesla shareholders, since it is they -- not Musk -- that control the voting interest of that entity.
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Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia and Tesla. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
