If I own 10 shares of Tesla, what will be left in my account when Tesla and SpaceX merge? Will the 10 shares stay as they are, turn into SpaceX shares, or will I receive new shares of the merged company?
On October 20, during SpaceX's third-quarter earnings announcement, Elon Musk said the boards of both companies had set up independent special committees to review a possible merger.
In after-hours trading right after the announcement, SpaceX's stock rose about 8% and Tesla's about 1.8%. The market reacted to the possibility of a merger right away.
But the boards starting a review and signing a merger agreement are completely different stages. No deal price or share exchange ratio has been disclosed yet.
How Is This Different From Ordinary Merger Talk?
If the two companies come under one roof, the business links multiply quite a bit.
Tesla is growing electric vehicles, batteries, energy storage, and autonomous driving and robots, while SpaceX has expanded from rocket launches and Starlink satellite communications into AI computing and data center business.
The Terafab semiconductor project the two companies are pushing together is another point of contact.
If chip design and manufacturing, AI computing, robots, and satellite connectivity were coordinated within one organization, it could become easier to align investment and development schedules.
✦ SpaceX's Third-Quarter Highlights
Growth speed and investment burden
SpaceX's third-quarter results also drew investors' attention. Revenue was $14.58 billion, up 161% from a year earlier, and net income was $4.4 billion. Revenue from AI and data center related business was reported at $7.56 billion.
But in the same quarter, capital expenditure reached $19.6 billion, and the spending forecast for next quarter is $35 billion to $40 billion. It means the money has to keep going in as fast as the company grows.
If a merger becomes reality, it won't stop at tying the two companies' technologies together; which side bears the investment costs and which business earns the cash will be decided inside one company.
So the synergy is attractive, but Tesla shareholders worry that they might have to take on SpaceX's massive AI and space infrastructure investment together.
What Will My 10 Tesla Shares Turn Into?
That depends on the merger structure. If SpaceX acquires Tesla, Tesla shares would turn into cash or SpaceX shares at a set ratio. Conversely, if Tesla acquires SpaceX, it would usually issue new shares to pay for it.
Setting up a holding company is also possible. What's been disclosed so far is only that a merger is under review, so which structure will be chosen hasn't been decided yet.
Let's put the two companies' market values at $1.5 trillion for Tesla and $2 trillion for SpaceX and simply add them up.
If shares were split in that ratio with no premium, existing Tesla shareholders' share would be about 42.9% and existing SpaceX shareholders' about 57.1%. This calculation just adds the two companies' current values.
In a real deal, the result would differ depending on which side gets an acquisition premium, how debt and cash are reflected, and how much is paid in stock, but for an investor who has no idea how their shares would change, it could be a useful reference.
✦ A Simple Market-Value Split Example
Explanatory math without premium, debt, cash, or deal costs
RBC analyst Tom Narayan presented a scenario in which, assuming SpaceX acquires Tesla at $480 per share, Tesla shareholders would own about 48% of the merged company. The merged company value assumed in this analysis was $3.74 trillion.
Adding the two companies' values in the simple calculation above gives $3.5 trillion, so they're similar. Compared with Tesla's October 20 regular-session close of $373.71, $480 is a price about 28.4% higher.
Is This a Good Deal for SpaceX Shareholders?
SpaceX shareholders could keep the growth opportunities of Starlink and the rocket business while also gaining exposure to Tesla's auto, energy, and robot businesses.
On the flip side, Tesla's EV business is affected by the economy and price competition, so they'd take on the risks of the car business anew.
Combining the two companies' businesses could widen the growth areas, but the more businesses there are, the more risks they'd be exposed to.
It's the same for Tesla shareholders. Having businesses like satellite communications, space launches, and AI data centers added to the portfolio could be attractive.
But considering that SpaceX plans to invest $35 billion to $40 billion in the next quarter alone, the capital expenditure burden after a merger and the way funding is raised would have to be made clear.
If the merger becomes a channel for pouring Tesla's cash into SpaceX's growth, Tesla shareholders will surely have complaints.
Musk's Conflict of Interest and Shareholder Approval
The most sensitive point is that the heads of both companies are the same person. Tesla's 2026 proxy statement lists Musk's stake in Tesla as about 19.8% as of September 30.
When setting the merger price, conditions favorable to Tesla and conditions favorable to SpaceX can differ, and Musk has a big stake in both.
So Musk said he would not take part in the independent special committees' discussions because of the conflict of interest.
The process in which the committees review the terms and both companies' shareholders evaluate the proposal is important.
If SpaceX, which holds US government and defense-related contracts, and Tesla, which operates a business in China, were to combine, regulatory and national security issues could also come under review.
This isn't a deal that can end with calculating only the technical synergies. It's hard for Musk to push it through just because he wants to.
How Likely Is a Merger?
✦ Tesla (TSLA) Closing Prices
Sep 30 to Oct 20, Nasdaq regular session close (USD)
Wall Street's outlook is fairly optimistic. Gene Munster of Deepwater Asset Management put the chance of a merger within the next two years at 95%, and Garrett Nelson of CFRA suggested a 90% chance by the end of 2027.
The time frames and analysis models differ, but both see the boards forming special committees as significant progress.
✦ SpaceX (SPCX) Closing Prices
Sep 30 to Oct 20, Nasdaq regular session close (USD)
There are many mountains still to climb. They have to agree on the deal price and exchange ratio, and the special committees' review, shareholder approval, and any necessary regulatory review remain.
When an actual contract comes out, the first thing investors should look at isn't only whether the merger happens, but who is recognized as being worth how much, and how many shares of the new company they receive.
✦ Tesla vs SpaceX, Relative Closing Prices
Sep 30 close set to 100 for each (closing-price change, no dividends)
The October 20 regular-session closes were $373.71 for Tesla and $147.79 for SpaceX. Musk's remarks came after the regular session closed, and Reuters reported that in after-hours trading following the announcement, Tesla rose about 1.8% and SpaceX about 8%.
Still, apart from the stock rise, investors in both companies are worried about whether they might end up losing out. New information will keep coming, so let's watch together to see how it goes.
This isn't investment advice. You know that, right? Let's each protect our own hard-earned money.
That's all for this post. See you next time.
Related Posts
- CoreWeave's $104.2B Backlog, So Why Is the Stock Falling?
- Broadcom CEO Likens Some AI Investors to Casino Gamblers
- Meta's Muse Wonder Rivals Claude. But Is AI Paying Off?
🌐 Korean version: 테슬라와 스페이스X 합병 가능성... 내가 보유한 주식은 어떻게 되는 걸까?
No comments:
Post a Comment