A SpaceX‑Tesla merger would be the biggest ever, but are the numbers correct?

(SeaPRwire) –   Elon Musk might be preparing to leverage SpaceX’s skyrocketing valuation to save Tesla, potentially forming a massive combined entity that could operate at a loss.

A recent analysis by colleague Shawn Tully breaks down the financial figures regarding a rumored potential merger between SpaceX and Tesla. The resulting company would boast a valuation of $3.4 trillion, combining SpaceX’s projected $1.75 trillion value with Tesla’s $1.65 trillion market capitalization. This figure would make the deal nearly three times larger than the biggest merger in history.

Tully states: “Using the immense hype around the upcoming SpaceX IPO as a tactic to save a struggling Tesla is a logical move for Elon Musk. With an expected market cap of $1.75 trillion, SpaceX shares appear significantly overvalued—an offering that leading analysts suggest they would steer clear of. Consequently, Musk could utilize these inflated shares as currency to acquire Tesla at a premium, even at its current market cap, a figure that is also excessive by any standard measure.”

Nevertheless, the financial rationale becomes problematic, according to Tully. For instance, to absorb Tesla, SpaceX would need to issue new shares equal to 94% of its existing total, doubling its share count to 8 billion. Meanwhile, Tesla’s trailing GAAP earnings have plummeted from $15 billion in 2023 to $3.9 billion currently, and core operating earnings—excluding regulatory credits and Bitcoin profits—are only $2.3 billion. Furthermore, Tully notes that the cash flow situation is even more concerning.

For CFOs, treasurers, and capital-markets experts, this scenario prompts a critical question: what are the implications when the globe’s most anticipated transaction aims to address an issue of overvaluation by potentially generating an even larger one?

You can read Tully’s full story here. 

Sheryl Estrada
sheryl.estrada@.com