On December 6, Morgan Stanley
What advantage would there be to such a merger? And how likely or feasible is this proposal?
Analyst Adam Jonas speculated in the research note that a) the well-capitalized SpaceX could help the more financially troubled Tesla, b) that Musk is tempted to leave Tesla, which he finds boring, to focus on SpaceX; uniting the two companies would prevent his departure, which otherwise might send Tesla into a deflationary tailspin, and c) the two companies could share resources and research more effectively. Jonas believes that such a deal would create powerful synergies in a "deal of the decade."
It is true that there might be upsides to a merger. Tesla would be able to harness SpaceX's deep reserves of about $1 billion, as well as its positive relationship with its investors. SpaceX investors would potentially earn a much larger payout were a union with Tesla to be forged. It might in a sense make life easier for Musk, who could sidestep the pressure of quarterly reporting and minimize the vulture-like interference of short-sellers and speculators. Having all of his ventures centralized might also streamline Musk's managerial responsibilities.
But there are also reasons why a merger might actually create more problems than it would solve, and why such a union remains unlikely.
First, while the aerospace industry and the auto industry might superficially appear similar, they are actually completely different, so a merger might not actually make business more efficient.
Second, Tesla branched out into the solar industry by merging with SolarCity in 2016, further complicating matters. If Tesla were to merge with SpaceX, its balance sheets would be very complex, and auto, energy, and aerospace analysts would struggle to decipher what such a disparate conglomerate would be worth.
Third, any merger between Tesla and SpaceX might just put Tesla further at risk. The aerospace industry is extremely costly and risky, which is part of why space travel has thus far mostly been left to governments, who have the large public resources needed to advance such ventures. The merger might simply exacerbate Tesla's ongoing losses. Tesla posted its worst financial quarter ever in November, and SolarCity has proved more of a distraction than a boon as emphasis on solar panel production has pushed back the promised rollout of the Model 3. As the delays drag on, competitors like BMW (ETR: BMW), Porsche (ETR: PAH3), Toyota,
Fourth, Musk might not want to helm another public company. Musk has expressed frustration with Tesla, where he is subjected to constant investor scrutiny.
Finally, Jonas did not elaborate as to the financial mechanics of how such a merger would take place. SpaceX has flirted with an IPO, but remains private, raising $350 million in a recent round of funding to boost its total valuation to $21 billion. Tesla does not have enough capital available to purchase SpaceX, so any deal would likely need to be stock-based.
