A merger announcement is reportedly planned for early 2027, and is expected to be finalized before Trump leaves office.
ARK’s model leaves Tesla holders five times better off by 2036 after a merger, compared to 1.3 times for SpaceX holders, compared to remaining separate.
Committees have not agreed on terms, and shareholder and regulatory approvals remain hurdles.
Shares of Tesla (TSLA) and SpaceX (SPCX) fell overnight due to an attempted merger of Elon Musk’s companies before President Donald Trump leaves office, while ARK Investment Management expects a deal to leave Tesla shareholders five times better off by 2036 than if the companies remained separate.
Shares of TSLA fell 3% overnight Wednesday evening, while SPCX fell more than 1%.
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Politics adds pressure to TSLA-SPCX merger
A merger announcement is planned for the first half of 2027, with the aim of closing the deal during Trump’s presidency, people familiar with the matter told Bloomberg. The companies have a combined market value of about $3.7 trillion, but their independent committees have not yet agreed on terms of the deal.
Improving relations between Musk and Trump could help advance a deal, but possible congressional scrutiny after the midterm elections and the risk of falling AI stock valuations apparently add pressure to act.
“Musk and his advisors certainly want to take advantage of this window,” Bill Birmingham, head of research at REX Financial, told Bloomberg. “The timing is both favorable and critical.” The recovery in SpaceX’s stock price also makes it an attractive time to pursue a trade, said Morningstar analyst Nicolas Owens. “Now is a great time to use these stocks as a bargaining chip to make a deal,” Owens said. “If SpaceX’s stock price were to fall, it could complicate a purchase deal.”
ARK sees both groups of shareholders winning
Brett Winton, an analyst at Cathie Wood’s ARK Investment Management, said on X that a merger could benefit both shareholder groups, even at the current share price ratio. “Based on our modeling, compared to the no-merger case, even if there was a merger at the current stock price ratio, Tesla shareholders would be about 1.6 times better off in 2031, while SpaceX shareholders would be about 2 times better off,” he said.
By 2036, ARK’s model would leave Tesla shareholders about five times better off after a merger and SpaceX shareholders about 1.3 times better off, compared to the companies remaining separate. “So the right premium is highly dependent on your timeline,” Winton said. “Over longer time horizons, SpaceX shareholders should ask for a discount. Over shorter time horizons, Tesla shareholders should ask for a premium.”
He said balancing the projected benefits for the two sets of shareholders would involve a 30% premium to Tesla’s current stock price using 2031 projections, but a 50% discount using 2036 projections. “But everyone is better off in a combined entity,” Winton added.
Analyst sees advances in AI leading to merger
Winton sees orbital computing as a much bigger opportunity than Robotaxi, while recognizing that Optimus will take longer to develop and require vast AI resources. Musk also highlighted the companies’ shared interests in AI and engineering when discussing a possible merger during SpaceX’s earnings conference call Tuesday.
“There’s a lot to be gained by cooperating on super-intelligent software development, chip design, Terafab, obviously, robotics, getting into orbit with the Starmind constellation,” he said.
Musk said SpaceX is targeting 13 gigawatts of online computing by the end of 2027. At Tesla, he expects deliveries of Optimus to external customers near the end of 2027 and sees Robotaxi becoming financially significant in the second half of this year.
Analyst Dan Ives also linked Tesla’s progress in AI to the case for a merger. “Production of Optimus has begun as the AI era is now taking shape at Tesla, which is part of the strategic fit of the SpaceX merger,” he said on X. The companies are already working more closely together. Tesla has been pushing engineers to adopt Musk’s AI coding products, while the two companies have collaborated on robots’ AI capabilities.
Terafab’s cost breakdown remains undecided
Tesla and SpaceX have not yet decided how to share the cost of Terafab, which Musk said could exceed $100 billion in the long term. “We need to figure out what the relative split is between SpaceX and Tesla in terms of who pays what at Terafab,” Musk said during Tesla’s earnings conference call Wednesday.
“But it won’t amount to less than tens of billions of dollars in capital goods through early 2028. Then it’ll probably be north of $100 billion in the long term.”
Tesla Chief Financial Officer Vaibhav Taneja said most of the initial orders for research equipment have already been placed. Musk hopes to produce the first test chip around May or June 2027 and is aiming for volume production in 2028.
SpaceX separately plans investments of between $35 billion and $40 billion for the fourth quarter alone. Tesla lowered its investment forecast for all of 2026 to around $20 billion, but expects spending to increase in subsequent years. Tesla generated more than $1.5 billion in free cash flow in the third quarter and ended the period with more than $45 billion in cash and investments.
Musk supports merger, but conditions remain open
Although he favors a combination, Musk stressed during SpaceX’s earnings announcement that a deal remained uncertain. “I think some people assume that a merger between SpaceX and Tesla is a certainty, and I think that would be a stretch,” he said.
Independent committees of the board are reviewing the proposal, with Musk excluded from their discussions due to his conflicting interests. “I can only say that at this stage the special committees have not reached agreement on the terms of any transaction,” he said. “There’s obviously no guarantee that they will.”
Shareholder approval is another hurdle, with Musk saying Tesla would need the support of 50% of all shares, not just half of the votes cast. SpaceX’s sensitive U.S. defense ties and Tesla’s extensive manufacturing operations in China could further complicate regulatory approval.
What do retail traders think of TSLA and SPCX?
On Stocktwits, retail sentiment for TSLA was “extremely bullish” amid “extremely high” message volume, while SPCX sentiment was “bullish” amid “high” message volume.
While TSLA stock is down 14% year to date, SPCX is down 1% over the same period.
For updates and corrections, email newsroom(at)stocktwits(dot)com.
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Deepti Sri has no position in any of the stocks mentioned in this article. Content from the StockTwits News Team is for informational purposes only and is not intended as investment advice. To learn more, see our editorial policy. This article was originally published on StockTwits.
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