Tesla, Inc. (TSLA) stock closed at $396.68 on Tuesday, down 3%, hitting a one-month low as investors reacted to mounting speculation about a potential SpaceX merger ahead of Friday's IPO. Morningstar estimates Tesla shareholders could receive up to 66% of a combined entity if a deal occurs. The speculation intensifies as SpaceX prepares what could be Wall Street's largest IPO, seeking to raise $75 billion at a $1.8 trillion valuation, with Tesla mentioned 87 times in SpaceX's S-1 filing and Elon Musk holding major stakes in both companies. Wolfe Research said the merger thesis has moved into the mainstream, driven by Musk's voting control and AI synergies between the companies.
SpaceX IPO Fuels TSLA Merger Speculation
SpaceX is seeking to raise $75 billion at a $1.8 trillion valuation in what could be the largest IPO in Wall Street history. Investor demand reportedly surpassed $250 billion and ran nearly four times the shares available. Tesla is mentioned 87 times in SpaceX's latest S-1 filing. Musk is the largest shareholder of both companies. Tesla owns about 19 million SpaceX shares, and the companies already collaborate on AI tools, chip development, and computing infrastructure. Kalshi traders currently predict a 50% chance of a Tesla-SpaceX merger before May 2027, while Polymarket places the odds at 43% before the end of 2026. TSLA stock dropped another 0.2% in extended trading on Tuesday.
Wolfe Research and Morningstar Outline Merger Rationale
Wolfe Research said the potential for an eventual SpaceX-Tesla merger has "increasingly moved into the mainstream," with some investors now making it their primary reason for owning Tesla stock. The firm said the merger thesis rests on three pillars: Musk's growing voting control, the potential to create an AI powerhouse combining Tesla's real-world data with SpaceX's computing infrastructure, and access to a larger capital base.
Morningstar said Tesla and SpaceX are becoming increasingly intertwined through AI initiatives, chip development and supply-chain ties. SpaceX has bought over $500 million worth of Tesla Megapacks and $130 million worth of Cybertrucks. Morningstar said Tesla's robotaxi platform could eventually leverage Grok and Starlink, adding that the "most important additional reason" for a merger is Musk's desire to bring his businesses under "one conglomerate," enabling talent, tech and resources to move more freely across companies.
Morningstar Estimates 66%-34% Tesla-SpaceX Split
While SpaceX is expected to debut at a valuation above Tesla's $1.5 trillion, Morningstar believes Tesla shareholders may have more leverage than investors assume. The firm said Tesla investors may be reluctant to accept a deal that values Tesla below SpaceX, especially given SpaceX's soaring valuation and negative free cash flow. "Ultimately, we think Tesla shareholders may agree to a deal that gives Tesla at least 50% of the combined company, but they may want even more control," Morningstar said. The research firm estimated a "66%-34% Tesla/SpaceX equity ratio" based on its fair-value assumptions. Morningstar also said it "wouldn't be surprised to see a deal occur within a year of the SpaceX IPO."
Analysts Identify Merger Risks
Wolfe Research said a merger would likely require a substantial premium, could face opposition from existing SpaceX shareholders, and may attract regulatory scrutiny due to Tesla's extensive operations in China. Wolfe ultimately believes a deal remains "unlikely until mid-2027 (at the earliest)." Morningstar raised similar concerns, noting that SpaceX is a major U.S. government and military contractor, while Tesla maintains significant manufacturing and battery operations in China. The firm also warned that Tesla shareholders may be wary of future dilution, while new SpaceX investors may resist merger terms implying a discount to the IPO valuation.
Retail Sentiment on TSLA and SpaceX
On Stocktwits, retail sentiment on Tesla was 'bearish' amid 'normal' message volume, while SpaceX sentiment was 'extremely bullish' with 'extremely high' message volume. So far this year, TSLA stock has lagged its "Magnificent Seven" peers, making it the group's second-worst performer, down 12%.
FAQ
What caused Tesla stock to hit a one-month low on Tuesday?
Tesla stock closed at $396.68 on Tuesday, down 3%, as investors reacted to mounting speculation about a potential SpaceX merger ahead of Friday's IPO. SpaceX is seeking to raise $75 billion at a $1.8 trillion valuation, with Tesla mentioned 87 times in the S-1 filing.
How does Morningstar estimate the Tesla-SpaceX merger split?
Morningstar estimates a 66%-34% Tesla/SpaceX equity ratio based on its fair-value assumptions. The firm believes Tesla shareholders may have more leverage than investors assume, given SpaceX's negative free cash flow and soaring valuation. Morningstar said it "wouldn't be surprised to see a deal occur within a year of the SpaceX IPO."
What risks do analysts see in a Tesla-SpaceX merger?
Wolfe Research said a merger would likely require a substantial premium, could face opposition from existing SpaceX shareholders, and may attract regulatory scrutiny due to Tesla's extensive operations in China. Morningstar noted that SpaceX is a major U.S. government and military contractor, while Tesla maintains significant manufacturing and battery operations in China, raising potential regulatory concerns.
