Elon Musk Suggests Possible SpaceX-Tesla Merger, Analysts Weigh In

Elon Musk said on Tuesday that a merger of SpaceX and Tesla would be "a good idea". Musk said the companies had formed special committees to discuss a union. Shares of the space and technology company rose 8% in extended trading after the news.

Josh Gilbert, lead analyst for APAC at eToro, said a Tesla tie-up would be the largest merger the market has ever seen. Gilbert said the companies were worth around $3.5 trillion combined. Gilbert said the logic was easy to follow given how much both businesses now depend on artificial intelligence. Gilbert said the merger would face a high hurdle and tough governance questions because Musk runs both companies, even with Musk stepping back from the committees. Gilbert said investors would gain exposure to artificial intelligence, robotics, electric vehicles and space exploration under one ticker, concentrating investment in Musk's businesses.

Justus Parmar, CEO of Fortuna Investments, said a merger would give investors seeking to back Musk a single entity containing virtually all of Musk's companies. Parmar said a merger would avoid redundancy and reduce the time Musk spends moving between the two companies. Parmar said a merger would reduce public-company overhead, legal costs and administrative burdens. Parmar described Tesla's automotive business as high-margin and cash-generative, with further growth available from forthcoming robotaxis. Parmar said Tesla's cash flow could support SpaceX's bottom line and fund capital-intensive space exploration and launch goals, including orbital data centers.

Michael Monaghan, portfolio manager at Founder ETFs, said founders should control companies and expressed no fundamental governance concerns, citing SpaceX's legal counsel and scrutiny, while saying independent committees would follow the law and Tesla's China operations may need formal separation or strict operational and information safeguards because SpaceX is a critical US defense contractor. Daniel Newman, CEO of the Futurum Group, said a merger had been inevitable since the SpaceX initial public offering announcement and argued that combining space, artificial intelligence, autonomy and robotics would arguably create the world's best-positioned company for future developments. Brian Mulberry, chief market strategist at Zacks Investment Management, said existing synergies appeared to support greater future efficiencies and that a merger seemed increasingly likely after Musk mentioned the possibility twice on the call, although shareholders of each company would still need to vote. Yuri Khodjamirian, chief investment officer at Tema ETFs, said a combination made sense because the companies already collaborate on major projects such as Terrafab, and described the special committees as a positive effort to address governance challenges.