Tesla and SpaceX already split the bill for Elon Musk’s private jet…
They also split the cost of his personal security...
Some executives even work for both companies.
And in the last 12 months… Tesla booked $430 million selling batteries for SpaceX’s data centers and another $143 million selling cars to SpaceX.
The companies are joined at the hip… in all but formality…
But that might be about to change…
Because this week, Musk said committees of independent directors at both companies are weighing a possible merger…
I’ve been against this idea for a while, but I now think it’s close to inevitable.
The two companies are so tangled together that a merger would mostly be paperwork catching up with reality.
(Whether regulators allow it is a separate question…)
Most analysts expect an all-stock deal, which means nobody receives cash. Tesla shares (which I own) would be exchanged for SpaceX (which I don’t currently own) shares, with SpaceX likely paying a modest premium…
Now some quick maffs…
SpaceX is valued at about $2 trillion and Tesla at about $1.5 trillion. Add them together and SpaceX is roughly 57% of the combined company before any premium, with Tesla the remaining 43%.
So a Tesla shareholder who owns a car and energy company today would end up owning a company that is mostly SpaceX.
Then there is the voting…
Musk holds roughly 20% of Tesla, and he answers to a public board and to individual investors who hold about 30% of the votes, according to FactSet.
But at SpaceX, the structure of the June IPO gave him more than 80% of the voting power.
So in essence, he can’t be fired and nothing gets decided without his support.
I like SpaceX as a business, and I’ve said so in these emails… but I also can’t justify paying today’s price for it, roughly $2 trillion for the whole company.
If a swap puts SpaceX shares in my account, I will face a question I have already answered. Would I buy this at this price?
So far my answer is no, which means I may well sell.
Shares handed to you in a swap still need a reason to be owned. If you hold Tesla, ask the same question you would ask before buying any stock…
What is it worth, and what am I paying?
Oliver