Source: Fortune
Summary
SpaceX president and COO Gwynne Shotwell suggested that SpaceX might buy Tesla, Elon Musk’s second-largest holding, in a CNBC interview. Since SpaceX’s IPO, its shares have risen 37% to $185, making it more feasible for the company to purchase Tesla. The math now shows that SpaceX could buy Tesla by issuing only 38% of its shares, down from 46% previously. This has improved the chances of a merger, which some analysts believe is inevitable. The deal would create a combined entity with a market cap of $4 trillion, but with negative profits.
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The strategy enters a familiar phase.
SpaceX’s valuation has skyrocketed, making a potential merger with Tesla more attractive. Elon Musk could use SpaceX’s overvalued stock to bail out Tesla, which has weak fundamentals. The deal would create a massive conglomerate with a market cap of $4 trillion, but with negative profits. Musk would be using one pricey stock to buy another, which could be a great deal for Tesla but terrible for SpaceX shareholders.
The numbers tell a story of a potential merger that could only happen in Musk’s mind, but now looks more likely due to SpaceX’s moonshot stock price.
Author: Evan Null
