Piper Sandler says Tesla-SpaceX merger likelier than not

Wall Street analysts are moving past the question of whether Elon Musk's two largest companies should combine and are now working out what Tesla ↗ 1.00% shareholders might receive. Piper Sandler ↗ 5.66% says a merger proposal is "likelier than not." Bank of America has modeled premiums of up to 30% and warned that a shareholder vote and China could block a deal. Investor Gary Black told Tesla holders to keep their expectations in check.

The analysis follows Musk's statement on SpaceX's Oct. 20 earnings call that both companies had formed special committees of independent directors to discuss a combination. "I think it would be a good idea, but it's really up to the special committees of both companies," Musk said, according to Reuters. He added that he is a conflicted party and cannot take part in the talks. He also said no terms have been agreed and might never be. Tesla's quarterly filing says its committee is exploring a deeper relationship with SpaceX, which could include "a business combination".teslant.com+1

Premium scenarios

In an Oct. 29 note, Bank of America analyst Alexander Perry said a logical structure would be for SpaceX to buy Tesla in an all-stock deal. Based on Oct. 20 closing prices, a deal with no premium would give Tesla holders 42.4% of the combined company. A 20% premium would value Tesla at about $449 a share, and a 30% premium at about $486. Even in the 30% case, Musk would keep 51.6% of the voting power.thestreet.com

Piper Sandler analyst Alexander Potter said a 30% premium would not mean a 30% gain for Tesla stock, because SpaceX shares would be the payment and would quickly reprice. He expects most realistic scenarios to move the stocks by less than 15% in either direction at first. "In most scenarios, Musk would have >70% voting control of any new entity," Potter wrote (TeslaNorth; Yahoo Finance UK).teslanorth.com+1

Vote and China hurdles

Tesla's charter requires approval from a majority of all outstanding shares, so abstentions and broker non-votes count against a deal. Musk himself called this "quite a high hurdle." Perry pointed to Tesla's 2025 advisory proposal to invest in xAI, which drew more votes for than against but still failed because of 473 million abstentions. Bank of America sees China as the biggest regulatory risk, because a deal would put Tesla's Shanghai plant under a major U.S. defense contractor.za.investing.com+1

A note of caution

Gary Black of The Future Fund expects SpaceX to buy Tesla in a stock-for-stock deal at a 20% to 25% premium. In a post on X on Monday, he argued that this is "irrelevant," because traders tend to sell the buyer's shares during long all-stock deals, which shrinks the premium. As an example, he pointed to Marvell Technology's ↘ 12.72% all-stock purchase of Lumentum ↘ 18.59%, announced Monday. Marvell shares have fallen about 26% since reports of those talks first appeared, and both stocks dropped on the announcement.finance.yahoo.com