Key Takeaways
- Tesla shares rose 4% after Elon Musk said special committees at Tesla and SpaceX are evaluating a merger, which he called a good idea.
- Gary Black expects an all-stock offer of about $420 per Tesla share and argues that a stock deal, even at a 15% to 20% premium, won’t add much value.
- Tesla trades at 191.6x forward earnings. Analysts expect fiscal 2027 normalized EPS of $2.17, still below fiscal 2023’s $3.12.
- Any gain from SpaceX’s own multiple is open to anyone who buys SpaceX stock, so the deal itself offers Tesla holders little more than a modest premium.
Tesla (TSLA) bulls just got the news they’ve been waiting for. SpaceX (SPCX) and Tesla are formally studying a merger.
On SpaceX’s third-quarter earnings call late Tuesday, Musk said, “I think both SpaceX and Tesla have formed special committees to discuss this idea.” Both committees are made up of independent directors, since Musk sits on both sides.
And his own opinion? “Do I think it would be a good idea? Yes.”
Tesla rose 1.8% to $380 on the news.
But Gary Black, managing partner of The Future Fund, has spent the week throwing cold water on the excitement. “I’ve argued many times that a stock-for-stock deal where $SPCX buys $TSLA at even a 15-20% premium won’t add much value,” he wrote on X.
Talk about a buzzkill.
The premium is thinner than it looks
On Monday, Black put a number on the deal he expects: about $420 per Tesla share, paid in SpaceX stock. After today’s pop, that’s only about 10% above Tesla’s share price.
He doesn’t expect even that to hold. A deal like this takes six to 12 months to close, and Black thinks arbitrage traders will likely push the price down before then.
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Tesla’s multiple does most of the work
The bigger issue is what Tesla holders would be giving up. Tesla trades at 191.6x forward earnings, well above its three-year average of 135.1x…
SpaceX’s forward multiple is well below that, even after the stock jumped on its results.
Black expects the combined company to trade at SpaceX’s multiple, since SpaceX would be the buyer. Tesla’s earnings would then be valued the way SpaceX’s are, and the SpaceX shares Tesla holders received would also be diluted by all the new stock issued to pay for the deal.
And Tesla holders would bring much more multiple than earnings. Tesla’s normalized EPS fell from $3.12 in fiscal 2023 to $1.66 in fiscal 2025, and analysts expect only $2.17 in fiscal 2027:
Even the fiscal 2028 estimate of $3.24 is barely above Tesla’s 2023 figure.
So once those earnings are priced at SpaceX’s lower multiple, a 10% premium can shrink fast.
Plus, I just don’t see where the underlying business synergies would be. There’s some business overlap on the edges, but I don’t see how the companies can help each other more than they already are, since they – you know – share a CEO.
A modest premium at best
My take: Black has this right. An offer of about $420 would be a good day for Tesla holders. But it’s a modest premium, paid in a stock that trades at a lower multiple, and it could shrink before the deal ever closes. What matters more for Tesla stock is whether its own earnings can grow into that 192x multiple, and Tesla reports third-quarter results after today’s close.
Of course, there may be no deal at all. Musk said the committees haven’t agreed on any terms. And when even a guy who’s notorious for…let’s say “optimism” says it would be a very high hurdle, that’s probably a sign that it’s pretty unlikely to ultimately come to past.
So what is Tesla stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
