Key Takeaways
- Gary Black told Tesla bulls that in an all-stock SpaceX-Tesla deal, merger arbs would whittle down the 20-25% premium he expects.
- Marvell’s all-stock offer for Lumentum shows how it works: a 24% premium on paper became a 16% discount to Lumentum’s price before the leak, because Marvell’s shares fell 32%.
- Tesla trades at 189x forward earnings, well above its three-year average of 137x, so the stock has little cushion if the premium comes in smaller than bulls hope.
- No deal terms exist yet, and the special committees’ first terms will show how big the premium is before arbs go to work on it.
Tesla (TSLA) bulls hoping for a big payday from a merger with SpaceX (SPCX) just got a warning from Gary Black, managing partner of The Future Fund.
He pointed them to what happened to Lumentum (LITE) after Marvell Technology (MRVL) agreed to buy it with Marvell’s own stock. When a follower on X asked on Monday, Nov. 2, what premium would be fair for Tesla holders, Black answered:
“My guess is 20-25% but as we see with the MRVL-LITE deal it’s irrelevant since $SPCX – $TSLA will be a stock for stock deal and arbs will whittle down the SPCX price (and hence deal premium) after the announcement.”
Irrelevant. That’s a tough word for anyone counting on that premium. It’s also a point Black has been making since October, and Lumentum just gave him a live example.
How Lumentum’s 24% Premium Became a Discount
Marvell announced the deal on Nov. 2: 4.5 Marvell shares for each Lumentum share. The companies valued that at about $1,132 per Lumentum share, a 23.9% premium based on Oct. 28 closing prices, set before Bloomberg reported the talks that evening.
Marvell’s stock fell about 22% in the two days after the talks leaked, then another 12.7% on Nov. 2, when the terms came out. It closed that day at $171.41, 32% below its Oct. 28 close. That made the 4.5 shares worth about $771, around 16% less than Lumentum’s $914 close before anyone heard about the deal.
Lumentum sank 19% to $684.40 on Nov. 2. That’s about 11% below even the $771 its holders are now due, the gap merger traders want paid for waiting.
Black explained the mechanics in his original post. When a buyer pays in stock, “traders and merger arbs invariably sell down the acquirer’s stock particularly if there is a long time frame between deal announcement and deal close.” Marvell expects this deal to close in the first half of 2028.
Marvell’s forward P/E shows how far that selling took its valuation. It was 30x on Nov. 2, below its one-year average of 38x:
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Tesla Holders Are Already Paying Up
Tesla trades at 189x forward earnings. That’s well above its three-year average of 137x and not far off its December 2025 peak of 243x:
Part of that comes from falling estimates: analysts have cut their 2026 earnings estimates for Tesla by 14% since June 30. I’d guess some of it is merger hope, too.
And any deal will take a while. It would need yes votes from a majority of all Tesla’s outstanding shares, not just those cast, a bar Musk himself has called “quite a high hurdle.” Black thinks the timing could match Marvell’s: “A SPCX-TSLA deal given its size and complexity could take just as long.”
SpaceX’s Size Won’t Protect Tesla’s Premium
SpaceX is the bigger of the two companies, it has only traded since June, and Musk controls it. So arb selling might move SpaceX’s price less than it moved Marvell’s.
That doesn’t help Tesla holders much. If arbs can’t push SpaceX down, Tesla will likely trade below the deal’s value until it closes, the way Lumentum does now. Holders who sell before the close collect less than the premium on paper. Holders who wait get SpaceX shares worth whatever SpaceX is worth by then.
What Black Gets Right About Tesla’s Premium
Tesla holders shouldn’t bank on a 20-25% headline number. Lumentum shows that what holders actually get depends on the buyer’s share price once a deal is in play, and Marvell’s lost a third of its value between the leak and the close on announcement day.
No terms exist yet. Tesla’s Dec. 3 annual meeting carries no merger proposal. The special committees’ first terms will show the starting premium, and SpaceX’s price in the weeks after will show how much of it is left.
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