Tesla SpaceX Merger News: Musk's Devotion To Rockets Could Be Deciding Factor
After Tesla acquired SolarCity last year, a new rumor about another Musk-led venture being merged with the electric automaker is slowly gaining steam. According to one Morgan Stanley analyst, Musk's predisposition towards his other-worldly endeavors could lead the CEO to seek a merger with SpaceX.
Adam Jonas recently teased a possible merger between Tesla and Spacex, arguing that such a deal would yield powerful synergies. While it's true that both companies have collaborated on manufacturing and software in the past, it's far more complicated than bringing the strengths of both companies together under one management.
Tesla currently faces "fierce" competition from other better-capitalized companies seeking sustainable transportation. Its edge in innovation has largely been dulled as other companies caught on and the fact that the automaker has yet to reach sustainability cast serious doubts about its future.
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SpaceX on the other hand, is pretty much a monopoly, as far as private space firms are concerned, facing little competition in its field. It recently raised $350 million, bringing it valuation to $21 billion with an IPO long being discussed.
However, the CEO seems to be wary of running two public companies at the same time especially with the Scrutiny Tesla is going through after going public. It's one thing to convince willing investors to fund his dream, it's another to convince virtually everyone who's ever bought Tesla stock.
Putting all of Musk's world changing plans – electric cars, solar power, and space exploration— under one roof could ease the pressure on Musk as well as reduce the anxieties of those who think the CEO is being stretch too thing. And that seems to be the crux of Jonas' argument.
"Investors widely expect Elon Musk to, over time, devote increasing amounts of his time and talents to SpaceX, raising the very real question of who could replace him at Tesla," Jonas wrote. "A combination of efforts between the two firms could address this important issue."
If the two companies do merge, Tesla will be shifting a massive amount of risk to the company given that SpaceX is a pioneer in a very expensive industry. A merger could expose the company to colossal losses should the rocket-building business prove unviable. On the other hand, SpaceX is a wellspring of available capital, something Tesla desperately needs to continue being viable. Either way, risk is involved, it's only a matter of which option will benefit investors and Musk.
At the moment, the electric automaker doesn't have enough cash to buy SpaceX outright which means investors might have to accept a largely stock-based deal. Not that it would matter though especially considering that the company's shares have returned over 1,000 percent.
So far, all hints point to a merger with Musk's devotion to SpaceX and disdain at being the CEO of a public company being one of the key factors of consideration, aside of course, from the many risks involved in such a move. Just don't expect investors to wholeheartedly support the idea.
