CLSA Says SpaceX Merger Buzz Overshadows Tesla’s Concerns, But Musk’s Public Endorsement Could Reportedly Complicate Deal Talks

According to a Reuters report on Thursday, insiders involved in the discussions are worried that Musk’s comments could delay the merger process by several weeks.

• The disclosure has reportedly created a “mess” for the process, raising concerns about whether Tesla shareholders’ interests would be sufficiently protected.
• CLSA upgraded Tesla to ‘Hold’ from ‘Underperform’ and raised its price target to $400 from $310.
• Former Tesla board member Steve Westly cautioned against valuation concerns, regulatory scrutiny and Tesla’s large-scale operations in China.

While Wall Street is turning increasingly optimistic on a potential merger between Tesla (TSLA) and SpaceX (SPCX), Elon Musk’s recent public endorsement has reportedly unsettled some insiders involved in the discussions.

According to a Reuters report on Thursday, insiders involved in the discussions are worried that Musk’s comments could invite shareholder scrutiny and delay the process by several weeks.

The disclosure has reportedly created ‌a “mess” for the process, raising concerns about whether Tesla shareholders’ interests would be sufficiently protected during the negotiations. The concerns stem partly from Tesla’s acquisition of SolarCity in 2016, which led to years of litigation over Musk’s involvement.

Still, CLSA upgraded Tesla to ‘Hold’ from ‘Underperform’ and raised its price target to $400 from $310, saying growing optimism around the potential merger outweighs its longer-term concerns about the electric vehicle maker. The brokerage said Tesla’s shift toward an AI company makes a combination with SpaceX more logical.

At the time of writing, SPCX shares were down 8% while TSLA shares edged 1.3% lower.

Musk Says Companies Are Exploring Merger

On Tuesday, during the SpaceX earnings call, Musk confirmed that both companies had formed special committees of independent directors to explore a potential merger at shareholders’ request.

He said combining the companies could offer significant benefits in AI software, chip design, robotics and connectivity. However, Musk cautioned that a deal was far from certain and said he could not participate directly in negotiations because of his interests in both companies.

The Potential China Problem

Yorkville Ives analyst Dan Ives believes a merger is increasingly likely, putting the chances at 90% and with Tesla shares priced between $500 and $550 apiece. If the merger is approved, it would combine Tesla’s autonomous vehicles, humanoid robots and manufacturing capabilities with SpaceX’s AI, satellite connectivity and computing infrastructure.

Former Tesla board member and managing partner at The Westly Group, Steve Westly, also said the companies could move toward a merger relatively quickly.

Speaking to CNBC, Westly suggested an announcement could come as early as this year. However, he cautioned that the deal faces several hurdles, including concerns over valuation, regulatory scrutiny and Tesla’s large-scale operations in China. Tesla’s exposure in China could be particularly complicated because SpaceX holds sensitive U.S. government and defense contracts, potentially raising national security concerns.

Retail’s Take On SPCX, TSLA

Retail sentiment surrounding SPCX on Stocktwits remained ‘extremely bullish’ over the past 24 hours, amid ‘extremely high’ message volumes. However, sentiment on TSLA turned ‘neutral’ from ‘bullish’

One user expects antitrust lawsuits in 2029 if the merger is approved.

View this Stocktwits post

TSLA shares are down more than 13% so far this year, while SPCX stock has gained about 9% over its IPO price.

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