Black’s remarks come as SpaceX explores broader strategic options, including a potential merger with Tesla or an alternative combination with xAI.
- Gary Black said a Tesla-SpaceX combination would require issuing significant new shares, raising dilution concerns for existing investors.
- He argued that adding SpaceX would introduce earnings uncertainty that many institutional shareholders may find hard to justify.
- The comments come as Black said Tesla underperformed the Nasdaq over both one-year and five-year periods.
Tesla shares fell over 1% in premarket action on Monday amid comments from Gary Black, managing partner at The Future Fund, who warned that a potential merger between Tesla and SpaceX would significantly dilute Tesla shareholders and lack clear financial justification.
Merger Math Favors SpaceX, Not Tesla
In a post on X, Black said a Tesla-SpaceX deal “makes no sense mathematically” for Tesla shareholders unless it delivers unusually high cost or revenue synergies.
He laid out a framework in which Tesla is valued at roughly $1.5 trillion at about 200 times earnings, while SpaceX is valued at about $800 billion at roughly 400 times earnings. To complete such a transaction, Black said Tesla would need to issue new shares, representing approximately 35% dilution.
Under that scenario, the combined company would generate roughly $8 billion in adjusted net income, with about $6 billion coming from Tesla and $2 billion from SpaceX. Black said that would leave roughly a quarter of profits tied to space travel and communications, an exposure many institutional investors may be unwilling to accept.
Investor Concerns Over Business Mix
Black said Tesla investors already recognize the company is no longer just an electric vehicle maker, pointing to its energy storage, autonomy, and robotics businesses. He argued that those segments can be analyzed and modeled, while space-related operations introduce greater uncertainty.
He added that while a merger could make Elon Musk’s broader group of companies easier to manage by allowing Tesla to support SpaceX’s capital needs, that benefit does not directly serve Tesla shareholders.
Black also noted Tesla’s longer-term performance relative to the Nasdaq, highlighting that the stock has underperformed the index over both one-year and five-year periods based on Bloomberg benchmarks.
SpaceX Weighs Multiple Paths
Black’s comments come as SpaceX has been weighing broader strategic options, including a possible combination with Tesla as well as an alternative tie-up with xAI, Bloomberg reported, citing people familiar with the matter.
Those discussions are said to be exploratory, with no final decisions made, and the possibility that all companies remain separate. Any deal could require substantial financing and has drawn interest from large infrastructure funds and Middle Eastern sovereign investors, according to the report.
SpaceX has also been considering an initial public offering, with internal discussions pointing to a possible listing as early as June. A merger with either Tesla or xAI could complicate that timeline. Both Tesla and SpaceX already have financial links to xAI. Tesla recently disclosed plans to invest about $2 billion in the AI firm, following an earlier $2 billion investment by SpaceX.
How Did Stocktwits Users React?
On Stocktwits, retail sentiment for Tesla was ‘extremely bearish’ amid ‘high’ message volume.
One user said, “SpaceX merger was a hoax. Tesla doesn't have the cash to replace an ipo. Not even close. Lol.”
Meanwhile, another user said, “One announcement that SpaceX will be fused to tsla and this goes to $700. Be ready.”
Tesla’s stock has risen 8% over the past 12 months.
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