Tesla Stock Slips Premarket: Analyst Warns SpaceX Merger Could Erase $750B In Value

• Black said merged companies typically trade at the lower valuation multiple, not a blended premium, unless they receive a rare Berkshire Hathaway-style “Buffett premium.”
• Under his assumptions, issuing $1.5 trillion in Tesla equity to acquire SpaceX could reduce the combined valuation from about $3 trillion to $2.25 trillion, implying roughly 25% downside.
• He has previously said that a merger would increase Tesla’s exposure to space and satellite businesses, which some institutional investors may avoid.

Shares of Tesla, Inc. (TSLA) slipped over 1% in premarket trading on Monday, potentially setting themselves up for a fourth straight session of losses. Now, an analyst warns that a merger with SpaceX could erase roughly $750 billion in value unless the combined company earns a rare Warren Buffett-style premium.

TSLA stock slid over 3% on Friday to $367.96, its lowest level in more than six months.

Gary Black Warns Of 25% Downside In Tesla-SpaceX Deal

Gary Black, managing partner at The Future Fund, said on X that the risk reflects the “lowest-multiple rule,” under which merged companies with different valuation profiles typically trade at the lower valuation multiple rather than a blended premium.

Black said that if Tesla issued roughly $1.5 trillion in equity to acquire SpaceX at comparable valuations, the combined company would have about $3 trillion in equity value and roughly $22.5 billion in annual earnings before interest, taxes, depreciation, and amortization (EBITDA) based on his assumptions.

Applying Tesla’s multiple to the combined entity instead of SpaceX’s higher implied growth multiple would reduce the expected valuation to about $2.25 trillion, implying roughly $750 billion in lost equity value, or about 25% downside for Tesla shareholders.

“In my 30 years as a professional investor,” Black said, “I have rarely seen post-merger companies trade at blended multiples,” adding that the main historical exception has been Berkshire Hathaway, which benefited from a “Buffett premium.”

“In short,” he said, “a Tesla-SpaceX merger is a solution looking for a problem.” 

Gary Black: SpaceX Buying Tesla Could Lift Shares

Earlier this month, Black said a Tesla-SpaceX merger “makes no sense mathematically” for Tesla shareholders unless it delivers unusually strong cost or revenue synergies. In his earlier analysis, he estimated Tesla could face roughly 35% dilution, though his latest assumptions imply dilution closer to 25%.

He also said roughly one-quarter of combined profits could be tied to space travel and satellite communications under a merger scenario, pointing to exposure that some institutional investors may be unwilling to accept compared with Tesla’s core businesses in electric vehicles, autonomy, energy storage and robotics.

Black said the valuation impact would differ depending on the deal structure. If Tesla were to acquire SpaceX, the transaction would likely be dilutive for Tesla shareholders. If SpaceX were the acquirer instead, Tesla investors could see short-term gains, though some shareholders focused on Tesla’s autonomy and robotics opportunity could sell shares after receiving exposure to aerospace infrastructure.

“There can only be one multiple for a stock,” Black said. “With conglomerates, the least common multiple generally prevails.”

SpaceX IPO Plans Add To Tesla Deal Speculation

Investor discussion around a potential Tesla-SpaceX transaction has intensified as integration across Elon Musk’s companies accelerates. SpaceX recently merged with xAI, the AI company behind the Grok chatbot, in a transaction valuing SpaceX at about $1 trillion and xAI at roughly $250 billion, creating a combined entity worth around $1.25 trillion.

Tesla has also received regulatory clearance to convert its previously announced $2 billion investment in xAI into a stake in SpaceX following the transaction, further tightening financial links across Musk’s companies. SpaceX has also reportedly explored a potential combination with Tesla as well as an alternative tie-up with xAI.

SpaceX has also considered an initial public offering that could take place as early as June, a timing that could be affected by any restructuring involving Tesla or xAI. Both Tesla and SpaceX already maintain financial links to xAI following separate $2 billion investments in the AI firm.

How Did Stocktwits Users React?

On Stocktwits, retail sentiment for Tesla slipped to ‘bearish’ from the ‘bullish’ zone over the past month amid a 44% jump in 24-hour message volume.

TSLA stock has declined 56% year-to-date, but still trades at a forward price-to-earnings ratio of 178.7x, the highest among the “Magnificent Seven” group of equities.

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