Bloomberg: SpaceX and Tesla are heading towards a merger economy

Bloomberg reported that investors in SpaceX and Tesla, which are run by American billionaire Elon Musk, see the two entities on their way to merging, although Musk has ruled out such a transition for years.

However, Musk is now talking about the importance of “convergence” between the various companies he runs, which investors believe, according to Bloomberg, that the question is no longer whether the merger between Tesla and SpaceX will happen, but “when can it happen?”

According to Bloomberg, if such a deal goes ahead, it will create an entity with a market value approaching $4 trillion.

In the same context, the Wall Street Journal quoted Gwen Shotwell, the long-time president of SpaceX, as saying that she sees “points of convergence” between SpaceX and Tesla.

Shotwell told CNBC, “There is no doubt that there is integration between Tesla and SpaceX,” noting that there is a rapprochement between the two companies that “we all seek to achieve in the future.”

Hence, there is a belief among investors in the two companies that they are on their way to a merger, according to the newspaper, especially in light of the existence of joint projects between the two companies.

What are the links between Tesla and SpaceX?

According to Bloomberg, there does not seem to be anything in common between Tesla, which manufactures electric cars, and SpaceX, which has various activities, including launching satellites and rockets. The apparent link between them may only be that Musk runs the two companies, but artificial intelligence is an “important link” that brings the two companies together.

Tesla is currently expanding into human-like robots, while SpaceX acquired the artificial intelligence company X last February, and aspires to establish data centers in space.

Bloomberg estimates indicate that artificial intelligence is likely to be the largest source of revenue for SpaceX as of this year.

Tesla now owns a small stake in SpaceX, after Tesla’s previous investments in the artificial intelligence company X were converted into shares in SpaceX, after it acquired it.

Musk has already begun to take advantage of joint production that could serve the two companies, and the “Teravab” factory in Texas is planned to produce semiconductors for Tesla’s electric cars and its driving robots, and at the same time it will produce chips intended for SpaceX satellites.

Why don’t the two companies just cooperate?

Bloomberg answers this question by saying that developing artificial intelligence infrastructure, including data centers, is very expensive, requires huge investments, and also requires obtaining loans to finance the continued development of artificial intelligence.

Hence, the merger between Tesla and SpaceX may make the process of obtaining the necessary financing to develop their artificial intelligence architecture easier and less expensive, whether by offering new shares or obtaining loans.

Musk aims to own the entire artificial intelligence supply chain, from semiconductors to data centers, which he seeks to extend into space, so merging two companies that rely on artificial intelligence tools will help achieve production savings and increase profit opportunities.

Bloomberg points out the pressures of fierce competition in the field of artificial intelligence on Musk’s companies, and they are trying to achieve his vision for it, especially by large companies that have in turn invested huge sums in the structure of artificial intelligence and its tools, including Anthropic, which owns the “Cloud” platform, Open AI, which owns the GBT Chat platform, and Alphabet, which owns Google.

Does Tesla need to merge?

Bloomberg indicates in its report that Tesla needs to merge, especially with the intense competition in the electric car market, and the value of its shares may decline if the merger does not take place.

In this context, the agency quotes the CEO of Roundhill Financial Consulting, Dave Mazza, as saying that “failing to complete the deal means that there are no quick solutions for Tesla to maintain its price,” as it must succeed in projects related to artificial intelligence, such as driving robots, in order to justify its current share price to investors.

Some investors in Tesla believe that Musk is managing several projects at the same time, and that there is great enthusiasm for SpaceX, and this may be at the expense of interest in Tesla, and therefore the merger between the two companies may make Musk’s task in managing them less complicated, and put Tesla in the circle of attention.

How can the two companies merge?

SpaceX is the largest company in terms of market value, as its value reached about $2.1 trillion in early July, according to Bloomberg, while the value of Tesla reached about $1.6 trillion.

Since SpaceX is the largest party in such a deal, it is expected to acquire Tesla if the merger is completed.

Bloomberg explained that SpaceX may propose a specific share exchange ratio, indicating the number of SpaceX shares that it intends to offer in exchange for one share of Tesla shares, noting that Tesla shareholders are expected to demand a price premium that exceeds the current trading price of their shares in order to accept the merger.

If the merger is completed, the market value of the new entity, which includes Tesla and SpaceX together, may reach approximately $4 trillion, which will make it the fourth largest company in the world in terms of market value after Nvidia, Alphabet, and Apple.

Control of the new entity

Musk divided SpaceX shares into two types:

• A: A share has one vote.
• B: The stock has 10 votes.

In this way, Musk owns 42% of SpaceX shares, but controls more than 80% of the voting rights.

This situation does not exist in Tesla, in which Musk owns about 20% of its shares and does not control its voting power.

According to the laws in the state of Texas, where the two companies are headquartered, two-thirds of shareholders must approve the merger, and this is guaranteed for SpaceX, which Musk controls most of the voting power of its shares.

As for Tesla, Musk does not have this authority, but most small investors, according to Bloomberg, tend to vote in the direction that Musk calls them to.