Reports emerged this week that Elon Musk has discussed folding Tesla and SpaceX into a single company, just as SpaceX prepares for what could be the largest IPO in history. Tesla shares trade around $440, valuing the automaker at roughly $1.65 trillion.

SpaceX targets a June 12 Nasdaq debut at a valuation of up to $1.75 trillion, aiming to raise approximately $75 billion.

A combined entity could top $3 trillion — rivaling Apple and Microsoft. For Tesla shareholders, the question is straightforward: does this deal create value, or dilute it?

  • The Companies Already Act Like One — And That's Part of the Problem. SpaceX disclosed in its prospectus that it purchased $697 million in Tesla battery storage systems in 2024–2025 to power AI data centers in Memphis.

It also spent $131 million on Cybertrucks.

Both firms are jointly building Terafab, a semiconductor plant in East Texas that filings show could cost up to $119 billion. The operational overlap is deep — but every cross-company dollar flows through entities Musk controls on both sides, raising conflict-of-interest flags.

  • Musk's Voting Power Makes a "Fair" Deal Nearly Impossible to Verify. Musk holds about 20% of Tesla's equity but controls 85.1% of SpaceX's voting power through a special share class.

That means when Musk negotiates merger terms between the two companies, he is effectively negotiating with himself.

Tesla shareholders are already suing Musk for breach of fiduciary duty over the $2 billion xAI investment — a deal that later became a SpaceX stake. A full merger would dwarf that in complexity.

  • Wall Street Is Split, and So Are the Betting Markets. Wedbush analyst Dan Ives puts the odds of a merger at "80 to 90 percent" by early 2027 and maintains an Outperform rating on Tesla with a $600 price target.

But prediction-market traders on Kalshi assigned only 33% odds of a deal before May 2027.

Investor Gary Black warned such a transaction could pressure Tesla's valuation if shareholders dislike the economics.

  • The AI Angle Is Real — But So Is the Governance Risk. Tesla needs efficient AI for its vehicles; SpaceX faces a parallel computing challenge in orbit — radiation, weight limits, and power constraints. Combining chip production and AI research eliminates duplication. But critics argue the value creation at each step has come not from business performance but from Musk "shuffling assets between entities he controls and stamping a higher valuation on the combination." Tesla's public shareholders are the only check on that process — and a merger would test whether that check holds.