Will they? Won't they? That's the question on Tesla investors' minds as chatter grows about a possible merger with SpaceX.
The bigger question: Does it make sense?
On Friday, the EV giant was eclipsed by SpaceX, which, after a blockbuster $85 billion IPO, is now worth over $1 trillion more than Musk's other public company.
SpaceX's rapid ascent has fuelled speculation among analysts and Tesla investors that Musk's next move might be to merge the two companies together, creating a massive conglomerate that spans rockets, EVs, chatbots, and social media.
SpaceX president Gwynne Shotwell didn't rule out a tie-up with Tesla as she prepared to take the company public on Friday.
"That might make Elon's life a little easier, actually," Shotwell said, before adding that her focus right now was on SpaceX's ambitious expansion plans.
Tesla investors have responded positively to the growing momentum behind a merger with SpaceX.
Wedbush Securities analyst and Tesla bull Dan Ives wrote in a note last week that he expected the two companies to combine next year, adding that the move would allow Musk to "own and control more of the AI ecosystem."
"SpaceX is kind of a thing everybody's talking about. Nobody's talking about Tesla, and so it kind of sucks for Tesla shareholders," Ross Gerber, a longtime Tesla investor and Musk critic, told Business Insider.
"Are they better off together or apart? I think they're better off together," he said.
The case for combining
SpaceX and Tesla already share a lot of DNA. The two companies have shared employees and board members in the past, and Tesla holds a 1% stake in Musk's rocket company through its investment in xAI, which Musk folded into SpaceX earlier this year.
SpaceX is also one of Tesla's largest customers, buying $506 million worth of its Megapack batteries and $131 million of Cybertrucks last year alone.
Tesla and SpaceX are also collaborating on Terafab, a $55 billion chip-building megafactory that aims to produce chips for SpaceX's orbital data centers as well as Tesla's robotaxis and robots.
"There's no question that there's synergies between Tesla and SpaceX in our futures," Shotwell said on IPO day.
Seth Goldstein, an analyst at Morningstar, told Business Insider that merging the two companies would allow them to share employees and resources without having to worry about governance issues and shareholder lawsuits.
"Elon would have the resources to send his team wherever he wanted to in order to make the most impact," said Goldstein.
The merger chatter comes at a time when Tesla's ambitious pivot into self-driving cars and robotics has slowed.
The EV maker's stock is down around 10% this year, and Tesla has just a few dozen autonomous robotaxis on the road in Austin, Dallas, and Houston, well behind the ambitious targets set by Musk for the end of last year.
Gerber said merging with SpaceX would allow Tesla to reset the narrative and avoid becoming a neglected satellite of Musk's business empire.
"In my mind, Tesla is the second child that we don't want to talk about too much," he said.
"That's why they have to be together, because nobody's calling me about Tesla," Gerber added.
A bumpy road ahead
SpaceX's IPO may have gone smoothly, but a merger with Tesla would likely be anything but.
Musk's rocket company is the world's fifth-most-valuable company, but it is not profitable and posted a $4.9 billion loss last year, largely due to the eye-watering cost of its AI buildout. By contrast, Tesla has been cash-flow positive for years and is sitting on a $45 billion cash pile.
Goldstein said this disparity could ring alarm bells for Tesla investors, who could also see their positions diluted if SpaceX needs to raise more money in the future.
He said that SpaceX's stock surge, which has seen the company's market value surpass Amazon and Meta, could see Tesla investors push to delay any merger until after SpaceX's lockup periods have expired and the company's valuation has settled. A higher valuation for SpaceX could mean Tesla investors getting less of the combined entity.
"Ultimately, it's going to come down to valuation," Goldstein said.
Not all Tesla investors are enthusiastic about the prospect of becoming one with SpaceX. New York City's assistant comptroller for corporate governance, Mike Garland, told Business Insider that the Tesla and SpaceX board's lack of independence was one of several concerns he had about any proposed merger.
"It wouldn't surprise me if Elon thought of Tesla as a piggy bank to finance SpaceX," said Garland, adding that the comptroller's office, which oversees New York City pension funds that hold a stake in Tesla, would scrutinize the terms of any merger closely.
Tesla investors looking to challenge a possible merger may have limited options, however. The company's move from Delaware to Texas has made it much harder for shareholders to initiate the type of lawsuits that temporarily derailed Musk's last $55 billion pay package.
Ann Lipton, a professor of law at the University of Colorado Boulder, told Business Insider that even though a transaction between Tesla and SpaceX would be "conflicted," shareholders suing to block any merger in Texas would have to prove that intentional misconduct or fraud took place.
Under new laws passed last year, shareholders also have to own at least 3% of shares to initiate legal action, although Lipton said that limit may not apply to Tesla shareholders if SpaceX buys Tesla outright.
Gerber said that any investor opposition would be unlikely to deter Musk if he decided to consolidate his business empire further.
"Anybody who buys Tesla stock obviously knows that Elon controls the company," said Gerber.
"I think investors are more than fine giving up any real ownership rights to have an economic interest in Elon's future," he added.
