Tesla-SpaceX merger speculation grows as SpaceX trades 47% below peak

A Tesla-SpaceX combination may be closer than Musk's denial suggests, even as both stocks trade near multi-month lows.

A Tesla-SpaceX merger may be inevitable, Freedom Capital Markets' Paul Meeks said, as the Wall Street Journal reported Musk has directed Tesla executives to separate its Chinese business ahead of a potential tie-up.

"If you're a SpaceX shareholder—if you like it or not, you're going to get Tesla. It's just a matter of time," Paul Meeks, Head of Technology Research at Freedom Capital Markets, said in an interview with Investopedia.

SpaceX closed at $112.20 on July 30, down 47 percent from its June 16 closing high of $211.39 and 17 percent below its $135 IPO price. Tesla has lost about one-third of its value since the start of the year and fell 26 percent in the past month. Musk's net worth has dropped from a record $1.32 trillion on June 16 to roughly $709 billion, according to the Bloomberg Billionaires Index.

A merger would create one of the largest corporate combinations in history, merging the world's most valuable EV maker with the dominant U.S. space launch company and a major military contractor. But regulatory scrutiny, governance questions, and the geopolitical complexity of Tesla's China operations present formidable hurdles. Musk dismissed the WSJ report on X as "absurdly fake news," insisting the idea of separating Tesla's businesses had "never even come up in a discussion ever."

The merger speculation has been building since SpaceX's blockbuster IPO on June 12, which priced at $135 and closed its first session at $160.95. The stock surged to a closing high of $211.39 on June 16, briefly making Musk the first trillionaire in history at $1.32 trillion on the Bloomberg Billionaires Index. On Tesla's earnings call last week, an analyst asked Musk directly whether a merger made sense. "We can't talk about combining companies, that kind of thing, on an earnings call," Musk replied, but he proceeded to list several areas where the businesses already overlap and collaborate, including the Terafab chip manufacturing plant and Starlink integration with Cybercabs.

The WSJ report suggests Musk has been preparing for a merger by separating Tesla's Chinese business from its U.S. operations. Spinning off, selling, or closing the Chinese unit could remove an obstacle to bringing Tesla and SpaceX — a major U.S. military contractor — under one roof as rising geopolitical tensions between Washington and Beijing complicate cross-border ownership. The separation would address concerns about Chinese regulatory oversight of a company that also serves U.S. defense contracts. Musk, writing on X, insisted the idea of separating Tesla's businesses had "never even come up in a discussion ever" and dismissed the WSJ story as "absurdly fake news."

Combined entity would span EVs, Starlink, and defense

A combined entity would give shareholders exposure to both the EV market and the space launch industry. SpaceX's Starlink satellite internet service already integrates with Tesla's Cybercab autonomous vehicle platform, and the Terafab chip manufacturing plant serves both companies. The merger would also consolidate Musk's personal wealth — currently about $709 billion — into a single publicly traded vehicle, eliminating the complexity of valuing private SpaceX stakes. Analysts have noted that a combined company would be among the largest by market capitalization, dwarfing most S&P 500 constituents.

The market reaction has been mixed. SpaceX stock has fallen below its IPO price and even below the $115 bear case published by FinanceFeeds after the July 17 Starship abort. Tesla shares have lost one-third of their value since January. Both stocks were lower in early trading Friday as the merger speculation dominated headlines.

The last time Musk attempted a major corporate restructuring — the $44 billion Twitter acquisition in 2022 — the deal took months of litigation and ultimately required him to sell billions in Tesla stock. A Tesla-SpaceX merger would face even greater scrutiny from antitrust regulators, given Musk's control over both companies and their combined market influence. The deal would also require approval from shareholders of both companies, and SpaceX's status as a major U.S. military contractor would likely trigger national security reviews.

For investors, the key question is whether the merger speculation is real or a distraction. Musk's denial on X was categorical, but his history of denying reports that later proved accurate — including the Twitter acquisition — has made investors cautious. The next major event will be SpaceX's return to flight after the Starship abort, which could determine whether the stock recovers from its post-IPO slump. A successful launch would likely lift both stocks and could accelerate merger discussions, while another failure would deepen the selloff and push any deal further out.

This article is for informational purposes only and does not constitute investment advice.