SpaceX-Tesla merger would hurt SpaceX shareholders

Elon Musk announced on October 20 that SpaceX and Tesla are considering a merger, with independent committees exploring the union, sending Tesla shares up 3.4% and SpaceX up 7.8% the following day. The deal would be highly expensive for SpaceX, which would pay roughly $1.98 trillion for Tesla at a 30% premium, issuing stock equivalent to 92% of its current shares. SpaceX would gain only $3.28 billion in Tesla's annual profits, while Tesla's earnings are declining and SpaceX's are rising. Tesla shareholders would likely benefit from a full-price buyout, as Tesla trades at a price-to-earnings ratio of 633. However, SpaceX shareholders would sacrifice nearly half their company for minimal earnings, and the combined entity would face a steep challenge needing $550 billion in profits by 2035.