Why SpaceX Will Have to Pay a Premium for Tesla

SpaceX Steals the Limelight from Tesla

Since its initial public offering in June 2026, SpaceX (SPCX) has stolen the lime light from Elon Musk’s other public company, Tesla (TSLA). Given SpaceX’s newness, its rapid growth, and Tesla’s lackluster price action, it’s understandable that investors have turned their attention away from Tesla. Nevertheless, for the first time in years, Tesla has several upcoming catalysts that could propel the stock far higher. If history is any guide, the best time to buy Tesla shares is when investors are largely ignoring it.

SpaceX Will Have to Buy Tesla at a Premium

After months of Wall Street rumors and speculation, Elon Musk officially confirmed that SpaceX and Tesla are exploring a merger. During SpaceX’s earnings call last week, Musk said that a merger would be a “good idea” and that each company had formed independent special committees to explore the transaction. As Tesla and SpaceX each become AI-centric companies, their shared technical stack, consolidated compute, and integrated energy ecosystem are worth far more together than they are as stand-alone entities.

Why a Tesla/SpaceX Merger is Likely in 2027

If Elon Musk wants a merger, he will have to act fast and do it with President Trump in office. Under President Biden, FTC Chair Lina Khan was a “hawk” and blocked several mergers, including Microsoft and Activision Blizzard, JetBlue and Spirit Airlines, and Kroger and Albertsons. Additionally, several Democrats have already threatened to launch criminal investigations into Elon Musk after he donated $445 million to Republican political groups for the 2026 midterm elections. With a “dovish” FTC and a Musk-friendly administration in power, the regulatory environment is perfect for a 2027 merger. Betting markets agree. Polymarket bettors currently see a 65% chance of a 2027 merger.

Tesla Buyout Will Garner a Premium

Because of his notoriety and significant influence at both companies, a merger would spark intense fiduciary scrutiny. With a market cap of nearly $2 trillion, SpaceX would be the acquirer of the smaller Tesla (currently valued at $1.56 trillion). If a merger is to be approved, the independent special committees for both companies will need to negotiate a deal that makes sense. With a pristine balance sheet and ~$45 billion in cash on hand, Tesla’s special committee would likely shoot for at least the typical 25% traditional takeover premium. Assuming a 25% premium, Tesla shares would be worth around $500.

Additionally, SpaceX would need to sweeten the deal further because Tesla shareholders would see their voting power diluted in a combined entity.

Tesla Breaks Out After Upgrade

On Monday, Tesla shares broke out above the 200-day moving average on heavy volume after a Barclays analyst upgraded the stock to overweight and raised the price target to $450, citing SpaceX merger upside.

Bottom line

As both SpaceX and Tesla pivot toward AI, consolidation promises significant synergies, but SpaceX will ultimately have to offer a substantial premium to win over Tesla shareholders. With a favorable regulatory climate expected in 2027 and independent committees evaluating fiduciary duties, Tesla's solid cash reserves and voting structure make a valuation bump almost imperative. Investors looking past Tesla's recent lull may find that current levels offer a compelling opportunity before merger momentum takes full effect.

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This article originally published on Zacks Investment Research (zacks.com).

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