Elon Musk may be about to use SpaceX\u2019s soaring valuation as a lifeline for Tesla\u2014and in doing so, create a combined giant that potentially loses money.<\/p>\n
A new Fortune analysis<\/a> by my colleague Shawn Tully lays out the math behind a reported potential SpaceX-Tesla merger. The combined entity would carry a $3.4 trillion valuation with SpaceX at an anticipated $1.75 trillion against Tesla\u2019s $1.65 trillion market cap. This would make it nearly three times the size of the largest merger ever completed.<\/p>\n Tully writes: \u201cCapitalizing on the incredible buzz surrounding the pending SpaceX IPO as a strategy for rescuing stricken Tesla makes perfect sense for Elon Musk. At an expected market cap of $1.75 trillion, SpaceX stock looks vastly overpriced\u2014an IPO prominent analysts are saying they\u2019d avoid<\/a>. So Musk could marshal its inflated shares as currency to pay big for Tesla, even making the deal at its current market cap, a number that\u2019s also over the top based on any conventional metric.\u201d<\/p>\n However, the financial logic is where it gets uncomfortable, according to Tully. For example, SpaceX would issue new shares equivalent to 94% of its current count to absorb Tesla, doubling its share base to 8 billion. But Tesla\u2019s trailing GAAP earnings have collapsed from $15 billion in 2023 to $3.9 billion today and core operating earnings, stripped of regulatory credits and Bitcoin gains, are just $2.3 billion. On top of that, the cash flow picture is even more alarming, he writes.<\/p>\n For CFOs, treasurers, and capital-markets professionals, the situation raises a sharp question: what does it mean when the world\u2019s most watched deal is designed to solve one overvaluation problem by potentially creating a larger one?<\/p>\n You can read Tully\u2019s full story here<\/a>.\u00a0<\/p>\n Sheryl\u00a0Estrada
sheryl.estrada@fortune.com<\/a><\/p>\n