Analysts speculate that Elon Musk will merge his two companies but traders on prediction markets are not so certain.
After SpaceX filed to go public in what may be a record breaking IPO, some are hypothesizing another major event on Wall Street: a merger between the spacecraft maker and Tesla.
"Step by step the holy grail could be combining SpaceX and Tesla in some way to give the connected tissue between both disruptive tech stalwarts looking to lead the AI Revolution," wrote Wedbush analyst Dan Ives, who expects the two companies to merge by next year.
A combination of the two companies could make sense. After all, both count Elon Musk as their CEO. Ives also noted that Musk "wants to own and control more of the AI ecosystem," something a SpaceX-Tesla merger could facilitate.
However, speculation is divided among analysts and traders. Kalshi traders placed only 33% odds that it will happen before May 2027 and even less chances for earlier months. On Friday, traders saw a nearly 77% chance the merger would happen before April 2027 but those chances plunged roughly 40 percentage points the next day.
The timing of the merger may be ideal for Tesla. In China, the company fell fell behind competitors BYD and automotive conglomerates Geely and Chery for the highest number of electric vehicles in the country in April, according to monthly wholesale figures from the China Passenger Car Association. BYD even defeated Tesla as the leading top electric vehicle last year.
Merger rumors are not new. Tesla and SpaceX, which also owns artificial intelligence company xAI, are already developing the semiconductor fabrication plant Terafab in East Texas. The project would manufacture chips for the two companies and filings show it can cost up to to $119 billion.
Musk also sparked conversation on the merger during last month's earnings call when he explained the challenges of two companies working on Terafab.
"SpaceX is going to take care of the initial phase of the scaled up Terafab," he said. "Any kind of intercompany thing has to be approved by both the SpaceX and Tesla board of directors. It's got to go through a conflict resolution." "It's going to have a lot of, unfortunately, a lot of complexity because we've got to make sure Tesla shareholders are served and SpaceX shareholders are served, and strike the right balance there," he said.
Walter Isaacson, who wrote a bestseller biography on Musk in 2023, also suspected a merger back in April.
"Elon Musk is always moving engineers back and forth between his companies. I think he wants to make this one big company," he told CNBC's "Squawk Box." Disclosure: CNBC and Kalshi have a commercial relationship that includes customer acquisition and a minority investment.
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