Tesla’s flying Roadster fuels Wall Street bets on a SpaceX merger

Tesla’s flying Roadster demo at a SpaceX test site has shifted investors’ attention from the car to a possible Tesla-SpaceX combination, after Barclays said a deal could be announced before Tesla’s annual meeting. Both stocks fell on Friday, and neither company has announced merger plans.

Tesla’s long-delayed Roadster made its debut Thursday at SpaceX’s rocket development and test facility near Waco, Texas, in a livestreamed demo in which the car clung upside down to a curling ramp, launched into the air, rolled midair and landed on its wheels. On Wall Street, however, the conversation quickly moved from the car to Elon Musk’s rocket company.

Musk, who runs both companies, called the car “what happens when you have a collaboration with the world’s best car company and the world’s best rocket company.” The flying version uses fan-based suction and cold-gas thrusters, and Musk said the Roadster will go into production in 2028. No prices were announced, Tesla says the flying model is not approved for public roads, and the FAA said the vehicle does not meet its definition of an aircraft.

Barclays sees a deal before the annual meeting

SpaceX’s Rocket Development and Test Facility in Texas (file photo)

In an Oct. 14 note, Barclays analyst Dan Levy wrote that a Tesla-SpaceX combination could be announced before Tesla’s annual shareholder meeting, which must be held by Dec. 6. He said the most likely structure would be SpaceX acquiring Tesla in an all-stock deal, with each Tesla share exchanged for roughly 0.7 SpaceX shares. If no deal is unveiled around the meeting, Barclays still expects an announcement within six to 12 months.

Analyst Dan Ives said the Roadster puts propulsion, pressure-vessel and control hardware developed at SpaceX on a Tesla product, strengthening the case for the two companies to operate “as one engineering platform over time.” Deepwater Management’s Gene Munster was more skeptical, calling the car “an engineering flex with no commercial value beyond embarrassing traditional car makers.”

Growing financial ties

The companies’ business ties have deepened this year. According to The Motley Fool, Tesla bought $2 billion of SpaceX shares in the first quarter, SpaceX purchased $318 million of Tesla Megapack batteries in the second quarter, and the two are working together on the proposed Terafab semiconductor project, which could cost up to $119 billion.

Shares slip

Tesla shares fell 2.13% on Friday to close at $354.72, while SpaceX shares slipped 1.74% to $146.03. Neither company has announced plans to merge, and any combination would require approval by special board committees and shareholders as well as regulatory review.

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Tesla’s flying Roadster fuels Wall Street bets on a SpaceX merger