Australian investors are closely watching a potential mega-merger between Elon Musk’s electric vehicle giant Tesla and aerospace manufacturer SpaceX. Musk recently confirmed that special committees have been formed to discuss a colossal A$5 trillion ($US3.5 trillion) merger, a deal that would represent the largest corporate combination ever. The prospect has generated significant optimism, with analysts suggesting such a tie-up could unlock more than A$200 billion in forced buying from passive funds tracking the S&P 500 Index.
Musk, who leads both companies, highlighted the substantial merits of combining the entities, particularly for fostering cooperation in developing superintelligence software. Tesla manufactures electric vehicles, battery storage, and solar products, alongside its ventures in robotics and artificial intelligence. SpaceX designs, manufactures, and launches advanced rockets and spacecraft, and operates a global satellite internet constellation. Barclays analysts anticipate the merger would position the combined entity as an AI vertical integration play, merging Tesla’s physical AI aspects, like robotaxis, with SpaceX’s virtual AI, such as its Grok AI model. This integration is also seen as a way to reduce governance risks, legal costs, and administrative burdens.
The financial implications are notable, with Jack Hu of Phoenix Growth Fund estimating an initial A$50 billion in passive buying from S&P 500 trackers, potentially escalating to A$242 billion as SpaceX’s escrow arrangements expire. While SpaceX, which had its blockbuster IPO earlier this year, is not yet S&P 500 eligible, it is expected to be included by 2027. Shares in both companies saw gains following Musk’s comments. However, Minotaur Capital, holding short positions, expressed mixed views, noting that while a merger simplifies resource allocation, it could diminish the ‘pure-play’ focus for investors. Musk cautioned that any merger would require significant investor support, with Tesla needing approval from 50 per cent of all shareholders.
