Blog Analyst Suggests Tesla Could Merge With SpaceX

The leader of Morgan Stanley’s global auto research team said Tuesday he can foresee a Tesla and SpaceX merger in the future.

The firm’s Adam Jonas wrote in a report that “investors widely expect Elon Musk to, over time, devote increasing amounts of his time and talents to SpaceX, raising the very real question of who could replace him at Tesla. A combination of efforts between the two firms could address this important issue.”

Jonas said he expects the automotive market to become increasingly competitive and Tesla will be battling companies with much larger war chests. He sees potential for SpaceX to become highly profitable, giving Tesla the capital it needs to support its ambitious plans.

There’s also a bit of history around Musk combining company efforts, such was the case when Tesla acquired SolarCity. Jonas wrote that “the willingness of Tesla leadership to undertake strategic actions to consolidate its separate interests in the interest of both financial sustainability and technological overlap“ could be replicated with a Tesla/SpaceX deal.

Musk carried out some promotion of both companies over the weekend when he said  SpaceX’s Falcon Heavy rocket will transport his Tesla Roadster on its maiden voyage.

 

[beachbum77]

That would be great. One company burning cash buying another. SpaceX just borrowed another $100 million, and Tesla will be back to the capital markets again in Q1.

So it is pretty obvious neither company is cash flow positive. Sounds like Morgan Stanley wants to sell more of their Tesla shares.

 

[doug]

I don't really see it any time soon. It wouldn't be a good idea for SpaceX to go public in the near future. At the same time Tesla is way too expensive to take private.

 

[elasalle]

Folks getting ideas because SpaceX launching EM's Roadster belching Bowies Space Oddity.

 

[Leopold Stotch]

The analyst was way off. The future of Tesla is in headgear. Proof attached.

 

[johnnyira]

I'm not sure why that would be a surprise,Elon already owns both , just tax purposes to say they're separate companies anyway.

 

[Ulmo]

Would SpaceX take Tesla private or Tesla take SpaceX public?

 

[bcsteeve]

That would be great. One company burning cash buying another. SpaceX just borrowed another $100 million, and Tesla will be back to the capital markets again in Q1.

So it is pretty obvious neither company is cash flow positive. Sounds like Morgan Stanley wants to sell more of their Tesla shares.

Link to where SpaceX "borrowed another $100 million".

I think I know what you think you're talking about, and if so you have a strange definition of "borrow".

 

[bcsteeve]

Would SpaceX take Tesla private or Tesla take SpaceX public?

It isn't easy to go back once you've gone public. From his comments, I know Elon's preference would be to bring Tesla into the private fold... but that's not likely to happen.

Frankly, I think this analyst is out to lunch. If Elon can keep SpaceX private, he will. Tesla can go belly up tomorrow and they've (almost) achieved Elon's (not investor's) stated goals: accelerate sustainability. Every car company not named Mazda is releasing electric cars. The wave is already moving, with or without Tesla. SpaceX still has a long way to go and we already know his distaste for public companies.

 

[beachbum77]

Link to where SpaceX "borrowed another $100 million".

I think I know what you think you're talking about, and if so you have a strange definition of "borrow".

Quite correct. That should have said "raised", not "borrowed". I believe that brings the total to $450 million or so since August. Musk's companies are really good at spending money.

 

[bcsteeve]

I'm not sure why that would be a surprise,Elon already owns both , just tax purposes to say they're separate companies anyway.

Not even close to true. The two companies are wholly distinct far beyond taxes. Elon only "owns" Tesla insomuch as he owns more shares than John Smith does, but there could be millions of "owners" of Tesla and Mr. Musk is not even a majority shareholder. The ownership pool of SpaceX is much, much smaller but it still isn't Elon-only (although he *is* the majority shareholder there). They have the same CEO and informally share talent and ideas between the companies, but they are not one in the same and I can't see them joining... well... ever. The only reason I can really see it happening is if Tesla is simply failing and needs a huge amount of cash AND lost all confidence of the markets AND Musk sees light at the end of the tunnel. Or, vice versa... but then he'd have to convince (might not be hard to do) TSLA owners to buy a completely unrelated money losing (if they're failing) company.

 

[beachbum77]

Folks getting ideas because SpaceX launching EM's Roadster belching Bowies Space Oddity.

It was a very odd announcement. We already have tons of unused stuff orbiting this planet. Now he wants to do the same to Mars. But maybe he is planning a move later and wants his Roadster to be able to be brought down for use on Mars after humans build roads and racetracks there. Musk will be able to claim first BEV on Mars, right?

 

[bcsteeve]

Quite correct. That should have said "raised", not "borrowed". I believe that brings the total to $450 million or so since August. Musk's companies are really good at spending money.

You seem to say that with a bit of sarcasm, but really you're just correct. They ARE good at it! And that's great! If they were bad at it, they'd be spending cash on things that aren't growing the company. The media is weird. So-called "analysts" are even weirder. There's absolutely nothing bad, strange, untoward or any other negative term about a massive growth company spending money. They SHOULD be spending every single dime they're making, and then some. They SHOULD be borrowing to their absolute limits and spending that too. They SHOULD be leveraging every dollar they can to finance the growth they are achieving.

Just look at Amazon for reference. Look at the billions and billions of revenue it has made over the decade... and compare that to the minuscule profit it has turned. That's fine... that's the way it works.

 

[bcsteeve]

It was a very odd announcement. We already have tons of unused stuff orbiting this planet. Now he wants to do the same to Mars. But maybe he is planning a move later and wants his Roadster to be able to be brought down for use on Mars after humans build roads and racetracks there. Musk will be able to claim first BEV on Mars, right?

Didn't he already confirm it was a joke?

 

[beachbum77]

You seem to say that with a bit of sarcasm, but really you're just correct. They ARE good at it! And that's great! If they were bad at it, they'd be spending cash on things that aren't growing the company. The media is weird. So-called "analysts" are even weirder. There's absolutely nothing bad, strange, untoward or any other negative term about a massive growth company spending money. They SHOULD be spending every single dime they're making, and then some. They SHOULD be borrowing to their absolute limits and spending that too. They SHOULD be leveraging every dollar they can to finance the growth they are achieving.

Just look at Amazon for reference. Look at the billions and billions of revenue it has made over the decade... and compare that to the minuscule profit it has turned. That's fine... that's the way it works.

Steve, you cannot use Amazon as a comparison. Amazon annoyed investors by spending the profits. BUT, they did not keep coming back to the markets for more cash. Bezos used positive FCF to grow the company, rather than paying dividends or doing buybacks. That is a HUGE difference to what Tesla is doing, which will not continue indefinitely.

 

[dhanson865]

It was a very odd announcement. We already have tons of unused stuff orbiting this planet. Now he wants to do the same to Mars. But maybe he is planning a move later and wants his Roadster to be able to be brought down for use on Mars after humans build roads and racetracks there. Musk will be able to claim first BEV on Mars, right?

It won't orbit mars, it'll orbit the sun between earth and mars. The type of orbit is known as a hohmann transfer orbit. It will in no way be junking up any normally used orbit that anyone on either planet will care about

 

[dhanson865]

Didn't he already confirm it was a joke?

No, he gave joking responses about it but he hasn't said anything that anyone is 100% sure either way. Consensus is that it's a high probability he will send a gen 1 roadster into solar orbit.

But confirmation followed a bizarre exchange between The Verge and Musk. After Musk tweeted the plan, we asked him to confirm that it was real. Musk replied to us first by email, confirming that it was real. Then, after The Verge published a story about the plan, Musk sent us a response in a direct message on Twitter saying he “totally made it up.” We now know that response was false; a person familiar with the matter told The Verge Saturday evening that the payload is in fact real.

And here's a tweet from a journalist from The Verge.

So to recap: Musk told us last night it’s true he’s launching a Tesla to Mars. We published. Shortly after that, we got another message from him: “totally made it up.” We updated today. After that, he & another SpaceX official confirmed to other outlets that it is indeed true.

So he joked enough that everyone isn't sure but it's also been confirmed sort of by someone else not named Elon, so...

it’s not going to Mars. It’s going near Mars. He said it’ll be placed in “a precessing Earth-Mars elliptical orbit around the sun.” What he means by this is what’s sometimes called a Hohmann transfer orbit, an orbit around the Sun that takes it as close to the Sun as Earth and as far out as Mars. This is a low-energy orbit; that is, it takes the least amount of energy to put something in this orbit from Earth. That makes sense for a first flight.

Elon Musk: On the Roadster to Mars

You can check up on the launch at Falcon Heavy Demo Launch Campaign Thread • r/spacex

If it is confirmed or denied they'll link proof in the cargo line near the top.

 

[bcsteeve]

Steve, you cannot use Amazon as a comparison. Amazon annoyed investors by spending the profits. BUT, they did not keep coming back to the markets for more cash. Bezos used positive FCF to grow the company, rather than paying dividends or doing buybacks. That is a HUGE difference to what Tesla is doing, which will not continue indefinitely.

Not sure how you're making the statement that Amazon didn't keep coming back for cash. They increase their outstanding stock on a regular basis?! Historically, it isn't even close. Tesla's IPO was with 13.3 million shares and they currently have 167 million. An increase of 1155%. Amazon offered 3M shares at IPO and currently has 494M, or an increase of 16367% There are difference in the two companies, of course, but you can't really say I can't compare them on dilution. And the numbers I gave are both lifetime, which only highlights it even more because it includes the last several very stable years at AMZN. If you look only at AMZN during their highest growth years (similar to what TSLA is going through now) it'll show an even bigger spread. Amazon did what Tesla is doing. Amazon's still doing it, but much less so. Every growth company ever that didn't somehow manage to be massively profitable from the beginning - but especially manufacturing companies like Tesla - go through the same curve.

But if you don't like to compare to Amazon, that's fine... it doesn't matter. The point is, you're making their stock offering behavior out to be something that it isn't. What it is... is perfectly normal, should be expected and in fact applauded by its investors, and is in no way a bad thing except to undisciplined investors that were trying to time short term gains.

 

[arondaniel]

Would SpaceX take Tesla private or Tesla take SpaceX public?

And more importantly, will there be a Tesla Space Division or a SpaceX Automotive division?