Elon Musk’s SpaceX Just Became a Less Attractive Buyer for Tesla

Elon Musk’s cryptic remarks during Tesla’s Q2 earnings call on July 22 hinted at a potential merger between SpaceX and Tesla, reigniting speculation about a deal that could reshape the tech and automotive industries.

Musk addressed the possibility of a SpaceX-Tesla merger during the call, stating, “We can’t talk about combining companies and things like that on an earnings call. It’s got to be done with the appropriate process.” While the response avoided confirming any plans, Musk later praised the “more and more overlap…on so many fronts” between the two entities, citing the Digital Optimus project—a joint venture powered by SpaceX’s Grok AI chatbot—and the integration of Starlink satellite services into Tesla vehicles.

From Valuation Highs to Stark Realities

Following SpaceX’s June 12 IPO, the rocket company’s stock surged to a peak of $211 per share, valuing the business at $2.8 trillion. At that time, Tesla’s market cap stood at $1.6 trillion, creating a scenario where SpaceX could have acquired Tesla by issuing an additional 57% of its shares, leaving existing investors with a 66% stake in the combined entity. “It was a compelling case for Musk to deploy what looked like an overvalued stock to capture a highly valuable property,” said one analyst at a firm that underwrote the SpaceX IPO.

But the landscape has since changed. As of mid-July 2026, Tesla’s stock had dropped 24% to $308, while SpaceX’s share price fell 46% to $113, reducing its market cap to $1.49 trillion. Under these revised valuations, SpaceX would need to issue 82% of its shares to acquire Tesla, which now carries a $1.22 trillion valuation. This would dilute SpaceX shareholders’ ownership to 55%, a significant drop from the 66% stake they would have retained earlier.

The Financial Calculus of a Merger

Analysts at Goldman Sachs, Morgan Stanley, and J.P. Morgan, which participated in SpaceX’s IPO underwriting, had initially projected the rocket company’s stock would reach $225 within 12 to 18 months. Those forecasts now appear optimistic, given the recent declines. “The math doesn’t add up for SpaceX investors,” said a financial analyst at a major investment bank. “Issuing so much stock would likely trash SpaceX’s share price, similar to the AOL-Time Warner merger’s aftermath, where dilution led to long-term underperformance.”

The potential deal also poses risks for Tesla shareholders. If the merger were to proceed, Tesla investors would receive SpaceX stock, which is now significantly devalued relative to its IPO peak. “Unless they sold immediately, Tesla owners would be stuck with a stock that’s underperforming due to massive dilution,” the analyst added.

Musk’s Vision vs. Market Realities

Musk’s comments during the earnings call painted an optimistic picture of a potential merger, emphasizing synergies between the two companies. However, the financial reality starkly contrasts with his rhetoric. The revised valuations mean SpaceX would effectively be overpaying for Tesla, exchanging a 55% stake in a combined entity with “puny additional earnings and big time negative free cash flow” for 100% ownership of its current assets, according to one industry observer.

Despite these challenges, Musk’s track record of pushing ambitious projects—such as the development of Starlink and the Digital Optimus AI—suggests he may still view a merger as a long-term strategic move. “Even the most terrible numbers shouldn’t take your eyes off the glorious horizon this great salesman’s so skilled at painting,” the Fortune article noted, highlighting Musk’s ability to inspire confidence despite economic headwinds.

As of July 24, 2026, the possibility of a SpaceX-Tesla merger remains uncertain. While Musk’s comments indicate he has not ruled out the idea, the financial landscape has shifted in a way that makes the deal far less attractive. For now, the focus will likely remain on how both companies navigate their separate challenges in the evolving tech and automotive markets.