I still don’t get the logic of investors cheering for a $SpaceX(SPCX.US) $Tesla(TSLA.US) combo. One, mergers of two megacap disparate companies rarely work as target synergies do not live up to their expectations. To argue both are AI plays and there are AI synergies to combining seems naive, since we have heard repeatedly during this earnings season all tech stories (e.g. $Salesforce(CRM.US), $Dell Tech(DELL.US), $Marvell Tech(MRVL.US)) are now AI plays. Any tech combo can now promise that.
Second, and perhaps more importantly, proponents of a $SpaceX(SPCX.US) $Tesla(TSLA.US) merger don’t even try to address the dilution math of such a merger: If a 300x EV/EBITA company like $SpaceX(SPCX.US) acquires a 100x EV/EBITDA stock of similar size such as $Tesla(TSLA.US), the consolidated entity will trade at the least common multiple - so here 100x EV/EBITDA - effectively wiping out 28% [(100x) x (SPCX $6.6Bb Adj EBITDA + TSLA $15B Adj EBITDA)/ $3T = .72]/ of the combined enterprise value. Why would a $SpaceX(SPCX.US) investor other than maybe Elon who might presumably prefer to be CEO of 1 rather than 2 megacap companies go for that?The copyright of this article belongs to the original author/organization.
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