Where will SpaceX (NASDAQ: SPCX) shares go from here? The possible merger with Tesla (NASDAQ: TSLA) may play some role. It’s no accident that the recent demonstration of a ‘flying car’ featured incorporated technology from both companies. It’s no longer just a rumour either. Both sides are already exploring merger possibilities.
Let’s say the two firms get wrapped up under an Elon Musk umbrella. Will that be a good or bad thing? I asked ChatGPT…
A question and an answer
My question: “Will SpaceX shares boom if the merger with Tesla goes ahead?”
ChatGPT’s answer was actually rather bullish, calling the merger a potential “major catalyst” and saying it “could trigger a substantial valuation surge”.
The rest of the spiel was, as usual with typical AI fare, verbose and long-winded. But I’ll sum it up by saying the companies are broadly similar enough to merge.
Is this true? Well, it’s certainly the case that both SpaceX and Tesla have their fingers in more pies than a casual observer might expect. SpaceX hosts a social media company under its aegis (X, formerly Twitter). And analysts expect its major revenue stream to come from artificial intelligence (AI).
Tesla, on the other hand, is morphing from a vertically integrated electric vehicles manufacturer to a company exploring a whole host of technological applications. The Optimus robots, which are human-shaped and might replace human labour, are perhaps the pick of the bunch.
In general terms, if the two firms are exploring advanced technologies of many different kinds, then bringing them together could bring a bevvy of efficiency improvements. That could see SpaceX shares soar in the future. There’s one problem though…
What to do?
One of the things putting people off when SpaceX IPO-ed a few months ago was its CEO – the polarising Musk. So when a merger aims to create a sort of ‘Musk super company’ worth nearly $4trn, then it might be seen as more of an ego move for one individual rather than what’s best for the companies and employees to keep doing what they do best.
Where do I sit? I’d rather the merger didn’t happen – and I say that while owning the shares in both SpaceX and Tesla. While I wouldn’t even be surprised for SpaceX shares to see some uplift from the move – indeed the share price jumped close to 10% when the rumours were confirmed – I don’t think the introduction of execution risk is beneficial at this stage.
Let’s not forget both companies are high-growth/high-risk enterprises with price-to-earnings ratios in the three-digit range (or in SpaceX’s case, sometimes not even turning a profit). While it’s not enough for me to sell, and I’d say both are still worth considering, I’m not optimistic about recent developments.
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John Fieldsend owns shares in SpaceX and Tesla.
This story originally appeared on Motley Fool
