Tesla and SpaceX (TSLA, SPCX) — Who Benefits Most from a Merger?

Both companies now have special committees studying a combination, and neither has agreed to any terms. On the two companies' own figures, an all-stock merger creates between −$4.4B and $6.6B of value we can count, against $3.47 trillion of combined market value. What it does is move value between holders, and the exchange ratio decides which way. At a ratio set by today's prices, Tesla's holders receive more than they give on our values, on the sell side's targets and in five of nine scenario pairs. SpaceX's public holders give it. If SpaceX is the acquirer, the chief executive gains control of Tesla's business; under his 2025 Tesla award as written, a deal below $505.98 a Tesla share would forfeit all 423.7 million of his unearned award shares.

TON618 Capital Research · As of 23 October 2026 · Download PDF · Download model

A Tesla–SpaceX merger is usually argued as a question of whether rockets and cars belong together. Contracts already settle most of that: SpaceX buys Tesla's batteries and plans chips with it, and Tesla owns a sliver of SpaceX. The question a combination actually answers has a number attached: at what ratio Tesla's shares become SpaceX's, who then owns how much, and who decides. This note prices that ratio on three bases, builds the combined accounts from both third-quarter filings, reads what the companies' own documents say a combination triggers, and sorts the public arguments by the party each serves. It does not say whether the deal should happen.

Terms used throughout, defined once. Exchange ratio: the number of SpaceX shares issued for each Tesla share; at market it is Tesla's price divided by SpaceX's. Premium: how far the ratio is set above the market ratio, paid to the holders being acquired. Break-even ratio: the ratio at which a holder base receives exactly what it gives; on any set of values it is the value of a Tesla share divided by the value of a SpaceX share. Value transfer: value received less value given, summed over a holder base. Fair value: the probability-weighted value per share in our latest notes on each company: SpaceX $123.95 (bear $9.91, base $66.78, bull $352.32 at 25/50/25) and Tesla $93.88 (bear $28.47, base $56.28, bull $240.03 at 30/45/25). Special committee: a committee of directors without a personal interest in a transaction, formed to negotiate it. Change in control: the event in Tesla's 2025 pay award, defined as the holders of another company, as a group, ending with more than half the votes. Class B: SpaceX's ten-vote shares, which only Musk and his permitted transferees may hold. Free cash flow: operating cash flow less capital spending. ROIC: after-tax operating profit over invested capital, trailing twelve months, compared with each company's hurdle rate.

Tesla has bought a Musk company once before. In 2016 it acquired SolarCity, the solar installer founded by Musk's cousins, which he chaired and of which he was the largest holder. Tesla's board formed no special committee; the deal needed a majority of the votes cast by disinterested holders and won 85.1% of them. Holders sued. The Delaware courts applied entire fairness, their strictest standard, assumed without deciding that Musk controlled Tesla at about 22%, and found the deal fair; the final appeal ended on 6 June 2023, seven years after the agreement.

The present round began with xAI. In an advisory vote in November 2025, more of Tesla's votes were cast for investing in xAI than against, but abstentions count as votes against under Tesla's bylaws and the proposal failed. Two months later Tesla agreed to invest about $2 billion in xAI on the terms other investors received. On 2 February SpaceX acquired xAI as a combination of entities under Musk's common control, with no special committee or minority vote in the agreement, and Tesla's right became 19 million SpaceX shares.

On SpaceX's third-quarter call on 20 October, Musk said both companies had formed special committees "at the request of shareholders" and that, as a conflicted party, he could not take part. Both third-quarter quarterly reports, filed on 22 October, now put the committees in writing, with different mandates. Tesla's committee of disinterested directors is to "explore deepening Tesla's relationship with SpaceX, which could be through certain arrangements including without limitation a business combination". SpaceX's is to "evaluate a potential combination", and any deal also needs the approval of its "controlling shareholder". Neither has named its members or advisers. At most six of Tesla's nine directors could sit on its committee: Musk is the counterparty, his brother Kimbal is not independent by the board's own determination, and Ira Ehrenpreis has sat on SpaceX's board since February. Tesla declined questions on the subject on its own call the next day. There is no definitive agreement, and no merger proxy has been filed.

The parties, and what a combination changes for each:

At the 23 October closes ($372.22 and $147.49), an all-stock deal at market would issue 2.52 SpaceX shares for each Tesla share: 10.0 billion new shares, 73% of SpaceX's count, leaving Tesla's holders with 42% of the combined company. A 15% premium takes them to 46%; 30% to 49%. Reversing the direction, with Tesla issuing 0.396 of its shares for each SpaceX share, gives the same economics at market; the direction changes the votes, not the split (§4). Tesla's holders would hold a majority of the shares only above a ratio of 3.43, a premium of 36%; with SpaceX's ten-vote class surviving, a majority of the votes is out of reach at any ratio a committee would entertain. These figures count Musk's 423.7 million unearned award shares as exchanged; if they are forfeited in a change in control (§4), a deal at market issues 8.9 billion shares, 66% of SpaceX's count, and Tesla's holders own 40%.

A ratio set from prices transfers nothing on prices. The transfer appears when a holder values the two stocks differently from the market, and the size of it is the gap between the market ratio and that holder's break-even ratio. Exhibit 1 sets out ten.

On our fair values the break-even is 0.76: the market ratio pays Tesla's holders 3.3 times what they give, a transfer of $499B from SpaceX's holders to Tesla's. That is the obvious headline, and it is also the claim that flatters our own published views, since both our notes put each stock below its price. So we test it hardest.

The asymmetry is ours in size, not in direction. Tesla trades at 4.0 times our fair value and SpaceX at 1.19 times. For the market ratio to be fair on our methods, we would have to be under-valuing Tesla 3.3 times as much as we under-value SpaceX. The sell side's mean targets give an independent read: $412.79 for Tesla, 11% above its price, and $254.23 for SpaceX, 72% above. Their break-even is 1.62, and on their numbers Tesla's holders gain 32% at the market ratio. The direction does not depend on our models; the size does.

It depends mostly on SpaceX. Exhibit 2 pairs every one of our scenarios for each company. At the market ratio Tesla's holders gain in five of the nine pairings, and the pattern is set by the SpaceX column: they gain in every Tesla scenario if SpaceX lands in its bull case, lose in every one if it lands in its bear case. SpaceX's scenarios span 36 times from bear to bull; Tesla's span 8 times. A Tesla holder who accepts the market ratio is, above all, buying SpaceX's distribution of outcomes.

Each side's own case. A SpaceX holder who believes our SpaceX bull case ($352.32) and takes Tesla at its price has a break-even of 1.06 and gives 25% of their stake at the market ratio. A Tesla holder who takes Tesla's price as the floor and our SpaceX fair value has a break-even of 3.00 and needs a 19% premium to be whole. No ratio between 1.06 and 3.00 satisfies both; one of them has to give up their case. The mirror runs the other way too. On the sell side's Tesla target ($412.79) against SpaceX's close the break-even is 2.80, above the market ratio, so SpaceX's holders would gain 5%: a SpaceX holder who gives Tesla's own case more credit than its price is a holder for whom the market ratio is a purchase rather than a sale. (Our Tesla bull case, $240.03, sits below Tesla's price, so it cannot stand in for a Tesla holder's case.)

The premium. A premium moves about $80B from SpaceX's holders to Tesla's per 10 points up to 15%, and $71B per 10 points from 15% to 30% (Tesla's holders pay part of their own premium through their stake in the combined company). At 30% the transfer is $226B on market prices, $57.08 per Tesla share and $16.64 per SpaceX share.

Built from both third-quarter quarterly reports, with each company's own adjusted measure beside the accounting figure, the combined company looks like this:

The sales between them are almost all Megapacks: Tesla booked $626 million of revenue from SpaceX in nine months at a gross margin of about 24%, and SpaceX capitalized $480 million of them as equipment; the $146 million difference is not explained in either filing, so the elimination uses Tesla's figures. Tesla's mark on its SpaceX stake (a $142 million loss in the third quarter, a $863 million gain over nine months) disappears with the stake. Everything else the two sell each other is, in both filings' word, immaterial. The Terafab cost split has no agreed terms, so there is nothing yet to eliminate.

Whose cash funds whose build. At 30 September Tesla held $35.9B of net cash and SpaceX $51.0B. SpaceX's fourth-quarter capital-spending guide of $35–40 billion means Tesla's entire net cash covers about 3 months of SpaceX's spending. After the fourth quarter, on SpaceX's guide and Tesla's own, the pair would hold about $54B. Against that, the 2027 base cases in our two models burn $80B between them (SpaceX burns $84B; Tesla's base case generates $4.4B), so the combined cash lasts about 8 months of 2027. Tesla's $30B of bank lines does not change the picture much: $20B of it is a delayed-draw term loan whose undrawn amount steps down to $10 billion at twelve months and to zero at eighteen. The combination answers SpaceX's funding question for about a quarter.

The accounting. SpaceX accounted for xAI as a combination under common control because Musk had "a controlling financial interest" in each "through his majority voting interest in each such entity". He does not hold a majority of Tesla's votes, so on our reading that route is closed: one company would buy the other and mark its assets to fair value. SpaceX's holders keep 57.6% of the economics in either direction, and most of the votes, so on our reading SpaceX would be the acquirer for accounting purposes. Tesla's book equity, net of its SpaceX stake, is $87.0 billion; the price SpaceX would pay at market is $1.47 trillion. The $1.38 trillion difference becomes goodwill and intangible assets. If a fifth of it were amortized over ten years, the charge would be $21.9 billion a year after tax, against combined trailing net income of −$0.3 billion: reported earnings would stay negative for a decade on purchase accounting alone.

What the combination is worth, and what it creates. No new model is built here: the combined value is the sum of the two parents' values plus the items a combination adds. On our fair values the combined company is worth $87.16 a share at the market ratio, against a market value of $147.49; on our bull cases $243.48, on our bear cases $10.37. Both parents' growth stages, terminal growth and hurdle rates carry over unchanged (SpaceX: 10% cost of capital, terminal growth 3–4%, staged legs of two to four years; Tesla: segment rates of 10.1–13.7%, stages ending where installed capacity binds). One change from the parents: Tesla's model carries its SpaceX stake at book value ($2.87B); here it is re-marked at 19 million shares times SpaceX's value on each basis, which moves Tesla's fair value by −$0.13 a share on our values. Both parent models predate our 23 October rule that terminal growth be set from dated long-run GDP projections. On the parents' own sensitivities, half a point less terminal growth for SpaceX ($116.42) and 2.5% for Tesla ($91.03) take the combined value to $82.34 a share and the break-even on our values to 0.78, from 0.76; the ranking does not change. The items a combination adds are set out with their ranges below.

Even the high case is 2.9% of what a 30% premium moves between holders.

Returns. Neither business earns its hurdle on trailing figures. Tesla's trailing return on invested capital fell from 22.9% to 5.6% over twelve quarters, against its 12.81% hurdle. SpaceX's is negative at −0.8% but has risen 5.4 points since December as compute revenue arrived. Combined, on a hurdle of 11.2% weighted by market value, the pair earns 1.8%, flat over the three quarters SpaceX has published, so a combination averages one shortfall that is shrinking with one that is widening.

SpaceX's charter decides more of this than any committee will. Class A shares carry one vote, Class B ten, and only Musk and his permitted transferees may hold Class B. His 5.22 billion Class B shares (including 1.30 billion restricted shares he votes but that remain subject to conditions) and 849 million Class A shares, per his 30 June filing, give him 44.7% of SpaceX's economics and 86.1% of its votes. The charter also requires a separate vote of the Class B holders, about 98% of them his, to approve "any Combination Transaction": a merger of SpaceX itself, a sale of substantially all its assets or a transfer of control. A deal done through a subsidiary might fall outside that definition, but his 86% of the votes decides any vote that is required. In a combination each class must receive equivalent economics, but Class B may receive stock with different voting rights, which is how xAI's high-vote shares became SpaceX Class B in February.

Direction decides the votes. If SpaceX acquires Tesla and Tesla's holders receive Class A, Musk's share of the combined votes is about 77% at market, against 17.7% of Tesla's today and 86.1% of SpaceX's. If Tesla acquires SpaceX, Tesla has one class of stock, so his votes would equal his economics, about 33%, unless Tesla's charter added a high-vote class. Tesla's own board looked at that in 2025: its audit committee found it "not feasible for Tesla to pursue such a structure in a manner contemplated by the Special Committee".

Tesla's 2025 award. In November 2025 Tesla's holders approved an award of 423.7 million restricted shares to Musk in twelve tranches, each earned on a market-value milestone (from $2 trillion to $8.5 trillion) and an operational one. None has been earned, and each share that vests carries an offset of $334.09, the grant-date price, which Musk pays. A change in control occurs when holders of another company, as a group, end with more than half the votes of Tesla or its ultimate parent; at the market ratio, in either direction, SpaceX's holders would. Tranches are then earned on market value alone, measured as Tesla's shares outstanding immediately before the change in control times the higher of the last close and the deal price, and "any Unearned Shares that do not become Earned Shares as a result of the change in control will be automatically forfeited." The first tranche needs a deal price of $505.98 a Tesla share, a premium of 36%, and is worth $6.1B net of the offset. At market, at 15% and at 30%, no tranche is earned and all 423.7 million shares are forfeited. Net of the offset they are worth $16.2B at Friday's close and $63.5B at a 30% premium; Tesla's quarterly report carries $115.6–130.1 billion of the award's grant-date value as unrecognized expense, $9.74 billion for the milestone it judges probable and the rest for those it does not.

The forfeited claim spreads across the combined company. Net of the offset, a deal at market costs Musk about $10.5B on this count and one at a 30% premium about $42.4B, on top of the premium itself. The same change in control lifts the service condition, otherwise running to January 2028, on the 286.4 million restricted shares from his 2018 award; those are already his and inside his 17.7%. Only Tesla as the acquirer at no more than 0.291 Tesla shares per SpaceX share, a 26% discount to SpaceX's price, avoids a change in control, and then every unearned milestone rises by the purchase price, about $1.47 trillion at today's prices. The award's terms make the direction, the premium and any replacement of the award matter to Musk personally. SpaceX's own award to him was "equitably adjusted" for the xAI merger; how a Tesla combination would treat it is not in any filing.

The lenders. Tesla's three new credit agreements, signed on 29 September and filed with its quarterly report, contain a carve-out for this case. A transaction that would otherwise be a change of control is not one if the new controlling holder is a "Permitted Holder" (Musk, his family and entities he controls) and Tesla keeps investment-grade ratings from at least two of Moody's, S&P and Fitch from the announcement through the 90th day after it; the test period extends while any agency has Tesla on watch for a downgrade or on a negative or developing outlook. The facilities' change-of-control default therefore turns on Tesla's own rating, not on the lenders' consent.

The law is Texas, not Delaware. Both companies are Texas corporations; Tesla converted in June 2024. Under Texas's 2025 amendments a listed company's directors are presumed to act in good faith, and a shareholder can overcome that only by pleading fraud, intentional misconduct, an act beyond the company's powers or a knowing violation of law. A conflicted transaction is protected if approved by disinterested directors or a committee, or by shareholders, who need not be disinterested. A company may ask the business court to confirm its committee's independence in advance; neither has disclosed a petition. Both companies require a holder to own 3% of the shares to sue on the company's behalf, about 119 million Tesla shares, a rule Tesla's holders voted in November 2025 to keep. Delaware's courts, until its own 2025 amendments, reviewed controller deals for entire fairness unless they used both a committee and a minority vote. A suit like SolarCity's would be harder to bring in Texas today.

The vote. Tesla's certificate requires a majority of all outstanding shares, so an abstention counts as a vote against. With Musk's 17.7% voting for, the rest of the register must deliver 39.2% of its shares; if he stands aside, 60.8%. The 423.7 million unearned award shares lower the bar a little, because Tesla's secretary votes them in proportion to everyone else's votes: with Musk for, yes votes from 35% to 38% of the other 2.83 billion shares suffice, depending on turnout. Tesla's 2025 meeting is the only calibration: a routine item drew 83% of the shares, so half of all shares is about 60% of a normal turnout; the 2025 award won 56.9% of all outstanding shares and the xAI proposal 31.8%. A further hurdle may apply. Texas's business-combination statute, which covers Tesla, bars a merger with a 20% holder's affiliate for three years after he crosses 20%, unless the board approved the share acquisition beforehand or two-thirds of the shares he does not own approve the merger at a meeting at least six months later: 2.17 billion shares, 54.9% of all outstanding. Whether Musk counts depends on how his shares are counted (17.7%, 19.8% or, with the unearned award shares, 28.4%); SpaceX's prospectus calls him "an approximately 20% shareholder of Tesla as of November 10, 2025". The documents do not settle it. At SpaceX, the Class B vote and Musk's majority settle the outcome, by written consent if he chooses.

The regulators. Antitrust looks thin for a concrete reason: the two companies report no segment in common (Tesla: automotive, and energy generation and storage; SpaceX: Space, Connectivity and Super Intelligence), and what links them is one selling to the other. A pre-merger antitrust filing would still be needed, as it was for Tesla's stake. Both are US companies under a US citizen's control, so the foreign-investment review board has no obvious hook. The friction is security clearance. SpaceX says it is required to maintain foreign-ownership mitigation for contracts that need facility clearances, and the rules look through to the "ultimate parent". A combination would put a company with a factory in Shanghai, $6.0B drawn on a working-capital facility from Chinese lenders and 17.9% of its nine-month revenue in China under the same parent as the leading national-security launch provider. We read the likely cost as ring-fencing rather than ineligibility; neither company has addressed it. Starlink's radio licenses would need the communications regulator's consent to any change in who controls the licensee.

We found forty distinct arguments in 109 searches across sell-side commentary, the financial press, governance voices, investor blogs, social posts reproduced by the press, the companies' statements and both third-quarter calls: 20 for a combination, 17 against and three that depend on terms. Each is recorded in its strongest form, with the party it actually serves, a verdict and the omission that matters, sized on this note's numbers. Seventeen check out against the filings, three are false, two are true only in part, four cannot be verified and fourteen are forecasts. Twelve serve Tesla's public holders, nine serve Musk and six serve SpaceX's float. The ten that matter most:

The finding is in the pattern. The most widely circulated arguments for a combination (synergy, control, an end to conflicts, inevitability) serve Musk, and the numbers most often cited behind them, the share ratio, his voting power and the award, are wrong or unsized. The funding argument is told as one for both sides, and Tesla's own cash flow contradicts it at scale. The case that SpaceX overpays is the one our numbers and the sell side's both support, and it belongs to the holders with about 14% of SpaceX's votes and no promised vote of their own. Among institutions with published views, Barclays and JPMorgan both see SpaceX as the likely acquirer in an all-stock deal, with JPMorgan's premium reported at 30–35%; Morgan Stanley mapped eleven areas of overlap without a merger call; Morningstar argued the business case could be met by joint ventures or supply agreements. Of two corporate-law scholars quoted in the press, Ann Lipton (University of Colorado) told AFP the legal obstacles look slight after the Texas move, and Eric Talley (Columbia) told Reuters that how Texas would treat such a case is unknown; no Texas court has yet ruled on a controller merger under the 2025 rules. We found no published view from ISS or Glass Lewis.

Single-source reports stay watch items until a filing or an independent outlet confirms them: that SpaceX approached Tesla and advisers have been hired; that Musk's public endorsement complicated the process; a target of announcing in the first half of 2027; a circulating roster for Tesla's committee that includes a director who sits on SpaceX's board; a $40 billion chip financing for SpaceX; and a July report, denied by Musk, that Tesla weighed selling its China business.

Ranked by what the combination does for each, on the numbers above, from most sense to least.

1. Tesla's public holders. At the market ratio they gain $357B on our values and gain on the sell side's targets; with the award's terms as written they also share in the forfeited award. They give up most of their vote and join a company whose 2027 base case burns cash. Two readings: a holder who trusts our values or the sell side's sees a cheap swap; a holder who trusts Tesla's price and doubts SpaceX's sees a loss of 9% that only a premium of 19% repairs. The terms that tell them apart: the premium, and whether the vote is conditioned on a majority of disinterested shares, which would give them the decision.
2. Elon Musk. With SpaceX as the acquirer, his votes over Tesla's business rise from 17.7% to about 77%, the related-party process ends, and the capital of both companies comes under one roof. Before the award, his economics are flat at market and negative at any premium, because he owns more of the payer than of the payee: a 30% premium costs him $61B. And with the 2025 award as written a change in control forfeits his unearned Tesla shares, $10.5B net to him at market and $42.4B at 30%. The terms that tell the readings apart: whether the Tesla award is replaced, and the direction.
3. The lenders. SpaceX's gain a cushion of $35.9B and Tesla's operating cash, about 3 months of guided spending. Tesla's would lend to a group whose 2027 base case burns $80B, and their September agreements carve a Musk-controlled combination out of the change-of-control default while Tesla stays investment grade.
4. Funds holding both, and the committees. Indifferent on value. Each committee's case is a ratio: Tesla's can defend the market ratio on almost any set of values; SpaceX's has to defend a ratio 3.3 times our break-even and 1.55 times the sell side's.
5. Compute customers and the government. Small and mostly negative: a supplier tied more closely to a competitor in AI models; a cleared contractor with a China-exposed parent.
6. SpaceX's public holders. They give $276B on our values and 15% of their stake on the sell side's targets, and they pay any premium: $125B at 30%. A holder who believes our SpaceX bull case gives 25%. Two readings: a holder who trusts our values or the sell side's sees a sale at too low a price; a holder who credits the sell side's Tesla target and takes SpaceX at its price gains 5% at the market ratio. The terms that tell them apart: the ratio against 1.62, and a disinterested-majority condition on SpaceX's side. What they get is Tesla's cash for about a quarter, lower volatility (which float holders could buy by owning both, but the roughly 3.0 billion locked-up shares outside Musk's cannot), and, if the award's terms stand, a share of the forfeited claim, about $5.4B at a market-ratio deal.

What would re-rank the list: a ratio below about 1.62 moves SpaceX's holders off the bottom on the sell side's numbers, and below 0.76 on ours; a replacement of the Tesla award in the combined company moves Musk's economics back to neutral at market; Tesla as the acquirer with one class of stock removes most of his control gain; a disinterested-majority vote or a two-thirds requirement gives Tesla's public holders the deciding vote; and a confirmed $40 billion chip financing would supply about as much as Tesla's net cash, weakening the funding argument for SpaceX's holders.

Everything in this section is conditional on a deal, and it is measured on market prices, because a deal's exchange ratio is set off market prices and that is what a holder who sells actually receives. Our values matter here only in the no-deal branch and for holders who keep the SpaceX shares afterward. Our probability of a completed combination by the end of 2027 is about 30%; Kalshi prices a definitive agreement before 1 May 2027 at 59%, and an agreement is not a closing. What follows are payoffs, not recommendations.

The working terms. SpaceX acquires Tesla in stock and Tesla's holders receive Class A shares, at a 30% premium to Tesla's price. Thirty percent sits inside the ranges reported for the banks that have published one (JPMorgan 30–35%, RBC 20–30%) and below the 36% at which the first tranche of Musk's award is earned in a change in control; the table also shows no premium, 15% and 36%. These are working assumptions, not a forecast of terms, and they are not the only terms possible: the controlling holder on the paying side loses at any positive premium (§7), and at the market ratio, which SpaceX's holders' own case calls the honest one, no holder earns a premium and SpaceX's holders pay nothing. Tesla closed at $373.71 on 20 October, before SpaceX's results call, and at $372.22 on 23 October; two closes cannot show how much deal expectation a price carries, so the premium is measured from the 23 October close. SolarCity took 109 days from agreement to vote.

The table is on the net basis: SpaceX's price absorbs the premium its holders pay, so the combined company is worth the two market values together, spread over more shares. If SpaceX's price did not move at all, the gain at 30% would be $111.67 a share instead of $57.08; that is the upper bound, not the central case. (We apply the award's $505.98 line to the deal price at SpaceX's pre-deal close; the award does not say when the SpaceX shares are valued, and on the net value the first tranche would need a premium of about 85%.)

A Tesla holder who wants out. Selling now gets $372.22. Waiting for a deal adds about $57.08 a share, 15%, at the working terms if it closes; $162B across Tesla's holders other than Musk, paid by SpaceX's holders. Weighted by our 30% completion probability, the deal's contribution is about $17.12 a share, 4.6%, before any other move in either stock; if completion were as likely as the market prices an agreement, about $33.68, 9%. Waiting has a cost: Tesla's shares have moved about 50% a year over the last three months (39% excluding the day after July's results), about $185 a share for one standard deviation over a year. The deal's expected contribution is about a tenth of one year's ordinary price risk. After an announcement the deal value floats with SpaceX's price, so a holder who wants the premium without SpaceX's risk can sell Tesla once terms are public, at whatever discount the market then demands for the chance the deal fails; a holder who waits for the close carries SpaceX's price and the shares that become free to trade, including Musk's (up to 6.4 billion, per the prospectus), whose lock-up ends in June 2027.

A buyer who wants SpaceX and buys Tesla to get it. If the deal closes at the working terms, each Tesla share bought today becomes SpaceX stock at an effective $113.45 a share, against SpaceX at about $130.85 once the premium is absorbed: a discount of 13% (23% against today's $147.49). Weighted by our probability, the deal's contribution is about 4.6% of the price paid, before any other move (9% at the market's agreement probability). In the other 70% of outcomes the buyer owns Tesla, not SpaceX, and over the last three months the two stocks' relative volatility, how much one moves against the other, has been about 73% a year (65% excluding the day after Tesla's July results). The route is a discount on SpaceX with a large chance of holding the other stock.

A SpaceX holder. At the working terms each SpaceX share pays about $16.64 of the premium, 11% of its price. On market prices nothing offsets that, because Tesla's $35.9B of net cash is already in Tesla's price; what changes is the risk: that cash sits under SpaceX's build, volatility is lower (which the roughly 3.0 billion locked-up shares outside Musk's cannot buy on their own after 26 October), and, if the award's terms stand, a share of Musk's forfeited claim (§4) is added. A holder who credits the sell side's Tesla target gains at the market ratio (§2), though not at the working premium.

Other positions that pay on a deal. Each pays only if a deal happens, and each carries a risk of its own.

• A relative-value pair, long Tesla and short 2.52 SpaceX shares for each Tesla share: it gains about 27% of the Tesla side at the working terms, because it collects the premium on one leg and SpaceX's absorption of it on the other, and it hedges the market move the two stocks share. Otherwise it carries their 73% relative volatility, before the cost of borrowing SpaceX shares. Weighted by our probability, about 8%, roughly a ninth of one year's relative risk.
• Merger arbitrage after an announcement (long Tesla, short SpaceX at the agreed ratio, earning the gap between the deal value and Tesla's price until closing): its risk is a broken deal, and the named frictions are the vote, the Texas two-thirds question and the clearance review.
• Agreement contracts on Polymarket and Kalshi pay on an announcement; Kalshi prices a definitive agreement before May 2027 at 59%–60%, and Polymarket's nearest contract, an announcement by 30 June 2027, at 59.5%; both sit above our probability of about 45% for the longer window of twelve months.
• SpaceX's bonds ($25 billion of notes at an effective 6.07%) could gain a cushion of Tesla's $35.9B of net cash and its operating cash flow; the pair's 2027 base-case burn limits how much.
• Options on Tesla would also carry the announcement jump; we have not priced them.

Short positions in Tesla also lose on a deal at any positive premium.

Each item is armed in our register with its basis and what it changes. None is a committee statement, a leak or a prediction-market move.

1. A definitive agreement or a merger proxy. Basis: an 8-K under item 1.01 from either company, a preliminary or definitive merger proxy, or a registration statement for the shares. On filing, this note's ratio, transfer and control arithmetic is re-run on the agreed terms and a standalone note follows. Prediction markets price an announcement by 31 December 2027 at 65.5% (Polymarket) and a definitive agreement before 1 May 2027 at 59% (Kalshi), against 66% and 66% respectively on 20 October; our probabilities stay at about 45% for a definitive agreement within twelve months and 30% for completion by the end of 2027.
2. The vote condition. Basis: the agreement or proxy. A condition requiring a majority of disinterested shares, or a two-thirds vote under the Texas business-combination statute, moves the decision to Tesla's public holders. A petition to the business court on committee independence would be disclosed by 8-K.
3. The Tesla award. Basis: any amendment, replacement or board determination on the 2025 award in connection with a combination, or the merger proxy's description of its treatment. As written, it forfeits in a change in control below $505.98.
4. The premium and the direction. Basis: the agreed ratio. A 30% premium moves $226B; SpaceX as the acquirer preserves the ten-vote class.
5. Tesla's annual meeting, 3 December. Basis: Tesla's filings to the meeting. A supplement adding a combination item would be the first filing with terms; a meeting held on the three-item ballot records no agreement by early December.
6. The chip financing. Basis: a SpaceX 8-K under items 1.01 or 2.03, or its annual report. Confirmed at $30 billion or more, it covers most of what Tesla's cash would contribute.
7. The ratio itself. Basis: daily closes. A market ratio below 1.62 would put SpaceX's holders ahead on the sell side's numbers without any deal term changing.