SpaceX Weighs Tesla Merger Ahead of Planned $1.5 Trillion IPO

February 3, 2026

By: Wiss Team

Wiss Team

SpaceX is exploring potential mergers with Tesla or xAI ahead of a planned mid-June 2026 initial public offering that could value the space company at approximately $1.5 trillion, according to reports from Bloomberg and Reuters. The IPO could raise up to $50 billion and surpass Saudi Aramco’s 2019 listing as the largest in history.

The discussions remain preliminary with no final decisions made, according to 24/7 Wall Street analysis. Options under consideration include exchanging xAI shares for SpaceX stock or combining operations with Tesla. Betting markets on Polymarket assign a 48% probability to a SpaceX-xAI merger by mid-year and just 15% likelihood to a Tesla-SpaceX combination.

The Consolidation Logic

The merger considerations stem from efforts to integrate Elon Musk’s technology empire more closely. Bloomberg reports SpaceX has discussed the feasibility of combining with Tesla at the urging of some investors, while separately exploring xAI integration. Two Nevada entities with “merger sub” designations were formed on January 21, 2026, listing SpaceX CFO Bret Johnsen as an officer.

The xAI merger discussions aim to bring Musk’s rockets, Starlink satellites, X platform, and Grok chatbot under unified ownership. This aligns with existing investment interconnections: SpaceX and Tesla together invested $2 billion into xAI, covering over half its spending in the first nine months of 2025.

Morningstar analysis suggests the talks signal Musk may consolidate his companies into a single conglomerate, given his major stakes in all three entities. According to TLDR reports, investors view a merger as potentially attracting interest from infrastructure funds and Middle Eastern sovereign wealth funds, though such combinations would likely require substantial financing.

The strategic rationale centers on streamlining operations across Musk’s portfolio, particularly as SpaceX pursues orbital data centers for artificial intelligence applications.

Potential Synergies

A Tesla-SpaceX combination could yield operational and technological advantages. Tesla’s energy storage expertise, including its Powerwall systems, could support SpaceX’s plans for a solar-powered orbital data center. Musk has discussed using Starship rockets to transport Tesla’s Optimus robots to the Moon and Mars, according to The Guardian.

Cross-pollination opportunities include Optimus robots assembling Starship vehicles or enabling Mars habitat construction, while Starlink satellite connectivity could enhance Tesla’s Robotaxi network and Full Self-Driving system updates. SpaceX revenue is projected at $22 billion to $24 billion in 2026, which could complement Tesla’s growth trajectory.

Financially, a merger might enhance fundraising capacity by drawing substantial investor interest and easing capital access for ambitious projects. Some analysts argue that a pre-IPO merger would resolve governance conflicts while providing Tesla shareholders with exposure to SpaceX without requiring a separate investment. The combination could also accelerate AI-driven growth by pooling resources while increasing Musk’s control in a unified entity.

The IPO Question

If a merger occurs, the rationale for a standalone SpaceX IPO becomes unclear. Bloomberg notes any combination could call into question the June IPO timeline. Reuters confirms the IPO aims to fund expansions, including Starship development and Starlink deployment, but a Tesla merger might achieve liquidity through stock issuance without a separate listing.

A reverse merger with Tesla could indirectly make SpaceX public, though it would dilute Tesla shareholders by issuing new shares to SpaceX stakeholders. Conversely, an independent IPO provides SpaceX with direct capital to pursue its objectives, including AI data centers, while freeing Tesla from funding Musk’s ventures and potentially enabling stock buybacks.

Without a merger, the IPO rewards SpaceX investors with liquidity while keeping the entity operationally focused and avoiding integration challenges.

Substantial Risk Factors

A SpaceX-Tesla combination faces significant obstacles. Antitrust scrutiny represents a primary concern—a combined $2.6 trillion entity dominating electric vehicles, energy storage, space launch services, and telecommunications would invite Federal Trade Commission and Department of Justice review.

Musk could see his control diluted if shareholders demand input on the direction and resource allocation of the AI project. Tesla shareholders would face substantial dilution despite the potential for merger-driven stock appreciation, which would likely cause significant volatility.

Operational challenges compound financial risks. While Tesla is already transitioning from a focus on luxury electric vehicles toward robotics, a merger could divert resources from that strategic priority. The combination might distract management attention amid Tesla’s recent earnings challenges and ongoing business model evolution.

National security implications arise from SpaceX’s extensive government contracts, particularly with the Department of Defense and intelligence agencies. Regulators could scrutinize whether combining SpaceX with publicly traded entities creates security vulnerabilities or conflicts of interest.

Valuation Considerations

A combined Tesla-SpaceX entity would have a market capitalization of approximately $2.6 trillion, making it the world’s largest publicly traded company by a substantial margin. However, achieving that valuation requires investors to accept Tesla’s current premium multiples while also valuing SpaceX at $1.5 trillion—an assumption that may not withstand scrutiny if the combined entity’s profitability doesn’t justify the price.

Tesla currently trades at roughly 400 times earnings according to key data points, representing a substantial premium to traditional automotive or aerospace companies. Extending that multiple to SpaceX operations requires conviction that space launch and satellite businesses warrant similar valuation frameworks—a debatable proposition.

The dilution mathematics also creates challenges. If Tesla issues new shares to acquire SpaceX, existing Tesla shareholders would see their ownership stakes reduced proportionally to the deal structure. Whether SpaceX’s growth prospects justify that dilution depends on assumptions about Starship commercialization, Starlink subscriber growth, and the viability of orbital data centers—all of which remain unproven at scale.

Market Probability Assessment

Betting markets assign just 15% probability to a Tesla-SpaceX merger by mid-year, suggesting informed observers view the combination as unlikely despite discussion reports. The 48% probability assigned to the SpaceX-xAI merger reflects potentially simpler integration given xAI’s private status and smaller scale relative to Tesla’s public market capitalization.

The preliminary nature of the discussions, combined with substantial execution risks, supports skepticism about near-term merger completion. Regulatory approval processes alone could extend beyond mid-2026 even if parties reached an agreement, potentially conflicting with planned IPO timing.

Investment Implications

According to a 24/7 Wall Street analysis, if a merger proceeds, Tesla stock would likely represent a short-term buying opportunity amid hype-driven rallies. However, longer-term positioning should be more cautious, given the potential for dilution, regulatory risks, and management distraction.

For SpaceX, an independent IPO provides a clearer investment thesis than a merged entity where valuation depends on assumptions about multiple business lines with distinct risk profiles. Investors seeking SpaceX exposure might prefer the transparency of standalone financial reporting over parsing combined-entity results.

The discussions underscore Musk’s preference for vertical integration and cross-company synergies. Whether that strategic approach creates or destroys shareholder value depends primarily on execution capability and whether operational benefits exceed integration costs and regulatory friction.

Advisory for Complex Corporate Combinations

Whether evaluating potential combinations, conducting due diligence, or planning integration strategies, our team provides strategic advisory for complex transactions.

Contact Wiss Advisory to discuss merger evaluation and transaction structuring.

Source: 24/7 Wall Street – “Will Elon Musk Really Merge SpaceX with Tesla Before Its IPO?” by Rich Duprey, January 30, 2026

Editorial Note: This article provides general information about potential corporate merger activity and does not constitute investment advice or recommendations regarding specific securities. The article discusses preliminary merger discussions that may not result in completed transactions. Investors should consult qualified financial advisors regarding investment decisions. Wiss & Company LLP provides accounting, tax, and advisory services to companies evaluating merger and acquisition opportunities.