Tesla has reignited speculation about a merger with SpaceX after showing off a Roadster sports car that hovered over five cars lined up side by side. Yet Tesla shares fell instead of rising, exposing a split between enthusiasm for the technology and doubts about whether it can be commercialized.
Speculation about a Tesla-SpaceX merger has resurfaced in the market following the unveiling of the new Roadster, according to U.S. business outlets including MarketWatch and Business Insider on the 17th.
Tesla staged the hovering demonstration on the 15th at a SpaceX test site in McGregor, Texas, with Chief Executive Elon Musk among those in attendance. Fitted with SpaceX rocket technology, the Roadster lifted into the air and cleared five cars parked in a row.
The demonstration drew attention because it combined Tesla's electric-vehicle technology with SpaceX's rocket systems. Market watchers suggested the technical cooperation between the two companies could eventually lead to a corporate merger.
Garrett Nelson, an analyst at research firm CFRA, wrote in a note to clients that the demonstration had changed the mood in the market. He said the event spread the perception that "Musk magic" had returned after a string of disappointing events, marking a turning point in market sentiment.
Nelson also said he saw few major obstacles to the creation of a combined "Elon Inc." through a Tesla-SpaceX merger. He put the probability of a merger by the end of next year at 90% and raised his price target on Tesla to $475 from $385.
Bill Birmingham, head of market research at Rex Financial, said Musk is tying together the future of transportation by merging automotive and rocket technology. The demonstration, he said, highlighted for investors the technical efficiencies a merger of the two companies could deliver.
Gene Munster, a partner at venture capital firm Deepwater, said on X, formerly Twitter, that the Roadster unveiling was the latest illustration of why Musk wants to combine the two businesses.
Major investment banks including Barclays had previously raised the possibility that the two companies could announce merger plans either before Tesla's annual shareholder meeting in December or sometime next year.
Gwynne Shotwell, SpaceX president and chief operating officer, said in a media interview in June that there was no doubt about the synergy between the two companies, adding that a merger would make Musk's life somewhat easier.
Musk said at the Roadster demonstration that Tesla and SpaceX engineers had worked closely together to build something better than a James Bond car.
Still, those comments and market expectations do not amount to an announcement of a merger. Neither company has formally confirmed a deal or set out a timeline.
Separately from the merger speculation, some observers are skeptical that the Roadster's hovering technology can be turned into a product that can actually be sold. Several experts said the demonstration looked more like a display of engineering prowess aimed at drawing investor attention than a substantive business achievement.
Even Munster, who focused on the merger prospects, said the hovering demonstration had "zero commercial value other than making traditional automakers feel bad."
The Verge, a technology news outlet, said a rocket-equipped Roadster carrying a 600-liter high-pressure compressed-air tank and thruster nozzles would struggle to win approval for use on public roads. Its value as a practical product, the outlet said, is effectively nil.
The stock market response bore out that caution. Tesla shares rose as much as 2.2% in morning trading before turning lower in the afternoon, closing at $354.72, down 2.13% from the previous session.