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The idea of combining Elon Musk’s two most valuable companies has gone from Reddit fantasy to something analysts are pricing into their models. And the closer it gets to reality, the worse it looks for Tesla shareholders.
BNP Paribas maintains an underperform rating on Tesla with a $280 price target, citing a projected $216 billion cash burn at SpaceX between 2026 and 2031. That’s not a typo. Two hundred and sixteen billion dollars, roughly the GDP of Greece, just flowing out the door at SpaceX over the next five years. And Tesla investors would apparently be footing part of that bill.
The China problem nobody asked for
On July 30, the Wall Street Journal reported that Tesla executives had been directed to prepare for the separation of the company’s China business ahead of a prospective SpaceX merger. China is not a minor market for Tesla. It’s one of the company’s most critical revenue engines globally, and carving it out would fundamentally reshape Tesla’s financial profile.
Elon Musk called the WSJ report “absurdly fake news” on July 31.
The logic behind a potential China spinoff isn’t hard to follow. SpaceX is a defense contractor with sensitive US government relationships, and merging it with a company that has deep manufacturing ties to Beijing would create a national security nightmare. Separating Tesla’s China operations could theoretically clear that regulatory path, but it would also strip Tesla of a business segment that drives a meaningful chunk of its global deliveries and revenue.
Where the $750 billion risk comes from
Analyst Gene Munster raised the probability of a SpaceX-Tesla merger to 90% on July 22, following discussions during Tesla’s Q2 earnings call. That number caught the market’s attention and helped fuel a fresh wave of speculation about how the deal might be structured.
Analysts at RBC and JPMorgan have estimated risks of up to $750 billion in value erosion for Tesla shareholders from a merger.
The concern is straightforward: SpaceX burns cash at an extraordinary rate because it’s building rockets, deploying satellite constellations, and pursuing contracts that require enormous capital expenditure. Tesla, by contrast, has reached a level of manufacturing maturity where it generates meaningful free cash flow. Merging the two would effectively redirect Tesla’s cash generation capacity toward funding SpaceX’s capital-intensive ambitions.
BNP Paribas has been particularly blunt, arguing that the risks outweigh the rewards and rejecting the notion that a merger would yield immediate or future value increases for shareholders. The French bank’s analysts see the deal as a mechanism for subsidizing SpaceX’s expansion rather than creating synergies that benefit the combined entity’s equity holders.
Both companies have operational overlaps in AI and advanced manufacturing. But when one side of a merger is projected to consume $216 billion in cash over five years, the synergy argument has to work very hard to offset that.
What this means for investors
In any merger scenario, existing Tesla shareholders would see their ownership stake diluted as new shares are issued to acquire or merge with SpaceX. Given SpaceX’s most recent private market valuations, that dilution could be substantial.
A merger involving a major defense contractor and a company with significant Chinese operations would face scrutiny from multiple US government agencies, potentially including CFIUS, the SEC, and the Department of Defense. Even if the China business were spun off, the approval process could be lengthy and uncertain.
If Tesla begins making formal structural changes to its China operations, that would be a far more reliable signal than any social media denial. And if BNP Paribas and JPMorgan are right about the downside risk, the cost of being wrong about this merger could be measured in the hundreds of billions.
Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.
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