Aug 20, 2018

The SpaceX factor in Elon Musk's Tesla takeover plan

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Last week the New York Times suggested that SpaceX may help Elon Musk finance his attempted buyout of Tesla.

Bottom line: It's possible, but SpaceX shareholders would throw a fit if it's done directly.

Here is what the NYT wrote, within a piece that was broadly noted for Musk's apparent mental fatigue.

Another possibility under consideration is that SpaceX, Mr. Musk’s rocket company, would help bankroll the Tesla privatization and would take an ownership stake in the carmaker, according to people familiar with the matter.

I've spoken to several SpaceX shareholders, and have heard the following:

  • Most of them believe Musk could pledge some or all of his stake in SpaceX, which was last valued in mid-2017 at $21 billion. He's believed to hold a very large stake in SpaceX — possibly around half — and has a history of betting big on himself. And, as Tesla stock continues to sink, Musk may be able to get a much lower price than his proposed $420 per share.
  • They do not want SpaceX to directly finance the Tesla buyout, at least in any meaningful way. These folks believe they have shares in the Musk company with profits and a deep management bench, and see no reason to marry it with the opposite. Particularly given all the conflicts of interest and possible regulatory headaches.
  • Yes, SpaceX is profitable, but EBIT is quite narrow and could blow up if a rocket or two does. One shareholder estimates that the company will do over $2 billion in 2018 revenue (based on expected launches), and that it has around $1 billion of cash on hand. SpaceX also has plenty of access to new capital, both equity and debt.

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