Don’t Buy Stock in That SpaceX-Tesla Merger Just Yet, Says CEO Elon Musk — ‘Absurdly Fake News’

Even before SpaceX (SPCX) launched as a publicly traded company, there have been rumors that CEO Elon Musk would take steps to merge the satellite giant with Tesla (TSLA) to consolidate his tech and manufacturing empire.

In an exclusive report today, The Wall Street Journal writes that “Tesla executives have been told to prepare for a separation of the China business ahead of a potential merger, a person familiar with those talks said.”

However, Musk has already denied the reports on his social media platform:

“This has never even come up in a discussion ever,” wrote Musk in response to the WSJ exclusive. “Absurdly fake news. People should assume news is fake until proven otherwise.”

Why Wall Street Can’t Stop Speculating on a Musk Mega-Merger

According to the WSJ’s sources, Tesla executives had been instructed to prepare for a separation of the company's China business ahead of a potential combination with SpaceX. 

The report described options under consideration including a spinoff, sale, or closure of Tesla's Chinese operations, though no final decision or timetable had been set. 

Along with Musk’s prompt dismissal of the report, Tesla's China division independently denied the claims.

Despite the denials, speculation about a mega-deal persists because the structural logic of a merger is compelling, despite the operational complexity. 

Tesla, valued at approximately $1.22 trillion, and SpaceX, valued at roughly $1.48 trillion following last month’s record $75 billion IPO, share increasing technological overlap in artificial intelligence (AI), manufacturing, and computing infrastructure. 

SpaceX COO Gwynne Shotwell sparked speculation in June by publicly acknowledging that merging the businesses could streamline Musk's management responsibilities. And Elon himself fueled the narrative during Tesla's July 22 earnings call by declining to rule out a combination and noting the growing convergence between the two companies. 

Why Gigafactory Shanghai Is a Key Part of the Merger Math

The China question represents the most significant practical obstacle to any deal. 

Tesla's Gigafactory Shanghai is the company's largest and most productive facility, with annual capacity exceeding 950,000 vehicles and historically accounting for more than half of Tesla's global deliveries. 

China is Tesla's second-largest market, representing approximately 18% of sales in the first half of 2026, and the company sources more than 95% of components locally through a network of over 400 domestic suppliers. 

Separating this operation would remove Tesla's lowest-cost manufacturing base – but could also resolve the fundamental conflict between SpaceX's role as a major U.S. defense contractor handling classified national security programs and Tesla's deep integration into China's industrial ecosystem.

JPMorgan analysts have identified regulatory approvals as the "practical bottleneck" for any combination, noting that Beijing would likely scrutinize a deal intensely given concerns about factory know-how, supply chains, and data from China's roughly 2 million Tesla owners potentially falling under the control of an American defense company. 

Morningstar equity research argues that Tesla shareholders should receive between 50% and 68% of any combined entity based on relative fundamentals, noting that Tesla trades at a meaningful discount to SpaceX despite having larger revenue, profits, and free cash flow.

How Investors Are Positioning on TSLA and SPCX

The market's reaction has been telling. Tesla shares rose early today on reports of progress toward a potential merger as the broader narrative shifted from concerns about weak quarterly earnings to excitement about a potential strategic transformation – then erased gains and fell into the red as the speculation was smacked down.

SpaceX stock, meanwhile, has been under severe pressure since its June IPO, falling more than 50% from its all-time high to close at $112.20 – below its $135 IPO price. Roughly 35% of its public float is shorted and there’s an imminent lockup expiration on Aug. 6 that could release 911.5 million additional shares. 

The tension between Tesla's need to shed geopolitical risk and SpaceX's need for a valuation anchor creates a natural gravitational pull toward an eventual combination that Wall Street finds impossible to ignore, even as the man at the helm of both companies officially denies active negotiations.

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