JPMorgan calls the possibility of a SpaceX-Tesla merger 'strategically coherent'
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SpaceX recently listed its shares in the public market , fueling rumors that it could potentially s merge with Tesla . While that union is far from certain, it would be a "strategically coherent" move for the pair of Elon Musk -owned businesses, according to JPMorgan. "We see the possibility of a SpaceX-Tesla combination as strategically coherent on paper, allowing CEO Musk to unify vision, mission, and engineering leadership across both platforms," analyst Rajat Gupta said Tuesday in a note to clients. JPMorgan has an overweight rating on SpaceX with a $225 price target, which is 51% above the stock's closing price on Tuesday. JPMorgan was a bookrunner for SpaceX's IPO. The bank also has a neutral rating on Tesla. Its $475 price target suggests 32% upside from Tuesday's close. JPMorgan's assessment of a Tesla-SpaceX tie-up comes amid intense speculation over the possibility of the merger. In late May, CNBC reported that Musk had already discussed joining the firms , per several people familiar with the matter. A few weeks later, SpaceX COO Gwynne Shotwell told CNBC's Morgan Brennan that a merger of the two companies "might make Elon's life a little easier," sparking even more chatter about the potential union. A SpaceX-Tesla merger is feasible, given "operational integration between the two entities is already deep," according to JPMorgan. The companies could vertically integrate across artificial intelligence, robotics, energy, transportation and space offerings, with their shared AI ambition serving as the "strategic glue," Gupta wrote. "We highlight two potentially enabling catalysts in particular," the analyst said in his note. "First, SPCX's record $1.77T IPO (priced at $135/share, ~$85B raised) furnishes a high-value acquisition currency. Second, Musk's move to lift his TSLA voting stake to ~20% (via exercise of his 2018 award) meaningfully increases his control." To be sure, there are also several "practical bottlenecks," including a series of regulatory hurdles, that could stymie the combining of the companies, according to JP Morgan. "Press reports understate the practical bottleneck of securing multi-jurisdictional regulatory approvals, especially in markets where TSLA has meaningful manufacturing exposure," Gupta wrote. "Other hurdles include governance/voting symmetry given Musk controls ~85% of SPCX voting power but only 20% of TSLA's, as well as the perception that a combination would be a SPCX-led acquisition rather than a merger of equals." Shares of SpaceX have risen 10% since the company's June 12 debut. During the same period, Tesla has gained more than 3%.