At first glance, it may seem as if building an affordable, long-range electric automobile and putting a man on Mars have very little to do with one another. However, Morgan Stanley analyst Adam Jonas says that electric vehicle and battery storage company Tesla Inc (Nasdaq: TSLA) and commercial spaceflight company SpaceX may end up sharing more than a common CEO.
According to Jonas, there are a number of reasons why a potential Tesla-SpaceX merger – both companies are led by Elon Musk – may make sense. The primary reason for a marriage between the two may simply be out of necessity if Tesla continues to struggle with its finances. Jonas says the competition will only get tougher for Tesla in coming years.
“We have argued for some time that Tesla’s addressable market of sustainable transport will attract fierce competition from some of the world’s best capitalized tech firms with arguably superior access to capital, talent and business models that can monetize vehicle data and content opportunities, threatening the long-term independence of Tesla as a standalone entity,” he says.
In addition, Jonas says Musk will likely devote more of his time to SpaceX in the future given that it seems to be his most passionate project. Jonas says Tesla may have more “key man risk” than any other company Morgan Stanley covers. In other words, if Musk steps down as Tesla CEO to focus on SpaceX, it could be disastrous for Tesla and its investors.
In November, Kynikos Associates founder and Tesla short seller Jim Chanos said he expects Musk to resign Tesla’s CEO by 2020.
“Obviously this is not being valued as a car company, it’s being valued on Musk … he’s the reason people own the stock,” Chanos said.
Jonas says SpaceX’s financial situation may be better than Tesla’s, and SpaceX has a much wider long-term competitive moat than Tesla does.
Jonas also sees the potential for overlapping technologies in material science, manufacturing and artificial intelligence. Finally, Musk and his companies have a history of joining forces in times of financial need. When SolarCity was struggling as an independent company, Tesla snatched it up and assumed its massive debt burden.
For now, Jonas says…
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