Tesla Stock at $344? The SpaceX Merger Math Just Broke (TSLA)

Tesla stock fell 11%: $344 vs the $500 merger math

0:00 Tesla stock, ticker symbol TSLA, fell almost 11% on Thursday to close around $344. On the same day the Nasdaq fell about 5.5% and the whole stock market had its worst day since April 2025. And that's more than $150 below the roughly $500 that JP Morgan's merger math said a SpaceX deal could pay. So, if you're bullish, the stock is now below where it was before JP Morgan's merger math even came out. And the last time I checked, a prediction market still thought an announcement was more likely than not.

0:29 But if you're skeptical, stick around because I ran the math on what this price is really saying and at around $344 it spits out a number that shouldn't even be possible. And then I'll show you why I think a lot of Thursday's drop probably wasn't about the merger at all. Buying Tesla right now is like buying a used car with a raffle ticket stapled to the windshield.

Tesla is a used car with a raffle ticket

0:48 My name is Blake. I dig up stocks before the bull stampede so you're not buying at the top like Wojak. And today on 9-to-5 Investing, we're talking about Tesla stock and what that metaphorical raffle ticket is worth after the worst day in the stock market since April 2025. You get the car no matter what, but if the ticket hits, you win a big premium. So, the only question is how much of your price is paying for the car and how much is paying for the ticket.

1:15 So, first, let's remember where this came from.

Where the SpaceX merger talk came from

1:17 On October 20th, on SpaceX's earnings call, Elon Musk said both companies had set up special committees of independent directors to look at a merger. He said it felt like, quote, "Tap dancing through a minefield." said he thought it would be a good idea and he said the committees hadn't agreed on any terms. The next day, JP Morgan sketched out what a deal might look like with SpaceX buying Tesla and paying in SpaceX shares instead of cash. It said a typical premium was 30 to 35% above the market price.

1:42 So, starting from Tesla's October 20th close of about $374, you land at about $486 on low end and at about $505 on the high end. That's where the $500 headline comes from, but nobody has actually offered Tesla holders anything and that hasn't changed. So, imagine Chad bought in at around $407 after all the merger chatter because he figured the free money was about to show up.

Election night and the Tesla-SpaceX slide

2:04 Then came election night. Tesla and SpaceX started sliding after the close on Tuesday as the results came in. And on Wednesday, Tesla opened down almost 5%. Fell nearly 6% at the low and finished down a little over 3%. That was only day one. On Thursday, Tesla fell almost another 11% to close around $344 a share. So, that's almost 14% gone since election day. And SpaceX fell almost 6% at one point on Wednesday before closing at $136 a share, down almost 4%.

2:32 And then on Thursday, it fell about another 9% to around $124 a share, which is well under its $135 IPO price. So, the currency you probably get paid in was moving, too. That matters more than it sounds like because in an all-stock deal, your payment is SpaceX stock. So, the $500 you were counting on is priced in the same currency that just got marked down. Gary Black at the Future Fund pointed to the Marvel and Lumenzum deal as warning because a 24% premium can go negative when the buyer's stock gets sold off, and that's the whole risk here.

3:00 But here's the interesting part.

Why the midterms hit a merger

3:02 Why would an election hit a merger when the companies haven't even agreed on terms yet? Well, the first reason is that Democrats won control of both chambers and Musk put hundreds of millions of dollars behind the other side. That makes him and his companies a natural target for hearings. Senator Ed Markey, replying to a post on X about big tech executives, wrote, quote, "They are going to need to plant new forests for all of the subpoenas we'll be printing."

3:24 That wasn't about Tesla specifically, but you can see why traders got nervous. The second reason is Texas. Democrat Gina Hinojosa won the governor's race, and she's called for a moratorium on data centers until the legislature meets. And Dan Ives at Yorkville said, quote, "SpaceX and Musk are clearly caught front and center in the spiderweb." Because SpaceX is based in Texas and its AI business needs data centers, Texas rules matter. Governor Abbott had already paused approvals while audits get done.

3:49 And what Hinojosa promised on top of that is still just a promise. So, nobody knows which projects they would actually touch. And then on Thursday, that fear spread to the whole market.

Thursday: the whole market sold off

3:59 The Nasdaq fell about 5.5%. The S&P 500 fell about 4.4% and a big index of chip stocks fell about 12% with Nvidia down about 9% and Broadcom down about 10%. Goldman Sachs analyst wrote that democratic wins, quote, are likely to lead to short-term data center moratoria, potentially affecting about 45% of planned US data center capacity expansion. Now, the election results will clearly have an impact on the AI investment cycle with a more difficult regulatory and permitting environment on So, was Thursday about a merger or was it about the market?

Was it the merger or the market?

4:30 Well, here's the part that I think a lot of people are going to miss. Tesla fell almost 11% and SpaceX fell about 9% on a day when the Nasdaq fell about 5.5%. So, a big chunk of that drop was probably just investors selling anything tied to AI and not a brand new verdict on the merger. Keith Lerner at Truist said, quote, we are now seeing something of a buyer strike in tech. New risk premium being baked in and that is the AI sell-off. Now, to be fair, some people do think it's about the deal.

4:58 Dan Ives said the merger, quote, now faces a much tougher regulatory roadmap and Mark Tepper of Strategic Wealth Partners said on X, quote, I don't see the SpaceX merger happening. But, from what I can tell, there wasn't one clean Tesla headline that explains an 11% drop by itself. So, I'd be careful of anyone who says there was. And the third reason is timing. Bloomberg reported people are pushing to announce a deal by the first half of 2027. So, it could close while Trump is still in office.

5:22 So, the clock just got louder.

Can Congress stop a Tesla-SpaceX merger?

5:25 But, here's the question that matters most for this deal. Can Congress actually stop it? From what I can tell, no, not by itself. Congress doesn't get a yes or no vote on a merger like this, but it can investigate, change funding, and pass new laws. So, having political power and approving the deal aren't the same thing. They can hold hearings, send letters, and make everyone's lawyers very wealthy. That's a delay and a headache and it isn't a veto.

5:46 But, the companies still have to get through whatever rules apply to the final deal, like antitrust filings and waiting periods. And depending on how it's set up, licenses, foreign reviews, and government contracts can add more conditions. And none of that has been clear yet. Now, to be fair, not everyone agrees because there are reports of a former Justice Department official warning about Starlink access, but so far that's a warning and not a case.

6:07 So, if Washington isn't the wall for this merger, where is it?

China, Shanghai and the overseas hurdles

6:11 Well, even without a vote in Congress, there are real hurdles, and the first one is overseas. Tesla has a giant factory in Shanghai. JP Morgan's October 21st report put China at about 20% of Tesla's revenue. SpaceX, meanwhile, does Pentagon work, and that same report says Starlink has never been approved to operate in China. So, you'd be combining a US defense contractor with a car company that depends on China. Alicia Garcia Herrero at Bruegel told Reuters, "A formal merger would make it harder for Chinese authorities to treat Tesla as a purely commercial actor."

6:38 JP Morgan's memo even floated moving Tesla China to a group of Chinese companies as a fix, and that's not a small footnote. That's like selling the engine to close on the car. And there's a risk that could stick around even after a deal closes. Derek Scissors at the American Enterprise Institute told Reuters, "Quote, this may be the biggest risk to a deal, that it could get unwound in 2029." So, a future administration could take another look at a finished deal.

7:01 It would need legal grounds, and it wouldn't undo anything automatically, but that risk can outlast the political window, and that's the part of the midterm story I'd actually take seriously.

The shareholder vote: 2 billion yes votes

7:11 The next gate is the shareholders, but they are not the only ones that have to say yes. On the SpaceX side, it's filing names, its committee, its board, and its controlling shareholder, and its charter generally needs a majority of the voting power plus a separate class B vote. Those class B shares get 10 votes each, so regular public shareholders don't automatically get a veto of their own. On the Tesla side, the special committee has to recommend it, and Texas law says the has to approve a merger plan, too, and must satisfy himself that it takes, quote, a 50% vote of all shares, not just those who vote, but of all shareholders, calling it quite a, quote, high hurdle to try to achieve.

7:41 Under Tesla's charter, that usually means more than 50% of all the shares that can vote, not just the ballots that come back. So, using October's share count, that's roughly 2 billion yes votes. The final merger documents will set the exact rules. Bloomberg's envelope is still on the kitchen counter, so that's one yes vote that isn't coming.

The raffle ticket math at $344

7:59 So, now, let's do the math that I promised you. And yes, in my recent SpaceX video, I did mention that I would not do the math on a merger that does not exist, and that is still the case. There are no terms to price here yet. This is different. I'm working backwards from Tesla's price to see what it is betting on. And this is the part that really surprised me. Go back to the used car and the raffle ticket. And this is toy math, so stick with me. Say the car is worth about $374, which is where Tesla closed on the day of that SpaceX call.

8:26 Even though the stock price doesn't prove what the car is really worth. And say a finished deal gets you shares worth about $495, the middle of JP Morgan's range. So, the price is about $121 on top of the car. So, if you bought Tesla at around $385 on Wednesday, you were paying about $11 for the raffle ticket. Now, if an $11 ticket pays $121, this toy math says the odds were under 10%. That's not something that you can actually see in the stock. It's just what these assumptions spit out.

8:52 But now look at Thursday's close of around $344 a share, because that's more than $25 below the car. So, the ticket costs less than nothing. And this model says the odds are below 0%, which isn't even a real thing. And here's why that's strange.

Polymarket says 55%. The stock says less than zero

9:06 Polymarket, which is a prediction market, had the odds of an official announcement by June 30th, 2027 at 56.5% after the close on November 4th. And last time I checked on Thursday, it was still around 55%. So, on the worst market day in a year and a half, that bet barely moved. And that's a different bet. Now, that's not a clean disagreement because the stock in that bet pay for different things. So, let's break my math because that is the honest thing to do.

9:29 If you plug that 55% into the toy model anyway, you get about $440 a share, which is almost $100 above where the stock closed on Thursday. That's an illustration, not a price target. Now, remember Chad at $407. At that price, he paid about $34 for the same ticket, which works out to about 28% in this model. By Thursday's close, that whole ticket was gone, and he was down more than $60 a share. But that doesn't prove the merger odds went to zero. But here's what's wrong with my math.

What's wrong with my math

9:54 And I'm going to be straight with you about it. The car isn't really worth a fixed $374. Tesla's operating income last quarter fell to about 718 million. And on Tuesday, we got data showing China-made Tesla sales in October fell about 29% from September, even though they were up about 10% from a year ago, so a raffle ticket that cost less than nothing probably just means a car that's getting cheaper. And on Thursday the whole market was getting cheaper with it.

10:15 If the car is really worth $344, the map changes completely because at price the ticket is worth about zero and you're just paying for the car. And it could cut the other way too because the stock was already up a lot from its late July low by October. So some merger hope may have been in that $374 from the start. The second problem is that the 56.5% is the odds of announcement perceived by the public. It's not the odds of a closed deal and it's definitely not the odds of a deal at JP Morgan's premium because even the size of a premium is up for debate.

10:44 Ross Gerber told Reuters that a premium would dilute SpaceX holders and Michael Morgan of Founder ETFs doesn't expect a big one since so many investors own both stocks. If you own both a premium helps your Tesla shares but dilute your SpaceX shares. So how it nets out depends on how much of each you own. It's probably just moving money from one pocket to the other. So with no premium the raffle price basically disappears but the combined company could still go up or down.

11:07 Today's price doesn't tell us which way investors are betting. And the third problem is who ends up in charge. Reuters reported on November 3rd that Barclays modeled Musk with about 56% of the voting power and about 37% of the ownership is SpaceX bought Tesla at their current sizes. And those are scenario numbers not agreed terms obviously. So you go from a company where shareholders can still band together and block a merger to one where Musk controls the ordinary votes although you'd still have voting and legal rights.

11:32 So here's how I read it.

How I read it

11:34 The price can't tell us which version of this merger investors expect especially on a day when the whole market is on fire. And that's the limit of my raffle math. And if you like Tesla on its own, you still need to value that business by itself because an 11% drop doesn't make a stock cheap. And even at around $344 it's still more than 370 times its last 12 months of earnings. But for anyone like Chad who bought mainly for the takeover premium, that bet still needs acceptable terms.

12:05 Every approval along the way and SpaceX shares that hold their value. And Thursday's showed how fast those can drop so there's no free money here. And by the way, Tesla shareholder meeting is coming up in December and a merger isn't on that ballot. So, even a fast version of this is a long road. For the record, I do own shares of Tesla, so keep that in mind.

What I'd watch: the terms and the proxy

12:21 A merger rumor isn't a substitute for valuing the business, but if I were watching it, I'd check two things. Number one is the terms. If an all-stock deal is announced, the number that matters is the exchange ratio, which is just how many SpaceX shares you can get for each Tesla share, along with what those shares are worth and what voting rights come with them. Number two is the proxy. If a deal ever reaches a vote and you own the stock, open that envelope and actually vote, yes or no, because not voting doesn't count towards the yes votes that this deal needs.

12:48 And the bigger lesson works on any stock. When a price has a rumor baked in, figure out how much you're paying for the rumor, because that's the part that can go to zero. So, if a deal shows up without any premium at all, would you vote yes? Tell me in the comments. I always love hearing what y'all have to say. Boomer still has not opened that envelope, but YouTube picked this one for you and it needs no shareholder approval.