JPMorgan warns investors underestimate 3 obstacles to Tesla-SpaceX deal

JPMorgan says a Tesla-SpaceX combination faces regulatory, governance, and structural hurdles that investors are underestimating.

JPMorgan Chase & Co. said a potential merger between Tesla Inc. and SpaceX faces regulatory, governance, and structural obstacles that investors are underestimating, pushing back against speculation that has driven Tesla shares up 6.7 percent.

"The combination is strategically coherent on paper, but the speculation around it underestimates the potential obstacles," said Rajat Gupta, analyst at JPMorgan, in a research note Tuesday. Gupta rates Tesla neutral with a $475 price target.

Gupta identified three primary hurdles: multi-jurisdictional regulatory approvals, particularly in China where SpaceX's defense contracts and lack of Starlink approval conflict with Tesla's large manufacturing presence; governance asymmetry, with Elon Musk controlling roughly 85 percent of SpaceX voting power but only about 20 percent of Tesla's; and the perception that any transaction would be a SpaceX-led acquisition of Tesla rather than a merger of equals, given SpaceX's roughly $2.2 trillion market capitalization versus Tesla's approximately $1.5 trillion.

The merger speculation has added a premium to Tesla shares that RBC Capital quantified at 25 percent to 30 percent above current trading levels when it raised its price target to $500 from $475 on Tuesday. If the deal fails to materialize, that premium could unwind. Gupta said the most likely structure would be a SpaceX-led all-stock acquisition, which could best bridge the valuation gap while avoiding a large cash outlay.

The diverging analyst views highlight the uncertainty surrounding what would be one of the largest corporate combinations in history. RBC's Tom Narayan, who lifted his Tesla target to $500, said the premium reflects "a potential SpaceX acquisition scenario based on unconfirmed media reports." His standalone intrinsic value for Tesla, excluding any SpaceX premium, stands at $435 per share. Within that valuation, Narayan raised the robotaxi segment by 20 percent, describing it as "currently Tesla's most robust opportunity" against a $4.2 trillion total addressable market, while cutting the humanoid robotics valuation by roughly 40 percent and the energy storage division by 30 percent.

SpaceX completed a record initial public offering earlier this year, raising approximately $85 billion at $135 per share. The company allocated 76 percent of its $10.1 billion in first-quarter 2026 capital expenditures to artificial intelligence, while Tesla plans roughly $25 billion in 2026 capital spending focused on AI, robotics, and chips. The two companies already share engineering talent and AI infrastructure, including the Terafab chip facility in Texas. SpaceX has purchased Tesla Megapack batteries and Cybertrucks, while Tesla invested $2 billion in xAI, now part of SpaceX.

Regulatory and Governance Hurdles

China presents the most complex regulatory challenge, Gupta said. SpaceX holds defense and US government contracts that could raise national security concerns in Beijing, while Starlink has no approval to operate in China. Tesla, by contrast, operates a large manufacturing presence there. Any cross-border merger review would involve multiple jurisdictions, including the Committee on Foreign Investment in the United States.

Governance issues could further complicate deal dynamics. Musk owns roughly 13 percent to 15 percent of Tesla equity and about 42 percent of SpaceX, but his voting control disparity — 85 percent at SpaceX versus 20 percent at Tesla — means Tesla minority shareholders would face dilution concerns. RBC noted that existing Tesla shareholders would require a premium partly because Musk "would control 50 percent-plus of a combined entity," well above his current stake.

SpaceX President Gwynne Shotwell recently acknowledged potential synergies and did not rule out a future combination, stating it "might make Elon's life a little easier." Gupta outlined four possible deal structures: an all-stock SpaceX acquisition of Tesla, a new holding company combining both entities, a cash-and-stock hybrid, or a phased partial combination. He said the all-stock structure appears most likely as it could best address the valuation gap between the two companies.

This article is for informational purposes only and does not constitute investment advice.