The stock price of Tesla increased by almost 5% on Friday, and the company did not introduce a new vehicle, neither implemented a price reduction, and nor issued a controversial Twitter message. The reason for the market reaction originated from news reports, which indicated that Elon Musk was making progress towards establishing control over his extensive technology businesses.
The rumors emerged about SpaceX, Tesla, and AI startup xAI to possibly be holding merger negotiations, which demonstrates that Wall Street shows interest whenever Musk makes strategic moves.
SpaceX, xAI and its Consolidation
As per reports, SpaceX and xAI are currently negotiating a merger, which will lead to a major public offering that is scheduled for the upcoming year. Also, the report shows that SpaceX is exploring a merger with Tesla, which adds more evidence to support this claim.
However, there is no confirmation about this news, but the potential of this development created positive expectations for Tesla shareholders who believe that Musk should combine his various businesses into one unified organization.
Investors are Invested
Shareholders of Tesla have requested consolidation as a way to make it easier for Musk to concentrate on Tesla’s transformation from an electric vehicle company to an AI and robotics enterprise. Andrew Rocco from Zacks Investment Research believes that the merger will create significant value for investors, as many Tesla and SpaceX supporters back the companies because they trust Musk.
He said,
“History says that ultimately, most Tesla/SpaceX investors are invested for the sole sake of betting on Elon Musk … A single entity would help to further align his attention and ample resources to one company”.
Investors assume that the merged companies will operate as a single entity, because they currently base their investments on Elon Musk, rather than on specific products.
Big Ambitions & Familiar Concerns
Musk has defined bold plans for Tesla, which includes providing autonomous vehicle access to approximately half of the U.S population by 2026, along with starting production of the humanoid robot Optimus during the current year.
However, Tesla’s track record of setting ambitious deadlines has created skepticism among the investors, because Musk’s political involvement brings up doubts about his ability to concentrate. Also, these concerns have developed into greater problems, because Tesla’s primary electric vehicle sales have declined.
xAI Takes Center Stage
Tesla made an announcement about its $2 billion investment in xAI, which experts view as a strategy to accelerate the development of its self-driving technology and robotic systems. Musk has developed a pattern of crossing corporate boundaries, which reached its peak when xAI purchased X for $45 billion, because this transaction provided the company with huge data resources and automatic distribution capabilities.
This month, xAI accomplished a fundraising achievement of $20 billion at a business valuation of $230 billion, while SpaceX also contributed $2 billion towards the overall fundraising campaign.
Bottom Line
Tesla investors find their merger hopes fulfilled through the current talks, because they believe that Musk should lead all his businesses together to improve performance and create future worth.
Also, the market response shows that when Musk begins to change his business operations Wall Street will react through trading, while some investors will celebrate.
