…Stronger-than-expected earnings and 161 per cent revenue growth lift investor sentiment as the billionaire signals support for combining the two companies’ AI, chip-design and robotics operations.
SpaceX shares rose more than eight per cent in early trading on Wednesday after Elon Musk expressed support for a potential merger between the rocket and satellite-internet company and electric vehicle maker Tesla.
The rally followed a stronger-than-expected earnings report and Musk’s disclosure that both companies had established special committees to discuss a possible combination.
Speaking during SpaceX’s earnings call, Musk said there were significant advantages to bringing the businesses together, particularly in artificial intelligence, semiconductor design and robotics. He added, however, that shareholders would ultimately decide whether any merger proceeded.
“I do think there’s a lot of merit to combining the companies,” Musk said, describing the subject as a sensitive matter given his interests in both businesses.
He subsequently said a merger would be “a good idea”, arguing that closer cooperation could create substantial opportunities across their technology operations.
Musk said he could not participate in the committee discussions because of his position as a potentially conflicted party.
Tesla shares also gained more than two per cent on Wednesday morning, reflecting investor interest in the possibility of a deal.
Although speculation about a merger has circulated for some time, Musk’s latest comments represented a more direct public endorsement than his earlier remarks following SpaceX’s July initial public offering.
At the time, he declined to express a preference, saying any discussion about combining the companies would need to follow the appropriate process.
The potential merger was not the only factor attracting investor attention. SpaceX also reported substantial growth in its latest quarterly results, returning to profitability after recording losses in the previous two quarters.
The company posted net income of $4.4 billion in the September quarter, comfortably exceeding analysts’ expectations of $1.57 billion, according to FactSet estimates.
Revenue climbed 161 per cent year on year to $14.6 billion, compared with analysts’ forecast of $12.9 billion.
SpaceX also reported earnings per share of 35 cents, against the 14 cents expected by analysts.
The company attributed its performance to growth in its “Super Intelligence” segment and its Starlink satellite-internet business.
The results underscore the expansion of SpaceX beyond its traditional rocket-launching operations. Its businesses now span space transportation, satellite connectivity and artificial intelligence, creating potential areas of cooperation with Tesla’s electric vehicles, autonomous-driving technology and robotics ambitions.
A merger could allow the companies to coordinate investments and share expertise across these fields. However, the financial structure of any transaction, its valuation and the terms shareholders might be offered remain unclear.
The companies would also need to address governance and conflict-of-interest questions arising from Musk’s leadership positions and substantial interests in both businesses.
