Barclays upgraded Tesla to overweight and raised its price target to $450, tying the call to a possible SpaceX merger. Elon Musk confirmed that both companies formed special committees to explore a combination. A deal would likely see SpaceX acquire Tesla largely through a stock exchange.
Barclays analyst Dan Levy upgraded Tesla from equal weight to overweight and lifted his one-year price target from $370 to $450 per share. The new target matches his expectation for the value at which Tesla would be acquired in an all-stock deal, according to The Motley Fool.
Musk confirms special committees at both companies
During SpaceX's recent third-quarter conference call, Musk was asked about a merger with Tesla. He said he thought a merger was a good idea and confirmed that each company had formed a special committee to explore a potential combination.
SpaceX has a market capitalization of roughly $2 trillion, while Tesla's stands at roughly $1.55 trillion. The Motley Fool says that size gap makes SpaceX the more likely acquirer. It adds that current difficulties securing large loans at favorable interest rates suggest the deal would be largely or entirely funded through stock.
What a $450 buyout would mean for shareholders
At $450 per share, Tesla shareholders would receive a valuation premium of roughly 20% over the current price. That equals about 3.1 shares of SpaceX stock for each Tesla share, based on both companies' share prices when the article was written.
However, the deal still needs regulatory clearance and Tesla shareholder approval. It would have to clear a 50% affirmative approval threshold, and investors who skip the vote would count as "no" votes.
Musk controls roughly 20% of Tesla's voting power and could likely muster significant support from institutional investors. He would still likely need meaningful support from retail investors, so shareholders may be offered an even greater premium.
Source: The Motley Fool
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