SpaceX Could Play Crucial Role in Taking Tesla Private

Elon Musk (Credit: SpaceX)

CNBC has an update on Elon Musk’s pursuit of making Tesla Motors a private company once again.

Morgan Stanley is telling its clients Elon Musk’s stake in SpaceX may be leveraged as a source of funding for his plan to take Tesla private….

“Elon Musk’s desire to potentially take Tesla private may require large amounts of new equity capital. We see scope for SpaceX to play a potentially crucial role in facilitating the required financing as well as the strategic narrative going forward,” analyst Adam Jonas said in a note entitled “How SpaceX Can Potentially Help Tesla Go Private” to clients Monday. “We believe investors should consider the potential role of SpaceX in the near-term financial options confronting Tesla and its shareholders.”

….In a blog post later that day, Musk said “the intention is not to merge SpaceX and Tesla.”

Despite the comment, Jonas said SpaceX could invest directly in Tesla as part of a strategic partnership.

“While we are in no position to dispute this statement on a merging of the two entities, we do not expect Elon Musk to rule out the potential for the involvement of SpaceX as a capital-providing strategic partner or the potential for the value of SpaceX equity held within Mr. Musk’s trust to be considered in the financing of a potential Tesla buyout,” Jonas said. “We see increasingly compelling areas of industrial and strategic cooperation between SpaceX and Tesla in telecommunications / satellite broadband which we see as potentially advantageous for shared and automated transport networks.”

Show of hands if all this sounds a bit familiar. Tesla Motors took over SolarCity in what Musk called a “no-brainer” of synergies and which critics charged was a conflict of interest riddled bailout of a failing company about to go under that benefited Musk and two cousins. The deal added to Tesla’s already enormous debt load.

Some critics are predicting Tesla will go bankrupt this year; Musk disputes that. SpaceX is also in better shape than Tesla was when it absorbed SolarCity.

  • Kenneth_Brown

    Unless CNBC has managed to get a copy of SpaceX’s financials, I can’t see how they can assert that SX is in a position to offer any more (SpaceX is holding loans to Tesla) investment in Tesla. It would put a tremendous amount of stress on SpaceX’s projects to take on that amount of debt and responsibility. It would also mean that all of Elon’s eggs would be in one basket aside from his merch business, The Boring Company.

  • Andrew Tubbiolo

    Here I was thinking at least this time around we don’t have a gambler who would endanger the space enterprise to provide money for ‘going to the race tracks.’. Looks like we have that guy again. Maybe Musk been going to the Andy Beal school of venture capital. When SX get’s liquidated I suppose it will wind up in the hands of ULA. They’ll operate Falcon and turn it into a slowly evolving program, and forget BFR. Of course if we’re left with a mature and stable Falcon project that would be a fine outcome.

  • Jon Tarragona

    If this is true, its reminiscent of the sort of schemes Enron would pull on its way up.

  • ThomasLMatula

    Sadly it looks like the automobile industry is going to “tucker” him. I hope he is able to take it private without much trouble. The money the Saudi’s are offering should help. Even better would be if he sold it off.

  • Andrew Tubbiolo

    So I assume he wants to take it private because he thinks the shareholders can’t operate the company in the best interests of the company. I’d hate to think he wants to tune them out because he’s been pulling ‘Donald Trumps’ when speaking on the open phone lines during share holder meetings. But I’m a bit confused because if he can’t trust his own shareholders, how can he trust the largest oil producer in the world who’s primary income source is the one resource Tesla Motors has removed from the car? If anyone has a real world need to “Tucker” Tesla, it’s Saudi friggin’ Arabia.

  • Andrew Tubbiolo

    One insight I think we can make about Mr Musk. He may consider ‘what can be’ to be closer to ‘what is’ more than most people. We see this with SpaceX and his wildly optimistic timelines for Space X to deliver pioneering systems. As late as they are, they’re still coming at ‘lightning speed’ compared to the rest of the community. I think we also saw it with Tesla buying Solar City. Electric cars and solar power can make a potent combination. The deep storage capability of a car to act as a mobile sink and source for excess solar power makes for very promising options in future power management. We’re seeing this start to play out with Tesla’s revolutionary outcome in grid power switching management in South Australia, as well as their pioneering “Virtual Power Plant” going up in Australia now. Plugging electric cars into a grid made of virtual power plants is the next logical step and promises to deliver a virtual Tesla battery farm that you and I paid for. It’s a compelling idea with one drawback, the time needed to build, integrate, operate, and see results from all this. It’s really going to take 30+ years when it’s really fleshed out as systems that have given results. Yet Must may see them as being right around the corner, and that’s why he can’t let his babies go even when they can’t currently perform. He acts as if his companies are going to change the world now, because he conflates tomorrw’s possibility with todays reality.

  • ThomasLMatula

    More likely he just wants to get the firm away from the Wall Street analysts and short traders that keep whip sawing the stock. And Saudi Arabia actually makes sense as they have been focusing on moving their economy beyond oil for decades. The deserts there are a natural for Tesla’s solar energy technology.

  • Andrew Tubbiolo

    Yeah, they’ve been trying and not succeeding. What Tesla technology can do to gasoline and diesel consumption makes no sense for Saudi Arabia’s real world interests. What ever they’d make off Tesla ownership or solar energy generation pales in comparison to what they make selling oil. If Saudi buys in, Tesla will go hybrid. …. So why is it that a bare chested libertarian like you does not take extreme offense at a state wealth fund buying into a private American enterprise? I mean, you guys take such offense at government money going into academia or welfare, why do you not take offense at state funds going into business? Or do you think it should only go into business and not academia and welfare?

  • envy

    The Saudis are working on a 200 GW solar installation expected to cost around $200 billion. There’s probably some ways that owning part of Tesla would help with that.

  • Steve Ksiazek

    The Boring Company is also at the point where they are going to start to need significant sources of external funding. All of their projects are supposed to be done with no public funds. He has a little test track proposed in LA, but he has promised Chicago a tunnel from the loop to OHare. That’s going to take Billions in private funding, and he has to convince his investors they can make money on this hole in the ground that is supposed to be cheaper than an Uber ride, and also has to compete with an existing rapid transit system .

  • Andrew Tubbiolo

    Let’s see if that gets built. That’s a large investment and Saudi politics are in flux. Any opposition force will array against this project to act as a lever against the ‘in group’, unless it’s wildly popular.

    Bloomberg estimates Saudi oil sales for 2017 were on the order of 180 Billion. Saudi GDP for 2017 was 680 Billion. So a quarter of their economy comes from a very unique resource. Electric vehicles tied to a national grid making heavy use of solar, wind, nuclear, and coal takes oil right off market except the materials market and aviation and shipping. If the Saudi’s want to get into the electric car and power business they’ll be going up against the Germans, Japanese, Americans, Chinese, French, and Brazil. How do you think they’ll come out against those players? They won’t be pulling in 200 billion a year in automotive and energy work per year to replace the loss of the oil sector. Fostering a grid tied transportation sector is probably the best move for the rest of the world to make with Saudi Arabia being in the almost unique case that it arrays against almost all it’s current interests.

  • envy

    Oil isn’t going to zero anytime soon, even if 100% of light transport go electric, so it’s not like that revenue is going to entirely disappear. More likely it will take a 40-60% hit in the next 20-30 years. Over the longer term it will probably continue to decline.

    And the auto industry is going electric regardless of what the Saudis do; they can either invest in it and get ahead of the curve, or they can wait and know their oil business is declining about the same amount either way. They aren’t planning for the next ten years. They are planning for the next 100.

  • Andrew Tubbiolo

    That’s a fair enough argument. We’ll see what plays out.