Investor Gary Black of The Future Fund LLC has warned against a possible SpaceX–Tesla Inc. (NASDAQ:TSLA) merger, citing the failed Netflix Inc. (NASDAQ:NFLX) acquisition of Warner Bros. Discovery Inc. (NASDAQ:WBD).

Shareholders Hate Firms Issuing Equity For Acquisitions

On Tuesday, the investor took to the social media platform X to reiterate his stance against a Tesla-SpaceX merger. Even if SpaceX were to go public and leverage that equity to explore a merger with/acquisition of Tesla, it would be detrimental to the investors of the commercial space flight company.

The investor said that buyers of SpaceX stock wouldn’t “willingly invest capital in a firm” that would issue equity to buy another company, sharing that believers of the merger were “fooling themselves.” He then said that investors weren’t keen on equity-backed mergers.

“Shareholders HATE when companies use equity to buy other companies,” he said, citing the example of the failed Netflix-WB Discovery deal. “The latest example is $NFLX which tried to buy $WBD and NFLX stock dropped -30%,” he said, adding that the stock only recovered when Netflix management backed away from the deal.

It’s worth noting that Paramount Skydance (NASDAQ:PSKY) is currently in pole position to complete an acquisition of Warner Bros., but lawmakers are demanding a probe into the alleged foreign funding involved in the proposed takeover.

Dilution Concerns

“I know very few institutional holders who will invest in a SpaceX IPO if they expect SpaceX to then turn around and dilute them by buying TSLA,” he said, reaffirming stock dilution concerns he shared earlier.

Black added that pre-IPO SpaceX investors would approve any mergers, but asked: “Who will purchase the $50B of rumored SpaceX IPO shares if post-IPO SpaceX makes a giant dilutive acquisition of $TSLA?” He then said that the mathematics of such a deal didn’t make sense.

Gary Black Shares ‘Likely’ Scenario

Adding another post to the thread, the investor shared that SpaceX would ‘likely’ initiate its $50 billion IPO with a $1.5 trillion market cap, adding that Tesla investors wanting to buy SpaceX would likely do so by selling “some of their TSLA shares to fund their SpaceX investment.”

He also shared that SpaceX’s management would mention in S-1 filings that the company has no “current plans for SpaceX to buy $TSLA once the IPO is completed,” which would help avoid litigation by investors.

Gary Black’s Earlier Criticism

The investor had earlier cautioned against the move, saying that such a deal could result in a "20-25% reduction" in the value of Tesla’s stock, which would be detrimental to the investors of the company. Black also said that if SpaceX were to buy Tesla, it would result in short-term gains, but investors of the company who believed in its EV vision would sell their stake.

SpaceX IPO Reports

Meanwhile, SpaceX could file for its IPO as early as this week, with the company reportedly targeting raising over $75 billion through the IPO, according to people familiar with the matter. This comes as Musk confirmed a valuation of $1.75 trillion in a social media post earlier this month.

According to Benzinga Edge Rankings, Tesla scores well on the Momentum metric and also offers a favorable price trend in the Long term.

Price Action: TSLA gained 0.57% to $383.03 at market close on Tuesday, further surging 0.97% to $386.71 during overnight trading.

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