MCGREGOR, Texas — At SpaceX’s rocket testing facility here last month, what soared into the sky wasn't a rocket, but a car.

Tesla’s new Roadster reversed up a flipped ramp, launched into the air, spun 360 degrees, and landed squarely on its tires. Its body’s cold-gas thrusters hissed compressed gas to stabilize its posture. Elon Musk, CEO of both companies, emphasized, "This is the result of close collaboration between Tesla and SpaceX engineers."

The Roadster's Star-Studded Tech Hides Core Vulnerabilities

The Roadster was more than just a new vehicle. Built at SpaceX facilities with thrusters co-developed by SpaceX, it served as a live demonstration of what Tesla and SpaceX could achieve if combined. Indeed, just five days after the Roadster unveiling on the 20th of last month, Musk announced that both companies had formed a special committee to discuss a merger. Chronologically speaking, the Roadster provided a preview of the merger's rationale.

However, the event also exposed Tesla’s structural weaknesses. What captivated the audience that day was not Tesla’s driving performance, but SpaceX’s propulsion technology.

Even so, the presentation felt more like a tech demo than a market-ready product. The car drove autonomously in a controlled environment for only a few seconds, and a single charge of the thrusters is known to sustain it for just 5 to 6 seconds.

First unveiled in 2017 with customer deposits pouring in, the Roadster's production target has been pushed back from its original 2020 timeline to 2028. Despite the flashy spectacle, it is far from delivering the immediate earnings Tesla desperately needs.

This reality ties directly into Tesla’s leverage in upcoming merger negotiations. The synergies highlighted by Musk—AI, robotics, chips, space transportation, and satellite communications—glaringly omit Tesla’s core business: automobiles.

A massive profitability gap further complicates matters. SpaceX boasts an operating or net profit margin of around 30%, whereas Tesla’s hovers below 3%. If Tesla brings little more than future prospects in AI and robotics to the negotiating table, critics point out that it will be difficult to command a fair exchange ratio.

$450 Billion Wiped Out Post-Midterms

The stock price, which had been resilient thanks to merger expectations, hit a rough patch following the midterm elections. Tesla shares had rallied more than 30% from their late July/early August lows, fueled by AI expansion and SpaceX merger optimism.

The catalyst for the downturn was the midterms, which resulted in the Democratic Party sweeping both the U.S. Senate and the House of Representatives. In Texas, where Tesla and SpaceX are headquartered, Democrats also secured the Senate and gubernatorial seats.

The market immediately priced in the likelihood of stricter congressional oversight, potentially stalling the business expansion of Musk’s corporate empire. Ahead of the election, Musk had emerged as a top Republican donor, contributing over $445 million.

The market reacted swiftly. Tesla plunged 3.3% on the 4th, followed by a steep 10.77% drop on the 5th to close at $343.69. SpaceX shares also fell roughly 9% on the 5th. According to CNBC, the combined market capitalization of both companies evaporated by approximately $456 billion within two days of the election.

The merger timeline remains shrouded in uncertainty. Bloomberg previously reported that there were moves to finalize the deal by the first half of next year to wrap up the transaction within Donald Trump’s current term.

However, Kathleen Brooks, research director at brokerage firm XTB, noted that while Congress cannot legally block the merger, additional regulatory scrutiny could significantly slow down the process.

A $31 Billion Tax Nightmare for Korean 'Seohak Ants'

Regardless of when or how the merger proceeds, domestic South Korean investors face an unavoidable tax dilemma. As of the 2nd, Korean retail investors hold approximately $23.3 billion (around 31 trillion KRW) in Tesla stock—making it the single largest foreign equity holding in the country.

Wall Street anticipates that if Tesla and SpaceX merge, SpaceX—possessing a larger enterprise value—will likely acquire Tesla through a stock-for-stock exchange.

Under South Korea’s current tax code, exchanging Tesla shares for SpaceX shares is classified as a "disposal via transfer," triggering a 22% capital gains tax. While domestic corporate mergers benefit from tax-deferral incentives, cross-border foreign mergers do not enjoy the same exemptions. This means investors could face a heavy tax bill without having sold a single share.

The tax liability is locked in the moment the exchange occurs. For instance, if an investor bought Tesla stock for 10 million KRW and its value rose to 30 million KRW, they would owe approximately 3.85 million KRW in taxes on accumulated gains—even if zero acquisition premium is attached.

In short, investors receive zero cash, yet they are required to pay taxes in cash. If the value of the newly acquired SpaceX stock plummets by half right after the exchange, the previously locked-in tax bill remains unchanged. Furthermore, foreign stock losses cannot be carried forward to offset these gains.

If taxes are inevitable, the ultimate variable is the acquisition premium. If a 20% premium is applied, yielding 36 million KRW worth of SpaceX stock, the tax liability increases to roughly 5.17 million KRW, but the remaining net value rises by about 4.7 million KRW. Higher premiums are inherently more advantageous for shareholders.

RBC and JPMorgan estimate that securing Tesla shareholder approval will require a premium of 20% to 35%. However, given Tesla's weak bargaining position, achieving this remains an uphill battle.

Long-term investors with massive capital gains face the heaviest burden. This reality has sparked parliamentary petitions calling for deferred taxation on cross-border stock swaps until actual asset disposal occurs—though tangible legislative reform remains stagnant.

The Next Watershed: December's Tesla Shareholders' Meeting

Ultimately, whether Tesla shareholders can secure a favorable premium depends on the shareholders themselves. For the merger to pass, it requires approval not merely from a majority of participating votes, but from an absolute majority of all outstanding shares.

Even Musk acknowledged this as a "pretty high hurdle." Assuming a voter turnout similar to last year's (74%), nearly 70% of all cast votes must be in favor.

With Tesla holding a weak hand at the negotiating table, this voting power serves as the retail investors' single remaining leverage point. The first major test will be Tesla’s annual shareholders' meeting, scheduled for December 3rd at the Texas Gigafactory.

While the surface-level agenda appears routine—including the re-election of Musk, board chair Robyn Denholm, and director JB Straubell, alongside a consultative vote on Musk’s 2025 compensation package (valued at $158.4 billion on paper)—analysts view this meeting as a "trailer for the merger vote."

If Musk’s re-election and compensation package pass with overwhelming support, it will signal that the merger proposal is likely to clear smoothly. Conversely, an uptick in dissent votes would pressure Musk to sweeten the deal with a higher premium to appease shareholders. In essence, the shareholder meeting's approval rate will dictate Tesla investors' real bargaining power.

Another key variable is when the merger terms will officially drop. While Bloomberg suggests an announcement closer to the merger timeline, Barclays has raised the possibility of an announcement before the shareholder meeting. As congressional pushback mounts, Musk has greater incentives to accelerate the schedule.

Either way, the moment merger terms are made public will act as an immediate tax notice for Korean retail investors. Once the exchange ratio and premium are locked in, their net gains and tax liabilities will be finalized simultaneously. With the merger clock ticking down and institutional tax reforms stalled, time is running out for retail investors to prepare.

[ⓒ Global Economic Times. 무단전재-재배포 금지]