The Future Fund Managing Partner Gary Black warned Tesla Inc. (NASDAQ:TSLA) investors excited about a potential merger with Elon Musk’s Space Exploration Technologies Corp. (NASDAQ:SPCX) to examine Marvell Technology Inc.’s (NASDAQ:MRVL) $115 billion acquisition of Lumentum Holdings Inc. (NASDAQ:LITE), where shares plunged despite a substantial buyout premium.
Black Warns Stock-Funded Deals Can Backfire
"$TSLA bulls excited by a $SPCX – $TSLA merger should look at what happened to Lumentum Holdings stock," Black wrote Monday on X. He noted that Marvell’s 24% premium valued Lumentum at $1,132 per share, yet the stock fell roughly 15% to $750 as Marvell shares declined 26% since merger rumors emerged.
Black explained that Marvell offered 4.5 of its shares for every Lumentum share, exposing the acquisition’s value to fluctuations in Marvell’s stock price.
"When an an acquirer uses its own stock to pay for an acquisition, traders and merger arbs invariably sell down the acquirer’s stock," Black wrote, emphasizing the risks of prolonged transactions.
He warned that a SpaceX-Tesla combination, given its size and complexity, "could take just as long" as the Marvell-Lumentum deal, which the companies expect to complete in the first half of 2028. Black previously warned that merger arbitrageurs could erode Tesla’s potential acquisition premium.
Marvell’s $115 Billion Deal Faces Skepticism
Reuters reported Monday that Marvell’s all-stock acquisition values Lumentum’s equity at approximately $102.5 billion, with shareholders receiving 33% of the combined company.
Marvell expects the combination to strengthen its position in AI data-center connectivity, particularly as optical technology increasingly replaces copper connections. However, Reuters noted that Marvell shares fell more than 10% while Lumentum declined more than 15%, reflecting concerns about valuation and execution risks.
Tesla-SpaceX Merger Still Faces Major Hurdles
Meanwhile, Musk confirmed that both companies established independent committees to evaluate a merger, although neither has agreed to terms. Reuters highlighted potential regulatory obstacles involving SpaceX’s government contracts and Tesla’s China operations.
While Barclays analyst Dan Levy last week highlighted potential AI and autonomous-driving benefits, Black previously predicted a roughly $420-per-share offer, warning that dilution and arbitrage could undermine shareholder gains. His latest comparison reinforces that even generous premiums offer little protection when the acquiring company’s shares decline.
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