Elon Musk confirmed Tuesday that a Tesla SpaceX merger is officially being studied, with both companies forming special committees to weigh combining into a single company worth about $3.5 trillion.
Musk made the announcement during SpaceX’s third quarter earnings call when an investor asked him directly about a possible combination. He said each company had set up a special committee to look at the idea, and he called a merger “a good idea.”
A special committee is a small group of board members brought in when a company’s leader has a personal stake on both sides of a deal. Musk runs both Tesla and SpaceX, so if he negotiated the terms himself, he would essentially be making a deal with himself. That is why these committees are made up only of independent directors, meaning board members with no financial conflict in the outcome.
“These special committees consist of independent directors, and because I’m a conflicted party, I can’t actually be in the discussions of the special committees,” Musk said. He described the process as “an odd kabuki dance where two groups of people are talking and I can’t be in the conversation,” comparing it to the highly choreographed style of Japanese theater.
Musk also tried to cool expectations. “Some people out there assume that a SpaceX and Tesla merger is a certainty, and I think that would be overstating it,” he said. He added that the committees were formed at the request of shareholders, and that on Tesla’s side a deal would need support from a majority of all outstanding shares, which he called “quite a high hurdle.” In plain terms, it is not enough for most of the people who show up to vote to say yes. More than half of every Tesla share in existence has to back it.
The money involved is staggering. At Tuesday’s closing prices, SpaceX was worth about $2 trillion and Tesla close to $1.5 trillion. Combined, that would be the largest corporate merger ever recorded. Shares of both companies jumped in after hours trading following the news.
A Tesla SpaceX merger would put Tesla’s electric cars, batteries and humanoid robots under the same roof as SpaceX’s rockets, its Starlink satellite internet service and its artificial intelligence business. SpaceX absorbed xAI, Musk’s AI company, earlier this year, and Tesla had invested in xAI before that. The two companies already work closely together. Tesla supplies batteries and manufacturing technology for some SpaceX projects, and the companies are jointly building Terafab, a facility designed to make AI chips.
SpaceX only became a publicly traded company in June, when it went public on the Nasdaq in a record $75 billion initial public offering, the first time everyday investors could buy its stock. Merger talk has followed the company ever since. In July, Musk sidestepped the question on Tesla’s earnings call, saying the companies could not discuss combining on that kind of call while pointing to “more and more overlap” between them.
The biggest questions around a Tesla SpaceX merger come down to control. Musk owns roughly 20 percent of Tesla, but he holds more than 85 percent of the voting power at SpaceX through special shares that carry extra votes. How much of a combined company he would end up controlling depends on the exchange ratio, the formula that decides how many shares of the new company each Tesla or SpaceX shareholder would receive. That number has not been set, and no deal terms have been agreed to.
Tesla shareholders have been here before. In 2016, Tesla bought SolarCity, a solar company Musk was also heavily invested in, through a similar special committee process, and shareholders fought that deal in court for years. Tesla investors are also already tied up in legal disputes over the company’s investment in xAI.
Wall Street is largely betting it happens anyway. Gene Munster, managing partner at Deepwater Asset Management, put the odds of a merger within two years at 95 percent. For now, nothing is on the ballot. Tesla’s annual shareholder proxy, the document that lays out what investors will vote on, was filed Monday and does not include a merger proposal.
