Elon Musk is exploring what would be one of the largest corporate combinations in history: merging his electric car company with his rocket and satellite company.
Musk said this week that independent directors at both Tesla and SpaceX have formed special committees to evaluate combining the two companies, a step that followed shareholder interest in the idea. At current market values, the combined entity could be worth roughly $3.5 trillion, which would create a single company spanning electric vehicles, rockets, satellite internet through Starlink, humanoid robots, AI chatbots through Grok, and the social media platform X. Musk raised the idea publicly on SpaceX's own third-quarter earnings call, where he called a merger a good idea and noted the two boards were already looking into it.
The timing is notable. SpaceX went public earlier this year in an initial public offering that, at its peak, briefly made Musk the world's first dollar trillionaire on paper, before SpaceX shares later fell by roughly half from that high, which caused him to lose that status for a time. SpaceX has continued to grow quickly since then, reporting 161% revenue growth in the third quarter and $14.6 billion in quarterly revenue, with its artificial intelligence business now generating more sales than its satellite connectivity division, a sign of how central AI has become to Musk's companies beyond just Tesla.
However, Musk's own public endorsement of the deal this week has reportedly complicated the process behind the scenes. According to a person with direct knowledge of the discussions, some people involved in the talks worry that Musk speaking about the merger publicly before it is finalized could invite additional shareholder scrutiny and delay the process by several weeks. Because Tesla's board would need to structure any all-stock deal carefully, given Musk's roughly 20% stake in Tesla compared with his much larger, super-voting stake in SpaceX, the mechanics of a fair exchange ratio between the two companies are likely to draw close attention from investors and legal experts alike.
If completed, the deal would need approval from shareholders of both companies, a process that typically takes months given the complexity of valuing two very different kinds of businesses, one a consumer-facing automaker and the other a government and commercial space and satellite contractor, fairly against each other.
Investors will be watching for a formal merger proposal with an exchange ratio, and for how Tesla's and SpaceX's special committees address the fact that Musk holds vastly different levels of control at each company.
Why would Tesla and SpaceX merge?
Musk has framed it as combining AI, rockets, satellites, robotics and electric vehicles into a single technology company, and shareholders have expressed interest in exploring the idea.
Has the merger been approved?
No. Special committees of independent directors are still evaluating the idea, and any deal would require shareholder approval at both companies.