Tesla and SpaceX Weigh a Merger
Elon Musk said independent directors at Tesla and SpaceX have formed special committees to discuss combining the two companies, which together are worth about $3.5 trillion. No terms have been agreed, Musk is barred from the talks as a conflicted party, and any deal would need a majority of all Tesla shares.
Elon Musk told investors on SpaceX's quarterly earnings call that board members at both companies are now studying a combination, without him.
At the companies' closing prices that day, a combined company would be worth about $3.5 trillion, with SpaceX at about $2 trillion and Tesla at nearly $1.5 trillion. Musk owns about 20% of Tesla and 45% of SpaceX.
Musk said the committees were formed at shareholders' request, that he is not on them and cannot take part because he is "a conflicted party," and that they have not agreed on any terms. "Some people out there assume that a SpaceX and Tesla merger is a certainty, and I think that would be overstating it," he said. On the Tesla side, a deal would need a majority of all outstanding shares, which he called "quite a high hurdle."
He said he thinks combining them would be "a good idea," citing shared work on AI software, chip design, robotics, connectivity and a giant chip plant the two are building together, called Terafab. Tesla's proxy for its December 3 annual meeting has no merger vote on it.
Elon Musk said Tesla and SpaceX have set up special committees of independent directors to discuss merging the two companies, a combination that would be worth about $3.5 trillion at current prices.
Musk disclosed the talks on SpaceX's third-quarter earnings call when an analyst asked about a combination. "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," he said. "It's an odd kabuki dance where two groups of people are talking and I can't be in the conversation."
What has and hasn't happened
The committees were formed "at the request of shareholders," Musk said. They have not reached agreement on the terms of any transaction, and there is no guarantee they will. On the Tesla side, approval would require a majority of all outstanding shares, not just those voting. Tesla's proxy for its December 3 annual meeting, filed the day before the call, includes no merger proposal.
Musk made clear he favors the idea. He said there is "a lot to be gained from cooperating on developing superintelligence software, chip design, the TeraFab, obviously robotics, mass to orbit," and connectivity. "I think it would be a good idea, but it's really up to the special committees of both companies," he said.
The size of it
At the companies' closing prices on the day of the call, SpaceX was worth about $2 trillion and Tesla nearly $1.5 trillion. Musk owns roughly 20% of Tesla and 45% of SpaceX, where he controls about 82% of the voting power, and would own about a third of a combined company. The two are already linked: Tesla has invested $2 billion in SpaceX, and some directors sit on or have ties to both boards. Tesla shares rose just over 1% after hours and SpaceX shares more than 5%.
On the same call, SpaceX reported third-quarter revenue of $14.58 billion, up 161%, and net income of $4.4 billion, its first operating profit since its initial public offering in June. Revenue from its AI business passed Starlink's for the first time.