Musk confirms Tesla and SpaceX formed special committees to explore a merger

Elon Musk confirmed Tesla and SpaceX formed special committees to explore a merger during SpaceX’s third-quarter earnings call on Tuesday. He disclosed the discussions to financial analysts reviewing the rocket company’s quarterly results.

Tesla is valued at roughly $1.5 trillion and SpaceX at $2 trillion. A combination would create a mega-entity valued upwards of $3.6 trillion, according to one source. The special committees have not reached agreement on terms of any transaction, Musk said, and there is no guarantee that they will. He cautioned that assuming a merger is a certainty would be overstating it.

Musk is not a member of either committee and is not involved in the discussions because he is a conflicted party as the CEO of both companies. The committees consist of independent directors and were formed at the request of shareholders. “Because I’m a conflicted party, I can’t actually be in the discussions of the special committees, so it’s this sort of a … it’s an odd kabuki dance where two groups of people are talking, and I can’t be in the conversation,” Musk said.

At least 50% of all Tesla shareholders would need to approve any deal, not just those who cast ballots, a threshold Musk described as quite a high hurdle to try to achieve. Shareholders ultimately decide, he said, and the requirement on the Tesla side covers all shares outstanding, not merely those that vote.

What Musk sees in a combination

Musk said the merger is a good idea. He pointed to cooperation on chips, AI, software, and robotics as areas that would benefit, along with Terafab, a joint chip manufacturing project between Tesla and SpaceX. Musk also referenced Starmind, SpaceX’s orbital AI data center project. He framed the rationale in expansive terms, saying the companies are pretty much in the superintelligence singularity and that there is a lot to be gained from cooperating on developing superintelligence software, chip design, mass to orbit, and connectivity. It is really up to the special committees to come up with something, he said, and then put it to shareholders as a vote.

Market reaction

SpaceX shares rose 8% in after-hours trading. Tesla shares rose 2% after being down slightly for weeks. Tesla reports its own quarterly results on Wednesday.

SpaceX’s cloud compute capacity, which serves companies like Anthropic and Google, has become the most profitable part of the company, bringing in $7.5bn according to the latest quarterly results. Starlink tallied revenue of $5.2bn. SpaceX as a whole is not profitable. The company has lost $1.1bn so far this year.

How a deal might take shape

Most Wall Street analysts and legal experts believe SpaceX would acquire Tesla or absorb it through a stock swap rather than the reverse, though this is analyst opinion and not a confirmed deal structure. SpaceX has maintained a higher valuation than Tesla since its IPO. A merger in which SpaceX absorbs Tesla would allow SpaceX shareholders to hold majority control of the combined entity. To buy SpaceX, Tesla would have to create millions of new shares, diluting current Tesla owners. Some Tesla shareholders may balk.

Barclays published a client note suggesting a combination could be announced ahead of Tesla’s annual shareholder meeting scheduled for December 3, 2026. SpaceX’s launch goals require tens of billions of dollars every year, spending that could drain Tesla’s ability to build new car factories and battery plants. The note was published earlier this month.

Board composition and overlap

Tesla has seven independent board members: Robyn Denholm, Ira Ehrenpreis, JB Straubel, Joe Gebbia, Jack Hartung, James Murdoch, and Kathleen Wilson-Thompson, per the company’s October 19 proxy filing. Neither Musk nor his brother Kimbal Musk are independent directors at Tesla. SpaceX lists six independent directors: Ira Ehrenpreis, Randy Glein, Donald Harrison, Steve Jurvetson, Luke Nosek, and Roelef Boutha. Ehrenpreis appears on both independent director lists, a notable governance overlap between the two companies. Antonio Garcias sits on the SpaceX board but is not considered independent. He once sat on Tesla’s board and founded Valor Equity Partners, which holds a 3.4% stake in SpaceX. Garcias’ firm financed SpaceX’s AI hardware purchases through leaseback arrangements.

Background

SpaceX made its stock market debut earlier this year and quickly outstripped Tesla in value. Before going public, SpaceX acquired xAI and X, the platform formerly known as Twitter, both of which Musk owned. Musk became the world’s first paper trillionaire after the IPO. Last year, Tesla shareholders approved a compensation package for Musk valued around $1 trillion, even after a Delaware judge tossed it over lack of independence. Musk has more than 50% voting power in SpaceX after its IPO, which would make it easier to garner support from SpaceX shareholders. He has been shifting Tesla resources toward robotics work.