Musk Says Tesla and SpaceX Boards Weigh $3.5 Trillion Merger
Independent directors at Tesla and SpaceX have formed special committees to explore a possible merger, Elon Musk told investors, while cautioning that no deal terms have been agreed and a combination is far from certain.
Tesla and SpaceX are formally exploring a merger, with independent directors at both companies forming special committees to weigh a combination that would create a company worth roughly $3.5 trillion at current market prices. Elon Musk, who leads both firms, disclosed the talks during SpaceX's third-quarter earnings call, saying he is excluded from the discussions because of his conflicting roles.
«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 told analysts. He described the arrangement as «an odd kabuki dance where two groups of people are talking and I can't be in the conversation.»
Musk stressed that the committees have not agreed on any terms and that a transaction may never materialize. «Some people out there assume that a SpaceX and Tesla merger is a certainty, and I think that would be overstating it,» he said. The committees were formed at the request of shareholders, according to Musk, and any deal on the Tesla side would require approval from a majority of all outstanding shares — a threshold he called «quite a high hurdle.» Tesla's annual shareholder proxy report, filed Monday, does not include a merger proposal for investors to vote on.
Musk owns roughly 20% of Tesla and 45% of SpaceX, and controls about 82% of the voting power at the rocket and satellite company. A combined entity would leave him with about a third of the total company. The two firms are already financially intertwined, including a $2 billion investment by Tesla in SpaceX confirmed in Tesla's proxy statement, and they share board members. Ira Ehrenpreis chairs SpaceX's compensation and nominating committee as well as two separate committees at Tesla, and Tesla director James Murdoch has previously invested in SpaceX.
Musk has argued that a tie-up makes strategic sense, pointing to collaboration on artificial intelligence software, chip design, robotics and connectivity, along with the planned Terafab chip plant being developed jointly by the two companies. The disclosure came as SpaceX reported its first operating profit since its June initial public offering. Third-quarter revenue rose 161% to $14.58 billion, beating analyst expectations of $12.86 billion, while operating revenue reached $2.79 billion and net income was $4.4 billion.
Revenue from SpaceX's AI business, renamed «Super Intelligence,» nearly tripled from the second quarter to $7.56 billion, surpassing Starlink's $5.25 billion for the first time since the company went public. Chief financial officer Bret Johnsen reaffirmed a target of $100 billion in annualized revenue by the end of this year, though the company is currently running at about $58 billion a year. Musk, in his typically optimistic style, said SpaceX's buildout pace implies annual recurring revenue of $500 billion to $1 trillion by the end of 2027.
Investors responded positively to the news. Tesla stock rose just over 1% in after-hours trading, while SpaceX gained more than 5% following the call with analysts, which also featured SpaceX president and chief operating officer Gwynne Shotwell. Tesla did not immediately respond to a request for comment.
6
