Elon Musk confirmed on Tuesday that Tesla and SpaceX are in formal talks regarding a potential merger that could create a combined entity valued at approximately $3.5 trillion. During SpaceX’s third-quarter earnings call, Musk revealed that independent board members from both companies have established special committees to evaluate the transaction.
The 'Kabuki Dance' of Governance
Because Musk serves as CEO and a major shareholder in both firms, he is legally sidelined from the negotiation process. “It’s an odd kabuki dance where two groups of people are talking, and I can’t be in the conversation,” Musk stated, adding that he feels like he is “tap dancing through a minefield” regarding the conflict of interest.
Musk currently owns roughly 20% of Tesla and 45% of SpaceX, wielding 82% of the voting power at the latter. If the merger proceeds, Musk would likely own about one-third of the combined giant.
Financial Performance and Strategic Overlap
The announcement coincided with SpaceX reporting its first operating profit since its June IPO. Third-quarter revenues surged 161% to $14.58 billion, significantly beating analyst expectations. Notably, SpaceX’s AI division, rebranded as “Super Intelligence,” saw its revenue triple to $7.56 billion, surpassing Starlink’s performance for the first time.
Musk highlighted several areas where a tie-up would make strategic sense:
- AI software and chip design
- Robotics and connectivity
- The joint Terafab chip manufacturing complex
Despite the potential synergies, the merger is far from certain. On the Tesla side, the proposal would require approval from a majority of all outstanding shares, a requirement Musk described as a “quite a high hurdle.” Current Tesla proxy filings do not yet include a formal merger proposal.
