The boards of Tesla and SpaceX have each formed committees of independent directors to study a merger. The combined company would be worth about $3.5 trillion. Elon Musk supports the idea but cannot take part in the talks, and the vote Tesla needs to approve a deal sets a high bar.
On SpaceX’s third-quarter earnings call on 20 October, Elon Musk revealed that both companies had set up special committees to consider merging. Neither company had announced this before.
Musk said the committees were formed at shareholders’ request and are made up of independent directors. As the chief executive and largest individual shareholder of both companies, he is a conflicted party and cannot take part in the discussions.
He also said to supports a merger and sees a lot to gain from closer work on AI software, chip design and robotics. He also said no terms had been agreed and a deal was not guaranteed.
The figures involved are very large. At the close on 20 October, Tesla was valued at about $1.48 trillion and SpaceX at about $2.01 trillion. Together they would be worth about $3.5 trillion, comparable to the largest companies in the world. SpaceX shares rose about 8% on the news.
Why a merger
The two companies already work together more and more. SpaceX’s results showed how fast it is growing: third-quarter revenue rose 161% to $14.6 billion, well ahead of forecasts, helped by a 22% sequential rise in its satellite internet business. I
t also reports growing revenue from AI. Tesla is spending heavily on AI, self-driving technology and humanoid robots. Supporters of a merger argue that combining SpaceX’s cash flow and growth with Tesla’s manufacturing and AI work would create one company better placed to compete in AI.
Tesla’s own results this week support that argument. Revenue was flat at $28 billion, net income fell 43% to $787 million, and the operating margin fell to 2.6%. Tesla also cut its 2026 capital spending plan to about $20 billion from more than $25 billion. A tie-up with SpaceX would give Tesla shareholders a stake in a faster-growing business.
Deal not straightforward
There are several obstacles.
First, Tesla’s approval threshold. Musk said a merger would need approval from a majority of all Tesla’s outstanding shares, not just those voting. Since many shares are never voted, that is a high bar, and Musk acknowledged it. Tesla’s proxy for its 3 December annual meeting, filed on 19 October, contains no merger proposal.
Second, governance. SpaceX listed in July with a multi-class share structure, under which Musk holds about 45% of the shares but about 82% of the voting power, according to Fortune. SpaceX also uses exemptions that let it skip a majority-independent board. A merger would raise questions about how the combined company would be governed, and whether Tesla shareholders would get a fair price for giving up their separate stake.
Third, history. In 2016, Tesla bought SolarCity, another company linked to Musk, a deal that led to years of shareholder litigation over conflicts of interest. The special committees are designed to avoid a repeat, but investors will scrutinise any terms closely.
For investors outside the US, the possible merger shows a broader trend: large technology groups combining businesses to compete in AI. Whether this deal goes ahead depends on what the two committees recommend and whether shareholders approve.
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