3 minBusiness
Tesla and SpaceX Boards Form Special Committees to Weigh $3.5 Trillion Merger
Independent directors at Tesla and SpaceX have formed special committees to explore a possible merger, Elon Musk told investors on SpaceX's third-quarter earnings call. Musk, who is conflicted as CEO of both companies, is barred from the discussions. A combined company would be worth roughly $3.5 trillion.
Independent directors at Tesla and SpaceX have formed special committees to evaluate a possible merger between the two companies led by Elon Musk, the billionaire told investors during SpaceX's third-quarter earnings call. The panels were created at the request of shareholders, Musk said, and have not reached any agreement on terms.
Musk said he is excluded from the deliberations because he is a conflicted party, holding roughly 20% of Tesla and 45% of SpaceX, where he controls about 82% of the voting power. «It's an odd kabuki dance where two groups of people are talking and I can't be in the conversation,» he said. He added that assumptions a deal is certain would be «overstating it.»
At Tuesday's closing prices, a combined Tesla-SpaceX would carry a market value of about $3.5 trillion, with SpaceX at roughly $2 trillion and Tesla at nearly $1.5 trillion. A formal deal price would not emerge until much later, if at all. Musk would own about a third of the combined entity.
The companies are already financially entangled. Tesla's annual shareholder proxy report, filed Monday, confirmed a $2 billion investment by Tesla in SpaceX. The proxy did not include a merger proposal for shareholders to vote on. On the Tesla side, any deal would require support from a majority of all outstanding shares, a threshold Musk described as «quite a high hurdle.»
Musk has made clear he sees strategic logic in a tie-up, citing 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 board overlap is also notable: Ira Ehrenpreis, founder of venture capital firm DBL Partners, 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.
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, above the $12.86 billion analysts expected, according to a Visible Alpha consensus from S&P Global Market Intelligence. Operating revenue was $2.79 billion and net income $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, while Musk projected annual recurring revenue of $500 billion to $1 trillion by the end of 2027.
Investors responded positively after the call with analysts, which also featured SpaceX president and chief operating officer Gwynne Shotwell. Tesla shares rose just over 1% in after-hours trading, while SpaceX gained more than 5%. Tesla did not immediately respond to a request for comment.
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