Musk advisers push Tesla-SpaceX deal before Trump exits

Advisers to Elon Musk want to announce a merger of SpaceX and Tesla ↗ 5.21% by the first half of 2027 so the deal can close while President Donald Trump is still in office, Bloomberg reported, citing people familiar with the matter. The two companies are worth about $3.7 trillion combined, which would make it the largest corporate transaction ever attempted. Terms have not been agreed.bloomberg.com+1

Bloomberg said the deadline reflects worry that political and market conditions could turn against the deal. The U.S. midterm elections are less than two weeks away. If Democrats win either chamber of Congress, Musk and his companies could face investigations, and Trump would be closer to lame-duck status, according to a summary of the report. A sustained selloff in chip and AI stocks could also weaken investor support.bloomberg.com

Musk Backs the Idea

Musk announced on Oct. 20 that both companies had formed special committees of independent directors to study a merger. He said he is staying out of the talks because he is a "conflicted party." Even so, he cautioned on SpaceX's earnings call that people who treat a merger as certain are "overstating it." He added that "the special committees have not reached agreement on the terms of any transaction," Yahoo Finance reported.finance.yahoo.com+1

"Musk and his advisers certainly want to take advantage of this window," Bill Birmingham, head of research at REX Financial, told Bloomberg. Morningstar ↗ 0.18% analyst Nicolas Owens said SpaceX's rebounding share price makes its stock a useful "currency to do a deal," according to the same report. Tesla and SpaceX shares both slipped in overnight trading after the news.finance.yahoo.com

Approval Hurdles

Musk controls more than 80% of SpaceX's voting power, so approval there should be easier. At Tesla he owns about 20%, which makes winning over shareholders harder, per the Bloomberg-based summary. Musk said a Tesla deal would need support from 50% of all outstanding shares, not just half of the votes cast. JPMorgan ↗ 0.74% said SpaceX's sensitive U.S. defense contracts and Tesla's large manufacturing base in China pull in opposite directions when it comes to regulators. The bank expects any deal to be an all-stock transaction led by SpaceX.investinglive.com

If the deal goes through, it would add more than $110 billion to Musk's personal wealth, according to the Bloomberg Billionaires Index. Barclays ↗ 2.44% analysts estimated Musk could hold 56% of the voting power in the combined company, Morning Brew reported.news.futunn.com+1

AI as the Common Thread

The two companies are already partners on Terafab, a chip plant in Texas. On Tesla's Oct. 21 earnings call, Musk said they still need to "figure out what the relative split is" on Terafab's costs, which he expects to exceed $100 billion over the long term, Yahoo Finance reported. Bloomberg said that AI, a business neither company was originally built around, is the main reason for the combination. SpaceX's AI revenue has already overtaken its connectivity business.bloomberg.com+1