Musk says SpaceX, Tesla form committees to weigh merger

Elon Musk said Tuesday, October 20, that SpaceX and Tesla ↗ 3.41% have each formed special committees of independent directors to discuss a possible merger. Bloomberg described the step as a preliminary move toward what would rank as the largest corporate tie-up of all time. Musk, who is CEO of both companies, made the remarks on SpaceX's third-quarter earnings call. He said the committees have not agreed on the terms of any deal and may never do so.theverge.com+1

A 'kabuki dance' without Musk

Musk said the committees were set up at shareholders' request. Because he is "a conflicted party," he said, he cannot take part in their talks, and he called the process "an odd kabuki dance where two groups of people are talking and I cannot be in the conversation," according to a transcript excerpt from The Fly. He also cautioned against treating a deal as a certainty. He said Tesla would need "a 50% vote of all shares, not just those who vote," which he called a high hurdle.tipranks.com

He still made the case for combining the companies. "I do think there's a lot of merit to combining the companies," Musk said, adding that "there's a lot to be gained from cooperating on developing superintelligence software." He also cited chip design, robotics and launch capacity as areas where the two could work together. In July, Musk had said a combination could not be discussed on an earnings call and would have to go through "the appropriate process."bloomberg.com+2

Results lift the stakes

The comments came after SpaceX said third-quarter revenue rose 161% to $14.58 billion, beating estimates as AI revenue grew more than ninefold, according to Reuters Thomson Reuters Corporation ↗ 2.16%. The company reported net income of $4.4 billion. Before the call, "When will SpaceX merge with Tesla?" was one of the most upvoted investor questions on both companies' Q&A platforms. Tesla is scheduled to report its own results on Wednesday, October 21.virginiabusiness.com+1

Earlier this month, Barclays ↗ 1.21% said a deal could be announced before Tesla's December 3 annual meeting. The bank sees SpaceX as the likelier buyer in an all-stock transaction. It estimated Musk would own about 37% of a combined company but control roughly 56% of its votes. Musk currently holds about 20% of Tesla.finance.yahoo.com+1

Governance questions

The two companies are already closely linked. Tesla's $2 billion investment in xAI turned into SpaceX shares after SpaceX acquired the AI company. Tesla's new proxy filing shows that Ira Ehrenpreis, a Tesla director classified as independent, has sat on SpaceX's board since February. The filing also introduces a retail auto-voting program that will apply to future shareholder votes. Electrek's reading of the proxy was that Tesla's board is lining up for a SpaceX deal, though Tesla has not proposed one.cnbc.com+1