Musk says a Tesla–SpaceX merger has “a lot of merit,” but warns it is not a certainty

Elon Musk confirmed on Tuesday, October 20, that Tesla and SpaceX are exploring a merger. Speaking on SpaceX's earnings call, he said both companies have formed special committees to evaluate a combination and that he sees “a lot of merit” in it, given their overlapping work in artificial intelligence, chips and robotics. Together the two are worth about $3.5 trillion, according to Al Jazeera and The Independent.

Musk also tempered expectations. He said the committees have not reached agreement on the terms of any transaction, that he is “a conflicted party” and cannot take part in their discussions, and that any proposal would have to go to a shareholder vote.

Why it matters

At Tuesday's closing prices, SpaceX was worth close to $2 trillion and Tesla almost $1.5 trillion, according to Brazil's Exame. Musk owns roughly 20% of Tesla and 45% of SpaceX. On the Tesla side, he noted, a deal would need the support of half of all outstanding shares, “not just those who vote,” a higher bar than a simple majority of votes cast. Tesla's agenda for its December 3 annual meeting does not include a merger.

The idea is not new. In January, Bloomberg reported that SpaceX was weighing a tie-up with either Tesla or xAI, Musk's AI company. The xAI combination went through in February, and SpaceX listed on the Nasdaq in June under the ticker SPCX.

What SpaceX reported

In the third quarter, according to its release filed with the SEC, SpaceX posted revenue of $14.6 billion, up 161% year over year, and net income of $4.4 billion, compared with a $1.1 billion net loss a year earlier. Its AI segment was the largest source of revenue ($7.56 billion), followed by connectivity, which includes Starlink ($5.25 billion). Shares of both SpaceX and Tesla rose in after-hours trading following the call.

The next chapter comes quickly: Tesla reports its own quarterly results on Wednesday, October 21, after the US market close, with a call at 5:30 p.m. Eastern. Investors will be listening for Musk to address the merger from the carmaker's side.