Elon Musk's public endorsement this week of a potential $3.5 trillion merger between SpaceX and Tesla has rattled insiders involved in the discussions, who worry his comments could invite shareholder scrutiny and delay the process by several weeks, according to a person with direct knowledge of the talks.
Musk, who is chief executive of both companies, told investors on Tuesday that the two were examining what would be the largest corporate transaction in history, called a merger "a good idea," and revealed that both had formed special committees to evaluate it. The disclosure created a "mess" for the process, the person said, because it could lead to questions about how well Tesla shareholders' interests would be represented.
The concerns echo Tesla's 2016 acquisition of SolarCity, another Musk-affiliated deal that sparked years of shareholder litigation over his role in it. In related-party transactions of this kind, independent board members typically oversee the process precisely to safeguard public shareholders — a discipline that a chief executive's public enthusiasm can complicate.
The talks themselves are at an early stage, three sources familiar with the matter told Reuters. SpaceX approached Tesla in recent weeks, advisers have been hired, and the companies are discussing a range of structures, including a SpaceX acquisition of Tesla or a merger under a newly formed holding company, possibly in an all-stock deal. Tesla, SpaceX and Musk did not respond to requests for comment.
The strategic logic, as Musk tells it, is convergence: Tesla and SpaceX increasingly overlap in artificial intelligence, robotics, advanced manufacturing, satellite communications and computing infrastructure, including data centers on Earth and potentially in orbit. "I do think there's a lot of merit to combining the companies as we are pretty much in the superintelligence singularity, and there's a lot to be gained from cooperating on developing superintelligence software, chip design, the Terafab obviously, robotics, mass-to-orbit with the Starmind constellation, connectivity," he said.
A combination would also consolidate Musk's influence: he owns nearly a fifth of Tesla and holds voting control at SpaceX. Whether shareholders and regulators see the same merit is now the question — and thanks to Musk's own remarks, it is one the deal's architects will have to answer in public, under a spotlight they did not choose, potentially for weeks longer than planned.
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