Abstract:
Elon Musk has finally made it clear what he has never said publicly: He fully supports the merger of his two most valuable companies, SpaceX and Tesla. It would be the largest corporate deal ever. Now it's time to race against time to complete the mission.
Musk made the above statement on the first of two consecutive earnings calls. This is also his clearest public support for the merger plan so far. Now, the world's richest man is at a moment of extraordinary influence. He has repaired his relationship with U.S. President Donald Trump, reopened access to the White House and rode the wave of investor enthusiasm. But neither of these advantages may be sustainable for long.
According to people familiar with the matter, as Trump is about to enter the second half of his final presidential term and market turmoil may shake the optimism that supports Musk's business empire, relevant parties are pushing to announce the transaction no later than the first half of 2027 to ensure that the merger can be completed during the current administration. The two companies currently have a combined market value of approximately US$3.7 trillion. The move would also further solidify Musk's control over his companies before the political and financial environment may become less favorable.
The U.S. midterm elections are right around the corner and will be held in less than two weeks. If the Democrats win control of either house of Congress, Musk and his companies may face investigations, and the president, who has gradually entered the "lame duck" stage, will be further constrained. At the same time, if the sell-off in chip and artificial intelligence (AI) stocks continues, it could also erode the investor support necessary to complete such a bold deal.
“Musk and his advisers certainly want to seize this window.” Bill Birmingham, director of research at REX Financial, said, “The current timing is both favorable and critical.”
Neither SpaceX nor Tesla responded to requests seeking comment on the target timeline for the merger.
Musk was as understated as ever in expressing his support for such a major project. He called the merger of the two companies "a good idea" and said he would recuse himself from related matters and leave the details to a special committee. He cautioned that winning support from Tesla shareholders might not be easy and said neither committee had yet finalized specific terms.
The timing of the deal will depend on when Tesla’s board becomes comfortable with the specifics, people familiar with the matter said. The people spoke on condition of anonymity because of private discussions. At SpaceX, getting shareholder approval poses less of a hurdle because Musk controls more than 80% of the company's voting rights. The situation at Tesla is trickier. Musk owns about 20% of the company, but less than a year ago, Tesla's board and shareholders approved a $1 trillion compensation package for the CEO.
Before this week, Musk had already released signals that SpaceX and Tesla would merge in some less straightforward, but not particularly subtle ways. On October 15, Tesla showed off a Roadster prototype designed in cooperation with SpaceX. The car was also equipped with air thrusters, allowing it to rush up an inverted ramp and fly over other Tesla models in a kicking motion.
SpaceX and Tesla already have business ties, the most notable of which is that the two parties are collaborating to build a semiconductor factory called Terafab in Texas. Behind the scenes, the two companies are also increasingly paving the way for joint operations, with artificial intelligence (AI) being a thread running through them.
Related articles:
EU lawmakers warn: The expansion ambitions of Musk’s SpaceX may pose a “danger” to Europe
Comments