Elon Musk says it might be time for two of his biggest companies to become one. SpaceX and Tesla are exploring a merger that would create a company worth roughly $3.5 trillion, which would make it the largest merger in history.
Musk revealed Tuesday on SpaceX's earnings call that both companies have formed special committees of independent directors to look at a possible deal, Axios reported.
"I think it would be a good idea," Musk said. But he cautioned that calling a deal certain would be "overstating it."
Why Musk Wants to Combine the Companies
Musk said there is "a lot of merit to combining the companies" because both are pouring resources into artificial intelligence and autonomous technology.
He pointed to several areas where the two companies could benefit from working together, including AI software, chip design, robotics and launching heavy loads into orbit, Yahoo Finance reported. He also mentioned Starmind, a space-based AI data center network that SpaceX is developing. SpaceX's launch business has also been on a roll, with its Starship rocket reaching Earth orbit for the first time last month.
The line between the two businesses has already been blurring. Tesla and SpaceX have increasingly teamed up on chips and AI projects, and Tesla recently unveiled a Roadster with SpaceX thrusters. Musk leads both companies as CEO.
Jerayr Haleblian, a mergers expert at the University of California, Riverside, said the idea has "sound logic," pointing to the companies' shared strengths in robotics, AI and energy, Al Jazeera reported. He said he expects "synergistic innovation" to follow.
What Stands in the Way
A merger is far from a done deal. Because he runs both companies, Musk said he cannot be directly involved in the talks. "Because I'm a conflicted party, I can't actually be in the discussions," he said.
The committees "have not reached agreement on the terms of any transaction," Musk said, and there is no guarantee they will. "They've got to come up with something, and then that's got to be put to the shareholders as a vote," he added.
Shareholder approval could be the biggest hurdle. Musk said a merger would need the support of 50% of all Tesla shares, not just the shares that are voted, which he called "quite a high hurdle."
Not everyone thinks that will be a problem. Gene Munster of Deepwater Asset Management estimated a 95% chance of a deal within two years. "Believe me, shareholders would support this," he wrote.
SpaceX's Big Quarter
The merger news came as SpaceX reported its first quarterly profit since going public in June. The company posted a $4.4 billion profit for the July-to-September quarter, compared with a $1.05 billion loss a year earlier. For the first nine months of the year, SpaceX's profit totaled $413 million, compared with a $2.59 billion loss over the same stretch last year.
AI was SpaceX's biggest moneymaker, bringing in $7.56 billion in revenue, while its Starlink satellite internet service brought in $5.25 billion. Musk said he expects SpaceX's annual recurring revenue to top $500 billion by the end of 2027.
Investors liked what they heard. SpaceX shares rose more than 8% in after-hours trading, and Tesla shares gained about 1.8%.
How Big Would It Be?
SpaceX is currently valued at more than $2 trillion, while Tesla is worth nearly $1.5 trillion. Together, they would dwarf the $1.25 trillion deal that combined SpaceX with Musk's AI company, xAI, in February.
The talks are the latest headline-making move from Musk, who recently said he wants to give every child in America a share of SpaceX.
Tesla is set to report its own quarterly results Wednesday, and investors will be watching for any new details about the possible deal.
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