Months of speculation about Elon Musk combining his two biggest companies moved a step closer to reality on Tuesday. On SpaceX’s third-quarter earnings call, Musk said SpaceX and Tesla have each formed a special committee to discuss a possible merger.
What Musk said
According to The Verge, Musk said the committees were set up at shareholders’ request and are made up of independent directors, though he didn’t name them. Because he is CEO of both companies, he said he is a “conflicted party” and can’t take part in the talks, calling the process “an odd kabuki dance where two groups of people are talking and I can’t be in the conversation.”
The committees haven’t agreed on any terms, and there’s no guarantee they will. Musk said any deal would go to shareholders, and on the Tesla side it would need a yes vote from 50% of all shares, not just those that vote, which he called “quite a high hurdle.” Still, he said he thinks a merger would be “a good idea,” pointing to possible cooperation on super intelligence software, chip design, the planned TeraFab chip plant, robotics and connectivity. “I feel like I’m tap dancing through a minefield,” he said, according to CNBC.
Why it matters
The Verge notes that a combined company could be worth more than $3.6 trillion, and that most analysts expect SpaceX, which has carried the higher valuation since its IPO, to absorb Tesla rather than the other way around. That could leave some Tesla shareholders unhappy. Earlier this month, a Barclays note suggested a deal could be announced before Tesla’s December 3 annual shareholder meeting.
The two companies already work together. They are building a semiconductor factory with Intel in Grimes County, Texas, SpaceX’s Grok models power AI assistants in Tesla cars, and SpaceX hardware showed up in the new Roadster’s thrusters.
Tesla reports Q3 today
Musk is back on an earnings call after the market closes on Wednesday, October 21, when Tesla reports its own third-quarter results. Its Q&A webcast starts at 4:30 p.m. CT. CNBC says analysts polled by LSEG expect earnings of 43 cents a share on $27.9 billion in revenue, compared with $28.1 billion a year ago. Tesla delivered 486,532 vehicles in the quarter, about 2% fewer than a year earlier, and CNBC reports the stock is down 14% so far this year. For the topics shareholders want covered, see our rundown of the top investor questions. SpaceX’s own numbers are in our Q3 results write-up.
Sources: The Verge, CNBC, Tesla Investor Relations.