Elon Musk Weighs Historic SpaceX-Tesla Merger, Citing AI Synergies

Elon Musk, speaking at the Viva Technology conference in Paris on June 16, 2023, has disclosed that SpaceX and Tesla are evaluating a potential merger. This union could establish a corporate entity valued at over $3 trillion.

Musk announced on Tuesday that both of his major companies have formed special committees to investigate the feasibility of a merger. The CEO of SpaceX and Tesla indicated that the concept holds "a lot of merit," particularly due to the companies' overlapping work in artificial intelligence. However, he cautioned that the committees have not yet reached any consensus on a formal proposal.

"They’ve got to come up with something, and then that’s got to be put to the shareholders as a vote," Musk stated during a SpaceX earnings call. He further explained that for the merger to proceed, it would need to overcome the "high hurdle" of securing a 50 percent approval from Tesla shareholders. Musk, currently the world's wealthiest individual with a net worth exceeding $900 billion, emphasized, "Some people out there assume that a SpaceX and Tesla merger is a certainty, and I think that would be overstating it. Do I think it would be a good idea? Yes. But at the end of the day, the shareholders have to be supportive of this."

Should a SpaceX-Tesla merger materialize, it would represent the largest corporate consolidation in history, significantly surpassing the $1.25 trillion combination of SpaceX and xAI in February. Based on current valuations, SpaceX and Tesla are ranked as the world's seventh and eleventh largest companies, respectively, with a combined market capitalization of approximately $3.5 trillion.

Jerayr Haleblian, an expert in mergers and acquisitions at the University of California, Riverside, commented that a SpaceX-Tesla merger possesses "sound logic." He noted, "In some sense, the core of both businesses are expert manufacturing. From a technology transfer perspective, there should be significant flows of information between businesses." Haleblian added, "Both firms seem to have expertise in robotics, AI, energy infrastructure. Accordingly, the core skills are applicable across industry sectors. The key to success will be synergistic innovation, which I anticipate will follow from acquisition."

Following Musk's remarks, shares of SpaceX, which recently held its largest Initial Public Offering (IPO) of all time in June, saw an increase of over 8 percent in after-hours trading. Tesla shares also experienced a gain of 1.8 percent.

These comments coincided with SpaceX reporting its first quarterly profit, attributed to robust growth in its AI and satellite-internet divisions. The company recorded a net profit of $4.4 billion in the July-September quarter, a substantial turnaround from a net loss of $1.05 billion in the same period last year. Year-to-date profit for the first three quarters reached $413 million, compared to a loss of $2.59 billion a year prior.