Independent directors at both companies will discuss a possible combination, Musk said on SpaceX's earnings call, adding that no terms are agreed and that Tesla approval would face "quite a high hurdle." The two companies were worth about $3.5 trillion together at Tuesday's close. Tesla reports after the bell on Wednesday.
The man who runs both companies thinks a merger is a good idea. He also says it is not his decision, nothing is agreed and the vote would be hard to win.
Elon Musk said on SpaceX's third-quarter earnings call, which began at 4:30 p.m. Eastern on Tuesday, that SpaceX and Tesla have each formed a special committee of independent directors to discuss a potential combination. He said the committees were formed at the request of shareholders and that, as a conflicted party, he is excluded from the discussions.
"At this point, the special committees have not reached agreement on the terms of any transaction. Obviously, there's no guarantee that they will," Musk said. "I think it would be a good idea, but it's really up to the special committees of both companies."
Neither company had filed a statement on the committees with regulators as of early Wednesday.
Two very different companies
At Tuesday's close, SpaceX had a market value of about $2.0 trillion, based on the share count in its own filings, and Tesla about $1.48 trillion, a combined $3.5 trillion or so. SpaceX, which listed in June, is now roughly 36% larger than Tesla by market value.
Musk pointed to work the two already share. He cited artificial intelligence software, robotics and projects including one he called Terafab as reasons there is "a lot of merit to combining the companies."
The hurdle Musk named
The structure is where the value will be decided. Musk said Tesla would need the approval of a majority of all outstanding shares, not just of shares voted, which he called "quite a high hurdle." He controls a majority of the voting power at SpaceX, so the harder approval sits on the Tesla side.
Some people assume a combination is a certainty, he said, "and I think that would be overstating it." "At the end of the day, the shareholders have to be supportive of this."
Tesla's annual meeting is scheduled for Dec. 3, and no merger proposal appears on its agenda. Barclays analysts were reported last week to expect an announcement either tied to the shareholder meeting or within six to 12 months.
What the tape can and cannot say
Tesla shares closed Tuesday at $373.71, up 1.54%, and were indicated about 1.6% higher near $379.70 at about 5:40 a.m. Eastern on Wednesday. SpaceX closed at $147.79 and was indicated about 9% higher near $161.50, but its move also reflects quarterly revenue that beat forecasts by a wide margin, so it cannot be read as a verdict on the merger remark.
For Tesla, the more useful number will come after Wednesday's close, when the company reports its own quarter and Musk can be asked about the committees on a second call.
Market implications
One reading is that a formal process has begun for a combination with real strategic logic. The companies already cooperate on AI, chips and robotics, independent committees exist on both sides, and the CEO supports the idea.
A second reading is that the decisive questions are price and approval, not logic. With no terms, no timetable and a vote threshold Musk himself called high, the value transfer between Tesla and SpaceX holders depends on an exchange ratio that does not yet exist. Tesla holders would be the ones asked to clear the high bar.
What to watch
Tesla's third-quarter release and call after Wednesday's close; any filing naming committee members or advisers; any exchange-ratio framework; and Tesla's Dec. 3 meeting agenda. A filing that names advisers to the committees would mark the first step from discussion toward negotiation.