The boards have formed special committees of independent directors at shareholders' request, Musk said on SpaceX's earnings webcast, but no terms have been agreed. Tesla rose 3.6% against 1.3% for the Nasdaq-100, a day when the AI and chip trade also rallied.
The most important thing Elon Musk said about a combination of Tesla and SpaceX is what he will not be doing: taking part in the discussion.
On SpaceX's third-quarter webcast, which began at 4:30 p.m. Eastern on Tuesday, Musk, who is chief executive of both companies, said the boards of Tesla and SpaceX have each formed special committees to discuss the idea of a merger. The committees were formed "at the request of shareholders," he said, and consist of independent directors. Because "I'm a conflicted party, I can't actually be in the discussions of the special committees."
He added that he thinks a combination would be a good idea, "but it's really up to the special committees of both companies." The committees, he said, "have not reached agreement on the terms of any transaction. And obviously, there's no guarantee that they will." He also said there is "a lot of merit to combining the companies."
What was said, and what was not
What Musk described is a process, not a deal. He did not give a price, an exchange ratio or a timetable, though he noted that a merger would need a vote of 50% of all shares, which he called "quite a high hurdle." The companies have not publicly named the committee members or their advisers.
SpaceX's filing for the webcast, an 8-K accepted Tuesday at 4:00 p.m., set out the call time. Tesla filed its annual-meeting proxy on Oct. 19. Neither filing's text that was available Wednesday afternoon described the committees.
The size of the question
At about 1:48 p.m. Wednesday, SpaceX had a market value of about $2.15 trillion, based on the 13.58 billion shares in its third-quarter filing, and Tesla about $1.529 trillion, a combined $3.68 trillion. No terms exist, and the figure describes today's market values, not a deal value.
What the stocks did
Tesla closed Tuesday at $373.71. In extended trading during the webcast window it rose to about $380, though the exact minute of Musk's remarks is not known, so the move is a coincidence in time and not a measured reaction. On Wednesday it traded at $387.22, up 3.62% at about 1:48 p.m., against a 1.27% gain for the Nasdaq-100 ETF and 0.47% for the consumer discretionary sector fund. SpaceX rose 7.23% to $158.47 from $147.79.
Tesla's outperformance of about 2.3 percentage points over the Nasdaq-100 is not clean evidence that the market is pricing a merger. The AI and chip trade rallied the same day, after SpaceX's results: Nvidia was up 2.44% and Super Micro 9.38%. Tesla also reports results after Wednesday's close, so positioning ahead of earnings is a competing explanation.
Two readings
One reading is that this is the start of a governed path. Both boards formed committees of independent directors, the standard device for a conflicted transaction, in response to shareholders. Musk argues for the strategic merit, and Tesla's shares are higher.
The other reading is that it is a statement from a conflicted chief executive that creates a long process with unknown terms. Musk himself said there is no guarantee, and a deal's terms would decide which group of shareholders benefits.
What to watch
Tesla's results and call, at 5:30 p.m. Eastern Wednesday, which are the first chance for Tesla itself to comment; any filing naming committee members, advisers or mandates; any proposed exchange ratio; and Tesla's and SpaceX's closes. Anything filed by either company would be the first document to describe the process in the company's own words.