Musk Backs Tesla-SpaceX Merger as SpaceX Reports First Quarterly Profit
Elon Musk, CEO of both Tesla and SpaceX, endorsed a potential merger between the two companies, stating special committees are evaluating the deal. SpaceX recently posted its first quarterly profit since going public, driven by AI compute revenue. A combination of the $1.5 trillion automaker and $2 trillion rocket firm would create the largest merger in history, though shareholder approval remains a significant hurdle.
Key points
- Elon Musk, the chief executive of both Tesla and SpaceX, publicly supported a merger between the two companies, noting that special committees of independent directors are currently assessing the terms.
- SpaceX reported a net income of $4.4 billion for the third quarter, its first quarterly profit since going public, with revenue jumping 161 percent to $14.6 billion, driven largely by cloud compute deals with AI firms.
- The potential combination of Tesla, valued at approximately $1.5 trillion, and SpaceX, valued at $2 trillion, would constitute the largest corporate merger in history.
- Analysts at Barclays suggest SpaceX is the likelier acquirer in an all-stock deal, estimating Musk would retain about 37% of the equity and 56% of the voting power.
- Musk cautioned that the merger is not guaranteed, noting that a deal requires a majority of all Tesla shares rather than just those cast, which he described as a high hurdle.
- SpaceX shares rose nearly 5% in after-hours trading following Musk's comments, while Tesla shares gained 2% ahead of its own quarterly earnings report.
Elon Musk has expressed strong support for a potential merger between his two most valuable companies, Tesla and SpaceX, as both firms prepare to report their third-quarter financial results. During a call with analysts, Musk confirmed that special committees of independent directors at both companies have been formed to evaluate the transaction, though he cautioned that no terms have been agreed upon and shareholder approval remains a significant challenge.
The merger speculation gained momentum following SpaceX’s announcement of its first quarterly profit since going public. The rocket and satellite company reported net income of $4.4 billion for the July-September period, a sharp turnaround from a $1.1 billion loss in the same period last year. Revenue surged 161 percent to $14.6 billion, driven primarily by its expanding cloud compute business, which has become the most profitable segment of the company. Starlink also contributed $5.2 billion in revenue, while the company’s overall operations remain in the black for the first time.
Financial analysts are closely watching the upcoming earnings reports to determine if the combined entities can sustain the heavy capital expenditure required for Musk’s artificial intelligence ambitions. Barclays recently suggested that SpaceX is the more likely acquirer in an all-stock deal, arguing that this structure would simplify the management of Tesla’s operations in China. In an all-stock scenario, Musk would hold approximately 37% of the equity and 56% of the voting power. The prospect of a merger, valued at a combined $3.5 trillion, has already moved markets, with SpaceX shares rising nearly 5% in after-hours trading and Tesla shares gaining 2% as investors weigh the strategic implications of integrating automotive, robotics, and space technologies.
Sources
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