Tesla: merge with SpaceX?

Tesla's independent directors must decide whether to negotiate a merger with Elon Musk's other company

On the evening of 20 October, on SpaceX's quarterly earnings call, Elon Musk said Tesla and SpaceX had each formed a special committee of independent directors "at the request of shareholders" to discuss merging the two companies. He runs both and cannot take part in either committee's talks. He sees "a lot of merit to combining the companies", citing shared work on AI, chips and robotics, and a chip plant the two plan together. To assume a merger is certain, he said, "would be overstating it".

A merger with SpaceX, 21 October 2026

Tesla's committee has to decide what to tell the board: whether to negotiate at all, and on what terms. No deadline forces the call, and no merger is on the agenda of the annual meeting on 3 December.

At the close on 20 October SpaceX was worth $2.01 trillion and Tesla $1.48 trillion, so a merger at market prices would leave Tesla's shareholders less than half the combined company. SpaceX's third-quarter revenue, which now includes xAI, rose 161 per cent to $14.58 billion, more than half of it from the AI business; net income was $4.4 billion. Tesla's second quarter brought revenue of $28.2 billion, a quarter more than a year earlier, and net income of $1.1 billion. Its shares are down 16.9 per cent this year, and it reports the third quarter after the market closes on 21 October.

Three frames of a rocket booster descending beside a tall launch tower and being held by its arms — SpaceX's Super Heavy booster returns to Starbase in Texas and is caught by the launch tower's arms on Starship's fifth test flight, 13 October 2024. Photos: Steve Jurvetson, composite by Wikimedia Commons editors, CC BY 2.0.

Tesla's proxy statement, filed on 19 October, puts Musk's stake in Tesla at 19.8 per cent; Fortune reports he owns about 45 per cent of SpaceX and controls 82 per cent of its votes. The companies are already tied: in January Tesla agreed to put about $2 billion into xAI, Musk's artificial-intelligence company, and when SpaceX bought xAI in February the agreement became one to buy SpaceX shares instead.

A deal would need the votes of a majority of all Tesla's outstanding shares, not only of those cast. Musk's own shares are among them: if he voted for a deal, other holders would need to add about 30 per cent of all shares.

The committee has three courses. It can negotiate price and conditions together, now: Tesla's holders would gain a share of a faster-growing company and end up a minority beside Musk, who would own about a third of it, Fortune estimates. It can decline and keep the companies working together through contracts like the xAI agreement: Tesla keeps its own valuation and turns down talks that, Musk says, shareholders asked for. Or it can agree the conditions before any talk of price, such as whether Musk's shares may count in the vote: the other holders keep a say over any deal, and the question hangs over Tesla's shares for months.

Your call

It is 21 October 2026 and you sit on Tesla's special committee of independent directors. Elon Musk, who owns 19.8 per cent of Tesla and controls SpaceX, sees merit in combining the companies, but he cannot take part in your talks. You can open negotiations now, decline and keep working with SpaceX through contracts, or agree the conditions of any deal before any talk of price. Decide what you recommend to Tesla's board, say what Tesla's other shareholders gain and give up under your plan, and name the fact or result that would change your recommendation.