Musk Weighs Folding Tesla Into SpaceX in What Could Be History’s Biggest Merger

Elon Musk has spent two decades running Tesla and SpaceX as separate companies with increasingly overlapping resources. This week, the two firms took a formal step toward becoming one.

On SpaceX’s third-quarter earnings call on Oct. 20, Musk said each company’s board had set up a special committee of independent directors to consider a merger, in his words “at the request of shareholders.” Musk said he is not on either committee, because as CEO of both companies he is a conflicted party under securities rules.

He voiced support for the idea, saying he believes a combination would be a good one. He also played down expectations: those who assume a deal is certain, he said, are overstating it. The committees have reached no agreement and may never do so.

Fortune puts the combined market value at about $3.5 trillion, with SpaceX near $2 trillion and Tesla close to $1.5 trillion. Musk owns roughly 20% of Tesla and 45% of SpaceX, where he controls about 82% of the votes. He would hold about a third of a merged company.

Any deal would need shareholder approval at both companies. On Tesla’s side, Musk said, it would take a majority of all outstanding shares, not just those voted, which he called a high hurdle.

His public comments may also slow things down. A person with knowledge of the talks told Reuters that his remarks could draw shareholder scrutiny and delay the process by several weeks, since committee negotiations are normally expected to run without public pressure from a conflicted party.

The talks come as Tesla reports flat revenue but a positive free cash flow of $1.5 billion for the third quarter. Analysts had expected a deeply negative figure, and the company had been in the red the previous quarter, at about minus $1.1 billion.

Operating cash flow was $6.3 billion, against capital spending of about $4.7 billion. That spending is going into AI and robotics. Tesla launched its Cybercab into its Austin robotaxi fleet during the quarter and said cumulative unsupervised robotaxi miles grew eightfold from the previous quarter.

Those investments underpin Musk’s push toward what he calls “physical AI,” with Tesla building robotaxis and robots and SpaceX supplying the infrastructure to connect them globally, according to The Wall Street Journal. Musk made a related argument on the call, saying there is much to gain from cooperation across software and chips as AI advances.

SpaceX is in strong shape heading into any talks. It reported 161% third-quarter revenue growth, with its AI business growing ninefold, and its shares rose about 8% in extended trading after the results.

For now, no terms, price or timeline have been announced, and the idea is at an early stage.