Elon Musk is musing again about another merger within his portfolio of companies — this time between two of his largest, SpaceX (SPAX.PVT) and Tesla (TSLA). For shareholders of the electric vehicle maker, however, it might not be a good thing.
Per CNBC, Musk has discussed with colleagues the possibility of folding the companies together, according to sources. Tesla employees said many expect a transaction to “eventually take place,” and the topic is openly discussed internally, as the two companies have already worked together on shared collaborations.
“In our view, there is a growing chance that Tesla will eventually be merged in some form into SpaceX/xAI over time. The view is this growing AI ecosystem will focus on Space and Earth together … and Musk will look to combine forces/technologies over time,” Wedbush analyst Dan Ives wrote in a note to clients earlier this year. xAI, Musk’s artificial intelligence startup that includes its Grok chatbot and X.com, merged with SpaceX in February.
In corporate circles, the “synergies” created when companies merge, like sharing resources and cutting costs to supposedly provide better products and services, are almost cliché.
In this case, however, although the two firms are sharing resources and working together on projects like the upcoming Terafab chip plant and orbital data centers, a tie-up would really be about one thing: control.
According to SpaceX’s recently filed IPO prospectus, Musk already owns much of SpaceX, and special voting shares make him an almost one-of-one shareholder. Musk’s special voting shares, known as Class B shares, have 10 votes each. His 5.5 billion Class B shares — 94% of SpaceX Class B shares in total — effectively give him 85% control of the company.
With so much control over SpaceX, as well as his holdings in Tesla (a roughly 20% stake), Musk would be effectively negotiating with himself and could give favorable terms in such a way that he could control the merged entity with the viselike grip that he has over SpaceX.
Luckily for Tesla investors, they would still get to vote on such a merger. Musk has a large Tesla stake but not a controlling one. Shareholders could vote a merger down if they don’t like the terms. Whether that vote serves as a meaningful check depends on how much Tesla shareholders want a piece of SpaceX.
“SpaceX’s balance sheet means that any merger will be a stock deal,” Columbia Business School’s Michael Ewens, a corporate finance and private equity expert, told Yahoo Finance. “If it were cash, Tesla shareholders would have much less to worry about.”
