Elon Musk said Tuesday that SpaceX and Tesla are exploring a merger — a business combination that one Wall Street analyst said could be worth nearly $5 trillion, making it the largest deal in the company’s history.
“Both SpaceX and Tesla have formed special committees to discuss this idea at the request of shareholders, and these special committees are made up of independent directors,” Musk said during SpaceX’s earnings call with investors, adding that he “sees a lot of merit in combining the companies.”
Tesla’s stock price rose $14.01, or 3.8%, to $387.72, while SpaceX shares jumped $14.62, or 9.9%, to $162.41 in morning trading. Here’s what you need to know about a possible merger between the companies.
How big would a SpaceX-Tesla merger be?
The merger would likely be valued at close to $5 trillion, Dan Ives, partner and senior managing director at investment firm Yorkville Ives & Co., told CBS News.
SpaceX is currently valued at $1.98 trillion, while Tesla’s market capitalization stands at around $1.5 trillion. But Tesla shareholders will likely demand a premium for their shares to agree to the merger, Ives noted.
“For the merger to be passed by the shareholders, there has to be a higher price for Tesla – possibly in the $500/$550 per share range in our view,” he said.
That would make the combined company one of the most valuable in the world, rivaling that of the most highly valued businesses such as chipmaker Nvidia, worth $5.2 trillion, or Apple, valued at $4.95 trillion.
What is the strategic reason for the merger of the companies?
The main reason for combining SpaceX, a space exploration and AI company, with an electric car maker is to position them for a future in which artificial intelligence, or what Musk calls “super intelligence”, will become more and more essential in everyday life.
“There is a lot to be gained from collaborating on the development of super intelligence software, chip design, the terafab obviously, robotics, mass and orbit with the Starmind constellation,” Musk said in Tuesday’s earnings call.
While Tesla’s primary business remains manufacturing EVs, Musk has signaled that the company is shifting away from traditional motor vehicles. In January, Tesla’s CEO said the company would phase out Production of its Model S and Model X vehicles.
Instead, the company is changing course to focus on developing autonomous products, such as self-driving taxis and humanoid robots. Musk said Tesla will eventually produce 1 million humanoid robots a year as the company transitions into an “autonomous future.” The humanoid robot, called Optimus, could hit the market in 2027, Musk said said in January.
AI is essential to Optimus, allowing it to follow orders and take on various tasks, as well as Tesla’s pressure and self-driving robotic axis.
Meanwhile, SpaceX owns xAI, Musk’s AI unit that created Grok, the chatbot used in social media app X and other Musk-owned products. Musk’s planned Terafab chip factory will tie all the businesses together by manufacturing semiconductors for both SpaceX and Tesla.
Combining the businesses makes sense for a “number of strategic AI and data-driven reasons, and this is the right move for Musk,” Ives said in a research note.
What are the hurdles to a merger?
On Tuesday’s conference call, Musk emphasized that a merger of SpaceX and Tesla is a long way off, noting that a majority of Tesla shareholders would have to vote for the combination.
“I think some people out there assume that a merger between SpaceX and Tesla is a certainty, and I think that would be overstating it,” he said.
Musk added: “At the end of the day, the shareholders have to support this, and especially on the Tesla side, we need a 50% vote of all shares, not just those who vote, but all shareholders. And that’s a pretty high hurdle to try to achieve.”
Still, Ives admits an 80% to 90% chance the merger will happen by the end of 2027.