Musk says merging SpaceX and Tesla would be a good idea as committees study terms

Musk backs combination but points to shareholders

Elon Musk said on Tuesday that merging SpaceX and Tesla would be a good idea, while stressing that the decision ultimately depends on shareholder support. He spoke during a question and answer period as part of SpaceX's third quarter earnings call.

The comment came after SpaceX acquired Musk's artificial intelligence firm xAI in February and then went public in June with the largest initial public offering on record.

At the request of shareholders of each company, SpaceX and Tesla have formed special committees of independent directors to discuss the idea. Musk said he is a conflicted party and cannot take part in those discussions. He said the committees have not reached an agreement on terms and there is no guarantee that they will.

Arguments center on AI and computing

Musk said there is merit in combining the companies as they operate around what he called the superintelligence singularity. He listed cooperation on superintelligence software, chip design, the Terafab, robotics, mass to orbit with the Starmind constellation and connectivity.

The possible overlap goes beyond cars and rockets. In public financial documents, SpaceX has indicated that the bulk of its future revenues is likely to come from orbital data centers that would provide computing backbone for artificial intelligence on Earth. Tesla has described a future built around self driving cars, robots and industrial hardware. Both businesses would need advanced computer chips and energy, and SpaceX could provide connectivity for Tesla hardware.

Control, values and regulatory hurdles

The merger would also increase Musk's control. Documents filed as part of SpaceX's initial public offering show that Musk holds more than 82 percent of voting power in SpaceX, compared with about 20 percent at Tesla. A combination could give him a majority of voting shares in the combined company, depending on valuations and negotiated agreements.

At the time of the announcement, SpaceX and Tesla had market valuations of about $2 trillion and $1.5 trillion, respectively. Musk said 50 percent of all Tesla shareholders, not only holders of voting shares, would have to approve a merger. That vote would occur only if the special committees agreed on terms.

The deal would face scrutiny from US regulators. Morningstar reported earlier this year that valuation disagreements are likely to be significant, especially among Tesla shareholders. The long term effect on SpaceX's goal of settling Mars or Tesla's earlier mass market electric vehicle ambitions remains unclear, but a combined company would most likely focus more on artificial intelligence and computing power than on Mars missions or cars.

Sources: Ars Technica