Musk Backs SpaceX-Tesla Mega-Merger But a Long Road Lies Ahead

A $3.5 Trillion Question

The world's richest man has publicly backed a potential combination of SpaceX and Tesla in what could be the biggest merger in history. On October 20, during SpaceX's third-quarter earnings call, Elon Musk confirmed what Wall Street had been speculating about for months: both companies have formally begun exploring a deal. He said a merger would be "a good idea," and that "there's a lot to be gained" from the two companies cooperating on AI software development, chip design, and robotics.

Together, the companies are worth about $3.5 trillion, making it potentially the biggest merger ever. Musk told investors that both businesses have formed special committees of independent directors to explore such a merger, though he said he cannot participate in those discussions because he is a "conflicted party." His enthusiasm, however, was unmistakable. The comments marked a significant shift from his more guarded tone earlier this year — the comments appeared to be the most forceful Musk has made publicly, as he had previously declined to offer an opinion one way or another following SpaceX's blockbuster July IPO.

Why It Could Make Sense

Musk argues that AI will decide where both companies go next. They are already jointly developing Terafab, an AI chip factory in Texas, while Tesla's driverless cars and Optimus humanoid robots could benefit from the computing power SpaceX is racing to build, including planned data centers in orbit.

SpaceX delivered a strong Q3 report on October 20. Top-line sales reached $14.6 billion, up 161% from a year earlier, and net income hit $4.4 billion — both well above Wall Street's targets. Tesla's picture is more complicated. Tesla reported that its net profit fell 43% to $787 million on flat revenue of $28 billion, as deliveries slipped 2%. In a combined company, SpaceX's surging revenue could help offset Tesla's figures. Barclays analysts have suggested that a merger could be announced before Tesla's annual shareholder meeting in December.

The Hurdles Are Real and Significant

On the Tesla side, Musk acknowledged the deal would require "a 50% vote of all shares, not just those who vote, but of all shareholders — and that's quite a high hurdle to try to achieve." That's an unusually demanding threshold. Every share that does not vote counts as a no, so low turnout works against the deal. Retail holders and index funds become the swing group, and both are hard to mobilize. A deal that looks attractive on paper can still stall if too many holders skip the ballot.

Regulators could challenge a Tesla-SpaceX deal over potential "vertical foreclosure" if Tesla gains exclusive access to SpaceX technology like Starlink, putting rival electric and self-driving carmakers at a competitive disadvantage. Kevin Li, an analyst at Counterpoint Research, noted that "antitrust scrutiny, national security considerations (given SpaceX's military contracts), and cross-border regulatory reviews all present significant challenges." China adds another layer of complexity — China accounted for 22% of Tesla sales last year, and China's national security authorities would pay particular attention to the deal.

What Comes Next

This is not the first time Musk has sat on both sides of a deal between his companies. Tesla's purchase of SolarCity in 2016 drew shareholder litigation precisely because the buyer and the target shared leadership and overlapping investors. Investors remember that fight, and it will shape how skeptically they read this process.

Musk has long said he wants about 25% voting control of Tesla. Under Barclays' math, a deal would give him about 37% of the combined company and roughly 56% of the votes, thanks to SpaceX's dual-class shares — a detail that critics say raises obvious conflict-of-interest questions. Whether this deal ultimately becomes a transformative chapter in corporate history or stalls under the weight of regulatory and shareholder resistance, one thing is clear: Musk has moved the conversation from rumor to reality, and the clock may already be ticking toward Tesla's December shareholder meeting.