SpaceX and Tesla Boards Form Special Committees to Review a Possible Merger

The merger question now has a process, not just a rumor — and Musk is not in the room where it will be decided.

The boards of SpaceX (Nasdaq: SPCX) and Tesla Inc. (Nasdaq: TSLA) have each formed special committees of independent directors to review a possible merger, Elon Musk said on Tuesday during SpaceX's third-quarter earnings call. The committees were created at the request of shareholders, according to Musk, who is chief executive and the largest individual shareholder of both companies. The committees have not reached agreement on the terms of any transaction, and Musk cautioned that no deal may ever emerge. The disclosure came on the same call on which SpaceX reported third-quarter revenue of $14.58 billion, up 161%, and its first quarterly profit since its June initial public offering.

Musk backs the idea — from outside the room

Musk said he supports combining the companies, but he cannot take part in the committees' work. “Because I’m a conflicted party, I can’t actually be in the discussions of the special committees, so it’s this sort of a … it’s an odd kabuki dance where two groups of people are talking, and I can’t be in the conversation,” he said. He pushed back on any assumption that a deal is done: assuming a merger is a certainty “would be overstating it,” he said, adding: “At the end of the day, the shareholders have to be supportive of this.”

Who could sit on the committees, and who cannot

Musk did not name the members of either committee, and neither company has disclosed them. What is known is the pool they must be drawn from. Tesla counts seven independent directors under Nasdaq listing standards, according to its Oct. 19 proxy filing: chair Robyn Denholm, Ira Ehrenpreis, former Tesla chief technology officer JB Straubel, Joe Gebbia, Jack Hartung, James Murdoch and Kathleen Wilson-Thompson. Neither Elon Musk nor his brother Kimbal Musk is independent. SpaceX lists six independent directors: Ehrenpreis, who also chairs SpaceX's compensation and nominating committee, Randy Glein, Donald Harrison, Steve Jurvetson, Luke Nosek and Roelef Boutha. Antonio Garcias of Valor Equity Partners — which holds a 3.4% stake in SpaceX and financed SpaceX's AI hardware purchases through leaseback arrangements — sits on the SpaceX board but is not independent.

The Tesla vote is the harder hurdle

The two shareholder votes would not be equally difficult. SpaceX's initial public offering left Musk with more than 50% voting power at SpaceX, which would make SpaceX shareholder support easier to assemble. At Tesla, by contrast, a merger would need the support of 50% of all Tesla shareholders, not just those who vote — a much higher bar, as Musk himself noted, because every non-vote counts against the deal.

Why Musk wants the two companies combined

“I do think there’s a lot of merit to combining the companies as we are pretty much in the superintelligence singularity,” Musk said. In his telling, the prize is cooperation on AI software and robotics, on Starmind, SpaceX's orbital AI data-center project, and on Terafab, the joint Tesla-SpaceX chip project. The companies already work together: Tesla sells SpaceX its energy-storage products and electric vehicles, and the two collaborate on the Roadster sports car as well as Terafab, according to MarketWatch.

The December timetable already looks unlikely

Wall Street had been gaming out a faster timetable. Barclays analyst Dan Levy floated that timing in an Oct. 14 client note, suggesting news could come before Tesla's December annual meeting — but that now appears unlikely: Tesla's proxy materials this week show a bare-bones agenda for the meeting, according to MarketWatch. Musk's comments were his most forceful public remarks on a merger to date, according to CNN; in July, after SpaceX's initial public offering, he declined to offer an opinion. Investors reacted in late trading on Tuesday: SpaceX shares rose nearly 5% in late trading, according to CNN, while Tesla shares rose a little over 1%.

What has to happen next

What to watch is whether either committee moves from review to terms, what Tesla says when it reports third-quarter earnings on Wednesday, Oct. 21, after the close, and whether any 8-K or proxy disclosure names the committee members or advisers. Almost everything that matters is still unknown: who sits on the committees, how long the review will take, what structure or consideration a transaction might carry, and whether any transaction emerges at all. Until a committee recommends terms and shareholders on both sides approve them, this remains what Musk described — two groups of independent directors talking, with the man who runs both companies waiting outside the room.