- Tesla and SpaceX are nearing a merger, with an announcement expected in December.
- The merger would become the largest corporate deal in history, with both companies valued at over $1 trillion.
- Both boards are negotiating the terms of the merger and governance structure, with unresolved issues regarding operations in China.
- The political environment in Washington may subject the deal to additional scrutiny.
According to a report by Bloomberg, Tesla and SpaceX are gradually approaching the possibility of a merger, with an announcement expected as early as December. The report cites informed sources indicating that the two companies have also discussed the option of delaying the announcement until early 2027. The boards and advisors of both companies are currently negotiating the terms of the deal and the governance structure of the merged entity. One key issue yet to be clarified is how much of SpaceX's shares Tesla investors will receive.
Bloomberg previously reported that the two companies initially planned to announce the deal in the first half of next year and to complete it before the end of President Donald Trump's term. Therefore, if an announcement is made in December, it would be several months ahead of schedule. Following the report, Tesla's stock price rose by as much as 1.9%, reaching US$398.35 (approximately HK$3,107), while SpaceX increased by 0.6%, reaching US$140.63 (approximately HK$1,097). SpaceX's market value after its June IPO is approximately $1.9 trillion, while Tesla's market value is about $1.55 trillion, making the merger the largest corporate deal in history.
Complexities of the Merger Deal
The report mentions that neither company has responded to requests for comment. Negotiations between the two became formal on October 20, when Elon Musk stated during SpaceX's third-quarter earnings call that an independent board committee has been established to explore the merger. Elon Musk noted that he cannot participate due to being "a party with a conflict of interest," describing the process as "a peculiar musical." He also pointed out that Tesla needs to secure 50% support from its outstanding shares, but the company only received 39.4% support in its board declassification proposal in 2025, falling short of the requirement.
China remains the largest structural issue. Sources from Bloomberg indicate that both companies still need to resolve how to separate Tesla's large and profitable manufacturing operations in China from SpaceX's government and defense contracts in the U.S. JPMorgan analyst Rajat Gupta described these two factors as "conflicting dynamics for regulatory and shareholder approval." Elon Musk has repeatedly stated that Tesla has no plans to spin off its Chinese operations, reaffirming this stance in August, prior to ARK Invest's prediction that the merger announcement would be made within the year.
Political Factors Affecting the Deal
Washington adds another layer of complexity. The Democrats gained control of Congress in this month's midterm elections and have pledged to investigate Elon Musk's business and political activities, which could subject the deal—one involving one of the Pentagon's most important launch and satellite contractors—to additional scrutiny. The report also notes that this news comes just three weeks before Tesla's annual meeting on December 3 at Giga Texas. The vote will only address three issues, primarily the reelection of Elon Musk, board chair Robyn Denholm, and JB Straubel, and does not include any merger proposals.
Any deal announced in December may require Tesla shareholders to convene a special meeting for a vote.
The two companies have already shared a growing list of projects, including the Terafab semiconductor plant located in Texas. Tesla's next-generation Roadster utilizes a cooling thruster based on SpaceX hardware, showcased last month at SpaceX's headquarters, becoming one of the most evident public examples of their overlap.
Challenges and Opportunities of the Merger
The merger talks between Tesla and SpaceX reflect the deep potential for collaboration between the two companies in technology and market sectors. However, the challenges faced during the merger process should not be underestimated, particularly regarding how to manage the separation of business operations in the Chinese market from U.S. government contracts. Additionally, the influence of political factors may further complicate the deal, especially in the current regulatory environment. These factors will impact the feasibility of the merger and future market positioning.