New Delhi: Elon Musk on Tuesday said that a merger between his two biggest companies, SpaceX and Tesla, would be a “good idea.”
While the tech billionaire warned that it would be premature to assume the certainty of the merger, he confirmed that special committees had been formed within both companies to examine the move.
Musk has suggested the possibility of a merger between the two companies in the past as well, citing growing overlap between their operations. Last week, British bank Barclays also floated the suggestion that a merger could be announced before Tesla’s annual meeting in December.
Stock prices for both companies went up after the comment. While shares of SpaceX rose 8 per cent, Tesla’s shares rose 1.8 per cent. The space tech company had also posted its first profit as a public company in the third quarter of this year.
Tesla, an electric car company, is valued at roughly $1.5 trillion. SpaceX, which manufactures space rockets and Starlink internet satellites, is valued at $2 trillion. A combination of the two companies would mark one of the largest mergers in history.
‘Merit in combining the companies’
Musk recently launched Terafab, a combined effort to manufacture computer chips between SpaceX and Tesla. Additionally, SpaceX acquired X and xAI earlier this year, before it went public. Both these moves point to Musk’s attempts at consolidating his companies, signalling that he sees them as operating more effectively when working together.
A full merger between SpaceX and Tesla would make sense considering both companies do work around chips, artificial intelligence, software and more, the BBC reported.
“I do think there’s a lot of merit to combining the companies as we are pretty much in the superintelligence singularity, and there’s a lot to be gained from cooperating on developing superintelligence software, chip design, the Terafab obviously, robotics, mass-to-orbit with the Starlink constellation, connectivity,” Musk said.
The merger, however, would ultimately be decided by shareholders. At least 50 per cent of Tesla’s shareholders would need to approve the merger—something Musk has described as “quite a high hurdle to achieve”.
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Benefits of the merger?
With Musk owning just under half of SpaceX and nearly a fifth of Tesla, analysts have said that a merger would give him control of the combined entity, Reuters reported.
Justus Parmar, Chief Executive Officer at Fortuna Investments, pointed to another benefit of bringing SpaceX and Tesla together in one place, for investors to back.
“Tesla runs a high-margin, cash-generative automotive business and there’s more growth to come with the robotaxis on the way. That cash flow could help support SpaceX’s bottom line and fund its very capital-intensive space exploration and launch goals, including orbital data centers,” he said.
(Edited by Ratan Priya)