SpaceX announced on Thursday that any possible merger with Tesla will need the approval of Elon Musk, despite the fact that he has stepped back from discussions due to conflict of interest concerns.
On Tuesday, Musk, who is reportedly the richest person in the world, suggested that merging SpaceX and Tesla could be “a good idea” and mentioned that special committees had been formed to explore this possibility.
In a regulatory update shared on Thursday, SpaceX stated that “no decisions have been made by our special committee regarding any potential combination, which would also need additional approval from our special committee, board of directors, and controlling shareholder.”
Many analysts on Wall Street believe that a merger between Tesla and SpaceX is more a question of “when” rather than “if,” though they differ on what Tesla shareholders should be compensated in such an arrangement.
Musk’s recent public endorsement of the potential $3.5 trillion merger has raised some concerns among insiders involved in the discussions. They worry that his remarks might attract scrutiny from shareholders, possibly delaying the process by weeks, as per reports from Reuters.
Musk, owning nearly 20% of Tesla, has significant voting power at SpaceX. Analysts argue that a merger would give him greater control over the new entity, potentially amplifying his influence.
This situation has created complications, with concerns about how the interests of Tesla shareholders might be represented, according to a source familiar with the dialogue.
Joining the two companies could streamline decision-making, which often involves approvals from multiple boards and shareholders. A merger could enable better allocation of resources, talent, and infrastructure towards more promising ventures, especially as the firms push further into AI.
Tesla has recently reduced its annual capital expenditure estimate to around $20 billion, down from a previous projection of over $25 billion. Meanwhile, SpaceX anticipates capital expenditures in the range of $35 billion to $40 billion for the fourth quarter.
As a significant contractor for the U.S. military, intelligence agencies, and NASA, SpaceX plays an important role in the aerospace sector. Tesla, on the other hand, remains closely linked to China, particularly through its Shanghai facility, which is vital for production and sales. Following these developments, shares of SpaceX saw a slight increase of about 1%, while Tesla experienced a minor decline in after-hours trading.
