Elon Musk told Tesla shareholders on Wednesday that he had "said all that needed to be said" regarding the potential merger with SpaceX. Before analysts' questions, Tesla's head of investor relations also stated that company executives "would not answer any questions on this matter."
A day ago, Musk made the merger between these two companies with a total market value of trillions of dollars the main topic of discussion on Wall Street for some time to come. During the third-quarter financial report conference call held on SpaceX, he publicly supported the potential merger.
Elon Musk said on Tuesday, "Do I think this would be a good idea? Yes." He also revealed that both companies have established special committees to study this transaction.
Elon Musk stated that commenting on this matter publicly is like "dancing on a minefield." However, analysts, investors, and fans have long been fascinated by the so-called "Muskonomy," and they have imagined a complex entity that would combine the development of electric vehicles and humanoid robots with reusable rockets, satellite communications, and artificial intelligence.
Speculations overshadowed Tesla's financial report. The report showed a decline in car sales, with an even steeper drop in its energy business. Musk has been pitching to Wall Street a vision for Tesla's future that revolves around Robotaxi and humanoid robots, rather than car sales. However, the company's autonomous driving technology is still in development, Robotaxi services are also in a very early stage, and Optimus robots are not yet ready for mass production.
Tesla's stock price fell 3% on Thursday, and has accumulated a decline of 17% so far this year. SpaceX's stock price tumbled 9%, erasing the gains from Wednesday and pushing its price back below the opening level since its market debut in June.
William Blair Analysts wrote in a report on Thursday that Musk's push for the merger is centered around control, rather than enhancing business strength.
Analysts wrote: "We fully respect the potential for overlap and collaboration between the two companies, but we believe this is a truly unique case, as Musk is essentially operating both companies as one entity. It is difficult for us to see any significant opportunities that could only be realized through a formal merger."
Neither Tesla nor SpaceX has responded to requests for comments.
Voting Rights
At SpaceX, Musk has the final say. As the world's richest man, he holds super-voting shares with a ratio of 10 to 1, which gives him nearly 80% of the voting control. SpaceX stated in its IPO prospectus that, since it is a "controlled company," Class A shareholders do not enjoy the same "protections" as shareholders of companies subject to Nasdaq's corporate governance requirements.
Tesla, on the other hand, is a different story. According to the company's latest proxy statement, Musk actually holds 19.8% of the shares. During the SpaceX financial call, Musk said that at Tesla, "We need 50% of the votes from all shares—not just from voters, but from all shareholders—this is a rather high threshold."
He said that he is "a party with a conflict of interest" and therefore cannot participate in the discussions between the two parties.
SpaceX currently has a market value of nearly $2 trillion, while Tesla is valued at around $1.5 trillion. This means that in the stock swap transaction, SpaceX will become the acquirer and may give Musk the best chance to control the merged entity.
Eric Talley, a law professor at Columbia University and an expert in corporate law ( Eric Talley ), stated to CNBC that the merger may alleviate shareholders' concerns regarding the allocation of Musk's time and company resources.
Tali said that investors on both sides are concerned about which company should undertake various projects related to robots and artificial intelligence, as the two companies have begun to merge in these fields.
He said, "This makes shareholders uncomfortable and has also led to some lawsuits. I truly believe that shareholders of both companies could benefit from resolving this issue, and it would also prevent lawsuits arising from conflicts of loyalty obligations."
However, experts indicate that even if the boards of directors of each company reach an agreement on the merger, regulatory obstacles could still be very high.
Steve Westley, a former board member of Tesla ( Steve Westly ), told CNBC's David Faber on Thursday that he believes the two companies will soon announce a merger proposal, preferably "if possible, before the election" is over. The mid-term elections in less than two weeks could lead to a shift in Congress towards the Democratic Party.
Westley said that the biggest question will be: “What will the regulators say, and what does SpaceX need to do to make this happen?”
Outside of the United States, Westley stated that the two companies also have to face China. China is an important market for Tesla; it is not only crucial for automobile manufacturing but also contributed 22% of the company's revenue last year.
Tali pointed out that China's national security regulatory authorities may pay extra attention to this transaction, as "there may be hundreds of thousands of Teslas on the roads now, operating like computers on wheels," while the Starlink satellite constellation of SpaceX continues to transmit data to the U.S. government.
Li Kaiwen ( Kevin Li ), an analyst from Beijing Counterpoint Research, stated in an email: "Antitrust reviews, national security considerations (taking into account SpaceX's military contracts), and cross-border regulatory reviews will all present significant challenges."
Although Musk has not provided a timeline for the completion of these transactions, he has recently been very transaction-oriented, which also includes integrating his companies together. Earlier this year, SpaceX acquired Musk’s xAI; after the merger, the valuation of the combined entity was $1.25 trillion, paving the way for a record-breaking IPO. Last year, Musk merged xAI with X (formerly known as Twitter), which he acquired in 2022 for $44 billion.
In August this year, SpaceX completed a $6 billion acquisition of Cursor, a programming startup founded by AI.
Just last Thursday, a few days before Musk proposed the merger idea, he unveiled Tesla's new Roadster prototype car, which relies on SpaceX technology and is therefore capable of hovering. The event was live-streamed from the SpaceX test site, further intensifying the merger speculation that has been ongoing for months.
Before IPO in June, Chief Operating Officer Gwen Shortwell ( Gwynne Shotwell ) stated to CNBC that the merger "might make Elon's life a bit easier."
She said, "The future goals we are all working towards are beginning to align. But for now, my focus is on keeping the lights here on at all times."
View:Analyst Oppenheimer says a merger between SpaceX and Tesla is "almost inevitable"
