Elon Musk’s next move could be a mega-merger of SpaceX and Tesla

SpaceX may have held the biggest initial public offering ever, but Wall Street may be expecting something even bigger from Elon Musk, the rocket company’s CEO.

Many of his fans and investors expect him to merge SpaceX with Tesla, the electric car maker of which he is also CEO, combining most of their businesses into a single tech conglomerate valued at roughly $4 trillion, a sort of Elon, Inc.

Investors, analysts and even top executives at SpaceX talked about the benefits of such a deal on social media, in research notes and in a television interview. The two companies have long shared executives and other resources and jointly developed multibillion-dollar projects.

Since Mr. Musk controls SpaceX and is Tesla’s largest shareholder, he would essentially be making a deal with himself. This would raise legal issues and likely trigger lawsuits claiming he violated the interests of other shareholders.

But no amount of legal action is likely to stop Mr. Musk, legal experts say. Corporate law in Texas, where Tesla and SpaceX are headquartered, makes it very difficult for unhappy investors to challenge management’s decisions.

Tesla moved from Delaware to Texas last year after Mr. Musk expressed dismay at a state court ruling — later overturned — that challenged a 2018 pay package that helped balance the wealth of the world’s richest man. SpaceX moved to the Lone Star State from Delaware in 2024.

“He’s basically gotten to the point where he can do almost anything he wants,” said Charles Elson, founding director of the Weinberg Center for Corporate Governance at the University of Delaware.

In Delaware, any aggrieved shareholder can sue the company in court. To file a lawsuit in Texas, shareholders must hold at least 3 percent of the company’s stock.

The only shareholders likely to come close to that threshold are large investment firms like Vanguard and Fidelity, which typically do not get involved in such lawsuits.

Shareholders can band together to form a three percent bloc, but even that is a formidable obstacle. At Tesla’s current market value of $1.5 trillion, the dissident investors would have to collectively own $45 billion worth of stock.

“You’re looking at a really huge amount of stock,” said James Spindler, a professor of corporate law at the University of Texas School of Law. “That’s a pretty big hurdle.

Tesla and SpaceX did not respond to requests for comment. A representative of Tesla’s board of directors declined to comment. SpaceX did not respond to a request for comment.

Experts expect SpaceX, as a larger company by market valuation, to offer to exchange its shares for Tesla shares to create a new company.

The sprawling conglomerate’s activities would potentially include building rockets; artificial intelligence; Starlink satellite internet service; production of electric cars and trucks; battery manufacturing; Solar energy hardware; and social media site X. Products both companies are developing include orbital data centers, self-driving taxis and humanoid robots.

Under Texas law, the merger would have to be approved by two-thirds of Tesla shareholders. Mr. Musk already controls about 20 percent of the vote. Many of Mr. Musk’s remaining shareholders deeply admire him and recently approved a pay package worth nearly a trillion dollars if he meets ambitious targets.

Tesla’s board has also supported Mr Musk’s ideas in the past. The automaker and SpaceX have long had some of the same people on their boards, many of whom have long friendships or business relationships with Mr. Musk.

“He has this cheering section that will follow him to the gates of Hades or the gates of heaven, wherever he takes them,” Mr Elson said.

But if the terms of the acquisition are too favorable for SpaceX, Tesla shareholders could balk, said Eric Talley, a professor at Columbia Law School.

“There’s going to be a limit to how much he can trip up Tesla shareholders before he starts losing room,” Mr. Talley said, referring to Mr. Musk.

Gwynne Shotwell, SpaceX’s president and chief operating officer, has not discouraged merger talks. A SpaceX-Tesla merger “could make Elon’s life a little easier,” she told CNBC last week. “There is no doubt that there are synergies between Tesla and SpaceX in our future.”

SpaceX’s regulatory filings concede the possibility of a merger, warning that an acquisition or partnership “may present significant challenges, including alignment of operations, systems and cultures, which could result in inefficiencies, increased costs or failure to realize expected benefits.”

The rocket company already has various ties to Tesla. They plan to jointly manufacture AI chips in a proposed factory called Terafab and develop AI software through another project called Macrohard.

Tesla also invested in xAI, Mr. Musk’s artificial intelligence company that merged with SpaceX earlier this year, and has sold hundreds of millions of dollars worth of batteries and cars to rocket makers over the past two years, according to SpaceX’s IPO.

“In the future, we plan to explore other areas of strategic cooperation with Tesla,” the document says.

From SpaceX’s perspective, any merger would need the blessing of only one person: Mr. Musk. The billionaire holds more than 82 percent of the shareholder votes in his company because he owns a special class of stock that gives him 10 votes for every one vote assigned to a class of stock held by other investors. The company also made various agreements designed to preserve his power.

Brian Quinn, a professor at Boston College Law School, said that because Mr. Musk had such a large voting stake in SpaceX, an acquisition of Tesla, which does not have two classes of stock, would potentially allow him to retain majority control of the combined companies.

“If you think the next thing that’s going to happen is SpaceX buys Tesla, having that buffer is valuable,” he said, referring to Mr. Musk’s large voting stake in SpaceX.

Some investment managers who own shares of Tesla and SpaceX say the merger makes sense.

Tesla’s expertise in semiconductors and data center construction would fit into SpaceX’s plans to build data centers in space, said Tasha Keeney, director of investment analysis and institutional strategies at ARK Investment Management. Ark funds own both shares.

SpaceX has reduced the cost of sending cargo into space, a prerequisite for building solar-powered data centers in orbit. If SpaceX can prove the space data center concept, Ms. Keeney said, its AI unit would gain a competitive edge against Anthropic, OpenAI and other AI companies.

But she said ARK Invest would prefer the merger to happen after Tesla becomes the dominant company in self-driving taxis. Tesla has been testing a small number of such taxis in Texas and San Francisco and has begun production of a Cybercab designed to operate without a driver.

“It would be good for shareholders to see this take off before the merger,” Ms Keeney said. “But we think it generally makes sense.

Lawyers, politicians and some shareholders are likely to try to block the merger, even if it would be difficult.

Shareholders could claim fraud in federal court if they can prove that Mr. Musk or the Tesla or SpaceX boards withheld information from shareholder votes. But such a lawsuit would likely succeed only if the combined company went bankrupt and shareholders lost money, experts said.

“As long as the business is doing well and the stock price keeps going up, that’s a pretty good bar to file a securities fraud lawsuit,” said Mr. Spindler of the University of Texas.

Federal regulators could theoretically try to block the merger on antitrust grounds because both companies are in the artificial intelligence business.

Regulators could also object on national security grounds. “It’s hard to ignore the national security implications of a deal involving two major companies that combine AI, robotics, communications and space,” Talley said.

But US regulators are unlikely to object as long as Donald Trump is president, Talley added. Mr. Musk has donated hundreds of millions of dollars to Republican candidates, including Mr. Trump, and the administration has declined to challenge several other major deals.

European officials could also try to raise antitrust objections to the deal, as they have done with Google, Meta and Apple. But it may be hard to prove that a combined SpaceX and Tesla would dominate any industry.

Arguably the biggest obstacle to a merger would be a drop in stock prices.

“When it’s a bull market, everybody’s pretty happy because everybody’s making money,” said Mr. Elson, the Delaware government expert.