Musk considers merging SpaceX and Tesla
What's the story
Elon Musk is gearing up to take SpaceX, his second trillion-dollar company, public. The move will likely make him the head of two of the 10 most valuable US companies. Now, there's speculation that Musk's endgame could be merging SpaceX and Tesla into one entity. The talks have been informal, with a current Tesla employee openly discussing the possibility, CNBC reported citing people familiar with the matter.
Market debut
SpaceX set to go public in mid-June
SpaceX is set to begin trading on the NASDAQ in just over two weeks. The company was valued at $1.25 trillion in a private market earlier this year, after merging with xAI, Musk's artificial intelligence firm. Tesla, meanwhile, has a market cap of about $1.6 trillion. Despite their different industries—rocket launches and electric vehicles—the two companies have been collaborating on AI-related projects due to their shared power and compute constraints challenges.
AI collaboration
Both companies investing heavily in AI
Both SpaceX and Tesla are heavily investing in artificial intelligence (AI). In the first quarter, over three-quarters of SpaceX's $10.1 billion capital expenditures were linked to AI. Meanwhile, Tesla has announced plans to triple its capital expenditure this year, exceeding $25 billion. The two companies have also been sharing resources for years, with Musk serving on both boards along with venture capitalist Ira Ehrenpreis and others.
Strategic moves
Tesla's investment in xAI
In January, Tesla invested $2 billion in xAI. After SpaceX merged with the AI company, those shares became part of SpaceX's holdings. The latter also revealed in its prospectus that it had bought $697 million worth of Tesla Megapack battery energy storage systems to power xAI data centers near its Colossus facilities in Memphis. Further, SpaceX spent $131 million on Tesla Cybertrucks last year at manufacturer's suggested retail price.
Merger hurdles
Legal experts weigh in on potential merger
A SpaceX-Tesla merger likely wouldn't spark antitrust issues, according to legal experts. It may also trigger concerns among shareholders of both companies. The complexities include determining the parent company, how a stock swap would be executed, and who decides the fair price. However, Musk's 85% voting power means he won't have to worry about pushback from SpaceX's board if this merger goes through.