SpaceX and Tesla face fresh uncertainty over their proposed $3.5 trillion merger after Elon Musk's public endorsement reportedly raised concerns among people involved in the discussions that his comments could complicate negotiations and expose the transaction to greater shareholder scrutiny.
The concerns, reported by Reuters on 22 October, centre on whether Musk's public support could undermine perceptions of independence as special committees at both companies evaluate a possible combination. Some participants reportedly fear the disclosure could delay negotiations by several weeks.
Musk, who serves as chief executive of both businesses, confirmed earlier this week that independent directors had formed committees to examine a transaction. He acknowledged that his ownership interests create a conflict of interest and that he cannot participate in their discussions.
The proposed merger would create a technology group valued at approximately $3.5 trillion based on the companies' recent market valuations. However, the figure is not an agreed transaction price, and neither board has approved merger terms.
According to reports, SpaceX approached Tesla in recent weeks, with advisers examining several potential structures. These include SpaceX acquiring Tesla or the companies combining under a newly established holding company. An all-share transaction is also reportedly under consideration, although no exchange ratio has been agreed.
The complexity reflects Musk's differing ownership positions. He holds approximately 20% of Tesla and just under half of SpaceX's equity, while exercising substantially greater voting control over the aerospace company through its share structure. Any proposed deal would therefore require independent directors to determine whether the consideration offered fairly reflects the interests of shareholders in both businesses.
Tesla's 2016 acquisition of SolarCity provides a significant precedent. Shareholders challenged Musk's role in that transaction, alleging conflicts of interest and deficiencies in the approval process. Although the courts ultimately upheld the acquisition as fair, the litigation continued for several years, and Tesla directors separately settled related claims for $60 million.
That history makes the independence of the current negotiations particularly important. Public endorsements from an executive with substantial interests on both sides could create questions about whether independent committees have sufficient freedom to determine valuations, negotiate terms or reject a transaction.
Shareholder approval represents another potential obstacle. Musk has indicated that a merger would require support from holders of a majority of Tesla's outstanding shares, rather than simply a majority of votes cast. This creates a demanding threshold because abstentions and uncast ballots could effectively count against the proposal.
The financial rationale remains substantial. SpaceX and Tesla are already collaborating on the Terafab semiconductor project, while their operations increasingly overlap in artificial intelligence, robotics and advanced computing. Combining these activities could potentially improve capital allocation and reduce duplicated development expenditure.
However, a merger would also expose shareholders to different investment risks, operating costs and financing requirements. Both businesses are pursuing capital-intensive technology programmes, making the proposed ownership structure and future allocation of resources important considerations for investors.
The transaction would require finance teams and independent advisers to assess not only potential synergies but also valuation fairness, financing costs and the governance implications of concentrating substantial corporate control in one individual.
For Tesla shareholders, the immediate issue is whether the independent committees can demonstrate that any proposed merger delivers value on terms that are fair to public investors. Musk's public support has intensified attention on that process, but the outcome remains uncertain.
Until the committees agree on a transaction structure and shareholders are presented with formal terms, the proposed SpaceX–Tesla combination remains a possible merger rather than an approved deal. Its progress will provide an important test of how companies manage conflicts of interest when a dominant executive has substantial financial interests on both sides of a major transaction.
