Musk’s spaceX–tesla merger backing raises deal concerns

Elon Musk’s public support for a potential merger between SpaceX and Tesla has raised concerns among people involved in the discussions, with fears that his comments could intensify shareholder scrutiny and delay negotiations by several weeks, Reuters reported on October 22.

The proposed transaction, potentially valued at $3.5 trillion, remains at an early stage. The companies are exploring possible deal structures,including a SpaceX acquisition of Tesla or a merger under a new holding company. Both have established independent committees to evaluate the proposal.

Musk, who leads both companies, told investors this week that combining the businesses would be a good idea. However, he acknowledged that the decision rests with the independent committees and that he cannot participate in their discussions because of potential conflicts of interest.

According to Reuters, some people involved in the talks fear Musk’s public comments could raise questions about whether Tesla shareholders’ interests would be adequately protected.

The concerns echo Tesla’s 2016 acquisition of SolarCity, which faced years of shareholder litigation over Musk’s role in the transaction. Courts ultimately upheld the deal as fair, but the dispute highlighted the governance risks associated with transactions involving potential conflicts of interest.

SpaceX approached Tesla in recent weeks, and advisers have been hired to explore possible deal structures, Reuters reported. The companies are also considering different forms of merger consideration, including an all-stock transaction. No final terms have been agreed.

A combination could bring together Tesla’s electric vehicles, robotics and artificial intelligence ambitions with SpaceX’s launch services, satellite communications and expanding AI operations. However, a transaction of this scale could face regulatory scrutiny, particularly given Tesla’s business in China and SpaceX’s work in US defence and AI.

Neither company has announced a final merger agreement. The proposal remains subject to negotiations, independent committee reviews and the necessary shareholder approvals.

The discussions highlight the corporate governance challenges surrounding a potential merger between two major technology companies led by the same executive.