Tesla and SpaceX Explore Merger in Bid to Create $3.5 Trillion Giant Before Trump Leaves Office
Elon Musk confirmed this week that Tesla and SpaceX are exploring a merger, a deal that would combine two of his most valuable companies into a single entity worth roughly $3.5 trillion. If completed, it would be the largest merger in history. According to Bloomberg, citing people familiar with the matter, the goal is to finalize the transaction while Donald Trump is still US president.
Strategic Rationale and Synergies
Musk has argued that artificial intelligence will determine the future direction of both companies. He pointed to increasing overlap between Tesla and SpaceX, noting that they are jointly developing an AI chip factory in Texas called Terafab. Tesla’s driverless cars and Optimus humanoid robots could benefit from SpaceX’s computing power, including planned data centres in orbit.
On Tuesday, Musk told analysts on a SpaceX earnings call that both companies have set up committees of independent board members to study a potential merger. He described the idea as “a good idea” but cautioned that it was like “tap dancing through a minefield.” The committees have not yet agreed on terms, and Musk said the deal is not certain.
Financial and Political Considerations
The financial picture for the two companies is mixed. SpaceX reported its first quarterly profit since listing, with net income of $4.4 billion and revenue up 161%. Capital spending reached $19.6 billion, mostly on AI. Tesla, by contrast, saw net profit fall 43% to $787 million, with flat revenue and a 2% decline in deliveries.
A merger would allow Musk to run all operations under one roof and move engineers and resources without disclosures or lawsuits over related-party deals. It could also make him richer, as Tesla’s pay package treats many performance goals as achieved if certain mergers go through. Musk owns about 48% of SpaceX and more than 80% of its voting power, while holding about 20% of Tesla.
Political timing is critical. Musk has been a major donor to Republican candidates, giving over $276 million since July through his super PAC. SpaceX’s listing documents warned that a shift in power in Congress could have a “material and adverse impact” on its growth. Completing the deal under Trump could offer a friendlier regulatory environment, but it still faces scrutiny from regulators and shareholders. The deal would need backing from more than half of all Tesla shares, which Musk called “quite a high hurdle.”
