Musk's Public Backing of SpaceX-Tesla Merger Could Delay Talks by Weeks, Reuters Source Says

Since Elon Musk said on Oct. 20 that SpaceX and Tesla have formed special committees to study a combination, the question has shifted from whether talks exist to whether his own words have complicated them. According to a Reuters exclusive published Oct. 22, some insiders think they have.

A person with direct knowledge of the talks told Reuters that Musk's public endorsement of a potential $3.5 trillion merger has rattled participants. They worry it could invite shareholder scrutiny and delay the process by several weeks. The person called the disclosure a "mess" because it could raise questions about how well Tesla shareholders' interests are represented.

Tesla, SpaceX and Musk did not respond to Reuters' requests for comment.

What the talks look like so far

Three sources familiar with the matter told Reuters the parties have hired advisers, but discussions are at an early stage. One of them said SpaceX approached Tesla in recent weeks.

That person said the companies have discussed several structures. They include a SpaceX acquisition of Tesla and a merger under a newly formed holding company. Different forms of consideration are also under review, including an all-stock deal.

None of that has been confirmed by the companies. Musk said on the Oct. 20 SpaceX call that the special committees "have not reached agreement on the terms of any transaction," and that "obviously there's no guarantee that they will."

The SolarCity shadow

The insiders' concern rests on precedent. In Tesla's 2016 acquisition of SolarCity, shareholders alleged Musk influenced the process to bail out his investment in the rooftop solar company, which was founded by his cousins. Musk owned roughly 22% of both companies at the time.

The Delaware Supreme Court later cited the plaintiffs' contention that no independent committee existed, together with "certain other facts concerning Musk's involvement in and public support for the transaction," in finding unfair dealing. The courts ultimately upheld the acquisition as fair. It took several years to resolve, and Tesla directors settled the allegations for $60 million.

This time, committees exist from the start. Musk has said he is excluded from the decision as a conflicted party, and any deal would need approval from at least 50% of all Tesla shares outstanding, not just those voted.

The ownership math is the complicating factor. Musk owns nearly a fifth of Tesla and just under half of SpaceX, and analysts have said a merger would give him control of the combined company.

What Musk has said, and not said

Musk has not backed away from his comments, though he has declined to expand on them. On Tesla's Q3 earnings call on Wednesday, Oct. 21, he said, "With regard to a potential merger with SpaceX, I think I said everything that should be said yesterday." He repeated his line that he feels like he is "tap dancing through a minefield." Tesla told investors beforehand that no questions on the merger would be taken.

On Oct. 20, Musk pushed back on the idea that a deal is settled. "Some people out there assume that a SpaceX and Tesla merger is a certainty, and I think that would be overstating it," he told analysts. He also said it would be a "good idea" and that "there's a lot of merit" to combining the companies. In a Fox News clip from Oct. 21, he is described as saying shareholders would ultimately have to support the move.

Timing

Barclays analyst Dan Levy has said an announcement could come within weeks, possibly before Tesla's annual shareholder meeting, so shareholders could vote on it there. Investor's Business Daily reports that meeting is expected on or before Dec. 6.

Levy has said the deal would likely be pitched as AI vertical integration, joining Tesla's physical AI work, such as the Robotaxi and Optimus robot, with SpaceX's software-side AI, including Grok and Macrohard. He also noted that the two companies already jointly build the Terafab chip factory in Texas, which a single board could steer more easily.

If the Reuters source is right that scrutiny adds several weeks, the pre-meeting window Levy describes gets tighter. Whether the committees move ahead of that meeting, or let it pass, is the open question. Neither company has announced a timeline.