Odds of a Tesla-SpaceX Deal Announcement by Dec. 31 Fall to 12.5% From 29% in a Week

Since Elon Musk told investors on SpaceX's Oct. 20 earnings call that independent directors at both of his companies had formed special committees to study a combination, the market's timeline for a deal has moved the other way. As of Oct. 25, prediction-market odds of an announcement by Dec. 31 stood at 12.5%, down from 29% a week earlier.

Longer-dated contracts look different. A contract for an announcement by July 1, 2027, was at 58%. A contract for Jan. 1, 2028, was at 62.5%. Those are bets on timing, not decisions by either company.

What Musk said, and what he didn't

Musk said the committees are made up of independent directors and were formed "at the request of shareholders." He said he cannot take part because he is a conflicted party. He called the arrangement "an odd kabuki dance where two groups of people are talking and I can't be in the conversation."

He also 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 said. The committees have reached no agreement on terms, and he said there is no guarantee they will.

He was not neutral, though. "I do think there's a lot of merit to combining the companies," Musk said, adding: "I think it would be a good idea, but it's really up to the special committees of both companies."

The Reuters report on delay

Reuters reported Oct. 22, citing a person with direct knowledge of the talks, that Musk's public endorsement has unsettled people close to the discussions. The source said the comments could invite shareholder scrutiny and push the process back by several weeks. Reuters also reported that both companies have hired advisers.

That is one anonymous source. Neither company has publicly confirmed any delay. The report does not say the falling odds are connected to it.

The numbers and the math

At Tuesday's closing prices, SpaceX was worth about $2 trillion and Tesla nearly $1.5 trillion, for a combined value near $3.5 trillion. Fortune calculated that Musk would own about a third of the combined company. A formal deal price is not set.

Musk owns roughly 20% of Tesla. His SpaceX stake is reported at 45% by Fortune and about 48% by TIME. Fortune reports he controls about 82% of SpaceX's voting power.

On the call, SpaceX reported third-quarter net income of $4.4 billion, versus a $1.1 billion loss a year earlier. Revenue rose 161% to $14.58 billion. Musk told investors he expects annual recurring revenue of $500 billion to $1 trillion by the end of 2027. That is his projection, not a reported result. SpaceX shares rose more than 5% in after-hours trading Tuesday and Tesla rose just over 1%.

The shareholder hurdle

On the Tesla side, a deal would need support from a majority of all outstanding shares, not just those voting. Musk himself called that "quite a high hurdle."

Tesla's annual proxy, filed Monday, Oct. 19, includes no merger proposal. It does confirm a $2 billion Tesla investment in SpaceX. The two boards also overlap: Ira Ehrenpreis, founder of DBL Partners, sits on committees at both companies, chairing SpaceX's compensation and nominating committee as well as two separate committees at Tesla.

The companies are already tied together through the planned Terafab chip plant, which SpaceX and Tesla are developing jointly. Musk also cited shared work on AI software, chip design, robotics and connectivity.

Skeptics and forecasters

Analyst views diverge on both odds and obstacles. Wedbush's Dan Ives puts the chance of a merger within a year at 80%. Deepwater Asset Management's Gene Munster sees a 95% chance within two years. Barclays analysts said this month a deal could be announced before Tesla's annual meeting, scheduled for Dec. 3.

Others point to hurdles. Morningstar analysts said a merger could raise U.S. national security concerns involving the combined company's supply chain. JPMorgan analysts flagged regulatory approval in China as a possible stumbling block, given Tesla's operations there. SpaceX also carries U.S. defense work.

TIME reported that Democratic lawmakers have previously questioned Musk over conflicts of interest and raised national security concerns about reported Chinese investments in SpaceX. Any deal could face more congressional scrutiny if Democrats win control of either chamber in the midterm elections.

What to watch

The next concrete signals would be a Tesla 8-K filing, a joint press release, or a supplemental proxy before the Dec. 3 meeting. None has appeared. Whether two committees chaired in part by overlapping directors can agree on a price Tesla shareholders will approve, with Musk on both sides of the table, is the open question.

A deal at this size would be the largest merger on record, and it would need a majority of every Tesla share outstanding.