How Elon Musk’s $3.5 trillion Tesla–SpaceX merger could rewrite the rules of his business empire and shift who holds the power

The Tesla-SpaceX merger proposed by Elon Musk would allow him to combine two of his most valuable companies under one business umbrella. But apart from the obvious benefits of merging electric cars, rockets, artificial intelligence, and satellites, this deal also poses a critical question of who will be in charge of the newly formed corporation. This possible deal, valued at roughly $3.5 trillion, may well become one of the biggest mergers that has ever been planned. Elon Musk has already openly stated that such a merger may be beneficial for both companies. However, neither of these two businesses has reached an agreement yet.

According to Yahoo Finance, both companies had already established individual committees consisting of independent directors to look into the deal as of October 21. Given that Musk himself has vested interests in both the organisations, he felt that he could not be a member of the committees because of his own conflicts of interest.

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This decision would not only affect the stakeholders in both organisations, Tesla and SpaceX, but would also have ramifications for Musk’s business empire as well.

A $3.5 trillion merger could reshape Musk’s voting power

This acquisition is going to be a merger between companies with diverse corporate ownership structures and distinct stakeholders. For instance, SpaceX has an estimated market value of $2 trillion, whereas Tesla has a valuation of roughly $1.5 trillion, making it possible for both companies to have a market valuation of $3.5 trillion.

Musk’s authority is very different at both corporations.

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He owns roughly one-fifth of Tesla but holds substantially greater voting power at SpaceX through a special share structure. A merger could change how much influence he exercises over the combined business.

As per the analysis done by Barclays in Yahoo Finance, it is estimated that in the event of any merger of SpaceX and Tesla through a stock exchange, Musk may hold a share of approximately 37% in the consolidated company and also about 56% voting rights in the company.

It is important for the investors to understand the difference between economic ownership and voting control.

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The financial stake of the shareholder does not necessarily mean that he will have equal decision-making power. This transaction might grant more decision-making power to Musk while reducing the power of others over important decisions.

That concentration of control could appeal to supporters who favour faster decision-making. It could also concern investors who want stronger checks on the chief executive’s decisions. Yahoo Finance’s coverage has highlighted the ownership differences and the role independent committees would play in considering a transaction.

Tesla shareholders remain a major obstacle

Musk’s enthusiasm does not guarantee that a merger will happen. The independent committees must examine whether the terms are fair to each company, and Tesla shareholders would have a decisive role in approving the proposal.

Musk has acknowledged that the process is uncertain. Yahoo Finance reported that he warned investors against treating the merger as inevitable, noting that the committees had not reached an agreement on transaction terms.

The approval threshold could be particularly demanding for Tesla.

The Yahoo Finance article explains that the deal will have to garner a majority of all outstanding stock, and not just a majority of the votes. The distinction is important, as it may prove difficult to hit the threshold if unvoted stocks get in the way.

Moreover, the businesses may have overlapping dealings which might attract attention.

Their respective board members and stockholders should see if the consolidation will favour their stockholders, how the assets will be evaluated, and if it is good for both firms.

Musk's leadership positions in both firms complicate the matter even more. Oversight is meant to shield the stockholders from any conflict of interest involving the company executives.

A merger could therefore face a difficult test even if its strategic logic appears attractive. Investors have to decide whether they feel that the benefits outweigh the cost, risks, and potential alteration of control within the companies. The $3.5 trillion value is still only an estimate until the committees come up with a solution and the shareholders take it into account.

AI, robotics and Starlink explain the business case

Musk’s argument for combining the companies centres partly on the growing overlap between their technology ambitions.

While Tesla has moved away from electric vehicles and towards autonomous driving, robotics and energy storage, SpaceX is known for its rockets and its Starlink satellite-based internet system.

The merged companies would be able to streamline their efforts in terms of investing in technologies. The battery and energy-storage solutions of Tesla may come in handy for SpaceX operations and future computing endeavours.

These two firms are already collaborating in Terafab, which is a joint semiconductor fabrication venture geared towards manufacturing semiconductor chips for use in cars from Tesla, humanoid robots, and even the SpaceX mission.

Merging these two firms would make it easier to have all these business ventures done through one firm.

Yahoo Finance has reported that Musk sees benefits in closer cooperation across AI software, chip design, robotics and connectivity. But potential synergies do not eliminate the practical challenges of running businesses with very different markets, customers and regulatory obligations.

Collaboration between SpaceX and the US government and military would certainly raise issues of national security, while the activities of Tesla in China might complicate the regulatory process.

Furthermore, the investors should estimate whether the merger is capable of producing sustainable long-term value or just concentrating all the strategic risks on one company.

Currently, the offer is still being considered.

The result will be determined by the terms established by the independent committees, reaction of the shareholders and any further regulatory challenges. Should the offer go through, its importance would not only be defined by the size of the company but also by the degree of control that Musk has over his technology empire.