The $3.5 Trillion Question: Inside the Tesla-SpaceX Merger Talks

Elon Musk has confirmed that his two flagship companies are exploring a historic combination, but the path to a deal is littered with governance landmines and a formidable shareholder vote.

For years, Wall Street speculation about a union between Tesla and SpaceX was treated as a thought experiment—a fun exercise in imagining what Elon Musk might do with his corporate empire. This week, that speculation became a formal, if fragile, reality.

During SpaceX’s third-quarter earnings call on Tuesday, Musk confirmed that both companies have established independent special committees to evaluate a potential merger. The disclosure, which sent SpaceX shares up as much as 12% in after-hours trading, formally opens the door to what would be the largest corporate transaction in history .

The numbers alone are staggering. With Tesla valued at roughly $1.5 trillion and SpaceX at approximately $2 trillion, a combined entity would be worth around $3.5 trillion . But the real story isn’t the price tag—it’s the unprecedented governance challenge of merging two companies controlled by the same conflicted billionaire.

The Strategic Logic: An AI Vertical

The case for combining Tesla and SpaceX rests less on rockets and electric cars than on artificial intelligence. Both companies are pouring tens of billions into AI infrastructure, and the overlap is growing.

SpaceX and Tesla are already jointly developing the Terafab chip plant. AI now accounts for more than half of SpaceX’s revenue, and the company expects another $35 billion to $40 billion in capital spending in the fourth quarter alone to fund further expansion . SpaceX reported $14.6 billion in third-quarter revenue, a 161% year-over-year increase, and net income of $4.4 billion—a dramatic turnaround from a $1.1 billion loss a year earlier .

“I think a Tesla-SpaceX merger makes sense. It’s very strategic because both companies are rapidly transitioning into artificial intelligence and autonomous systems,” said Justus Parmar, CEO of Fortuna Investments and an investor in both companies. “It would also avoid redundancy and the time he spends going back and forth between two entities” .

The collaboration became tangible last week when Tesla unveiled a Roadster prototype equipped with SpaceX rocket thrusters—a vehicle that flipped and leapt over a truck, offering a glimpse of what an integrated company might produce .

The Governance Minefield

If the strategic rationale is straightforward, the process is anything but. Musk himself acknowledged the awkwardness of the situation, describing it as an “odd kabuki dance where two groups of people are talking and I can’t be in the conversation” .

Musk owns nearly a fifth of Tesla and just under half of SpaceX, but through super-voting shares he controls about 85% of SpaceX’s voting power. At Tesla, his voting stake is roughly 20% . Analysts estimate that a merger could give him approximately 57% to 58% of voting rights in a combined entity—a level of control that would fundamentally reshape Tesla’s shareholder base .

The Tesla vote is the immediate hurdle. Musk noted that any deal requires the approval of a majority of all outstanding Tesla shares, not just those voted—a threshold he called “quite a high hurdle to achieve” . Every uncast ballot counts against the deal, making shareholder turnout a critical and unpredictable variable.

Then there is the shadow of SolarCity. Tesla’s 2016 acquisition of the struggling solar company, founded by Musk’s cousins, triggered years of litigation. A Delaware court ultimately upheld the deal but criticized the absence of an independent committee and noted that Musk’s public support for the transaction warranted a finding of unfair dealing . Tesla directors later settled allegations for $60 million .

Participants in the current talks are reportedly concerned that Musk’s public endorsement this week could create a similar dynamic. According to a person with direct knowledge of the discussions, the disclosure created a “mess” for the process, potentially inviting shareholder scrutiny and delaying negotiations by several weeks .

“A deal where one man runs both sides will draw tough questions on governance,” said Josh Gilbert, lead analyst for APAC at eToro .

What Comes Next

The special committees have hired advisers, and discussions are in early stages. SpaceX approached Tesla in recent weeks, and the companies are weighing multiple structures: a SpaceX acquisition of Tesla, a merger under a newly formed holding company, or an all-stock transaction . No exchange ratio has been negotiated, though Barclays has floated an illustrative ratio of 0.7 SpaceX shares per Tesla share .

Wall Street appears convinced a deal will happen. Gene Munster of Deepwater Asset Management estimated a “95% chance in the next two years” . But Musk was careful to temper expectations: “It would be overstating it to say it will definitely happen” .

The next milestone will likely come at Tesla’s December 3 annual shareholder meeting, where any disclosures in regulatory filings could clarify the terms and timeline. Until then, the $3.5 trillion question remains open—a test of whether Musk can consolidate his empire without repeating the mistakes of his past.

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This article is based on reporting from BBC, Reuters, CNBC TV18, and other sources published between October 19 and 22, 2026.