Elon Musk is rumored to be floating merger between Tesla, xAI, and SpaceX

SpaceX is reportedly contemplating a merger with both Tesla or xAI, based on Bloomberg. Should you’re a Tesla shareholder, you have to be very involved about what this implies.

The report

In keeping with BloombergSpaceX is weighing two potential paths because it prepares for an anticipated IPO later this yr:

1. A merger with Tesla
2. A merger with xAI (which already owns X/Twitter)

Some traders are reportedly pushing for a SpaceX-Tesla mixture. Individually, SpaceX and xAI are exploring a tie-up forward of the IPO, with Reuters reporting that xAI shares can be exchanged for SpaceX inventory.

SpaceX is anticipated to go public by mid-2026 at a valuation probably exceeding $1 trillion.

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The self-dealing downside

Let’s be clear about what’s taking place right here: Elon Musk is contemplating having one in every of his firms purchase one other one in every of his firms, with Musk himself main the “negotiations” on either side.

This is similar playbook we’ve seen earlier than:

Now SpaceX may soak up xAI, Tesla, or each. And right here’s the vital challenge: Musk owns a considerably larger share of xAI and SpaceX than he does of Tesla.

When Musk negotiates the phrases of any merger between these entities, he’s negotiating towards himself. However his pursuits aren’t equally distributed. He has way more pores and skin within the sport along with his personal firms than with Tesla’s public shareholders.

Who do you suppose will get the higher finish of that deal?

Tesla shareholders maintain the quick finish

Tesla is a public firm with fiduciary duties to its shareholders. SpaceX and xAI are personal firms the place Musk has a lot bigger possession stakes and way more management.

Any merger involving Tesla would require Musk to by some means pretty worth:

• A public automaker that simply posted declining deliveries and income
• A personal rocket firm with authorities contracts and Starlink
• A personal AI firm that has been burning money whereas racing to catch OpenAI and Google

The identical one that satisfied Tesla’s board to speculate $2 billion in xAI, over the objections of shareholders now suing him, can be the one figuring out what Tesla is “price” in a merger.

We’ve already seen how this performs out. As we reported, xAI is now telling traders it’ll construct AI for Tesla’s Optimus robotsthat means Tesla shareholders paid billions for know-how which will find yourself being owned by a distinct Musk firm solely.

The sample

Let’s hint the cash:

1. Musk overpaid for Twitter ($44B), traders misplaced billions
2. xAI “acquired” Twitter, magically valuing it at a lot larger than personal shareholders had been
3. Tesla invested $2B in xAI, propping up its valuation
4. Now SpaceX may soak up xAI (and perhaps Tesla too)

At each step, Musk’s personal traders get rescued. At each step, the automobile for that rescue is both Tesla shareholder cash or favorable deal phrases that Musk negotiates with himself.

Electrek’s Take

That is simply extra Elon self-dealing to save lots of his personal traders in xAI, which itself saved his personal traders in X.

If a SpaceX-Tesla merger occurs, Tesla shareholders will get the quick finish of the stick. It’s structurally inevitable. Musk will lead the “negotiations” towards himself, and he owns a better share of SpaceX than he does of Tesla.

His incentives are misaligned. His pursuits are conflicted. And Tesla’s board has proven zero willingness to face as much as him on any of this.

The lawsuit over Tesla’s xAI funding alleged breach of fiduciary responsibility. If SpaceX swallows Tesla at a valuation favorable to Musk’s personal holdings, that lawsuit will seem like a warmup act.

Tesla shareholders needs to be paying very shut consideration to what comes subsequent.

Nonetheless, I critically doubt this occurs. SpaceX absorbing xAI can be a lot simpler for Musk than bringing Tesla into the combo.