Elon Musk leaves open the possibility of merging SpaceX and Tesla

“From cooperative projects in many fields with SpaceX, you can see more and more interference,” Tesla CEO Elon Musk said during the announcement of Tesla’s business results on July 22. However, he said it was not possible to discuss mergers or similar issues during this meeting. “Everything must be done properly,” he said.

After speaking, Musk turned his words to Tesla’s legal counsel Brandon Ehrhart. However, Ehrhart only repeated the statement that SpaceX is a “great partner”, bringing “many beneficial transactions” to Tesla.

Investors and analysts have long speculated about a possible merger between Tesla and Musk’s aerospace company. This was mentioned even more when SpaceX made a record initial public offering (IPO) last month.

Gene Munster – Director of Deepwater Asset Management – a Tesla investor – said the meeting made him even more confident that the two companies will merge in the next few years. “The current probability is 90%. Yesterday I only thought it was 80%,” he said.

Tesla currently provides batteries and manufacturing technology for several SpaceX projects. The two companies are also developing Terafab – a semiconductor factory designed to make AI chips.

Supporters say merging the two companies could help simplify Musk’s corporate empire, while creating an integrated corporation operating in the fields of artificial intelligence (AI), robotics, manufacturing, energy and space infrastructure.

This month, JPMorgan analysts said “the level of operational integration between the two businesses is very deep”. The two sides share the same engineering team, AI infrastructure, Terafab project and operate together under Musk’s leadership. These factors “create favorable conditions for a merger”.

Stifel analysts were even more optimistic, writing: “Many investors believe that Musk’s merger of SpaceX with Tesla is inevitable. The question is no longer if, but when.”

Gwynne Shotwell – President and Chief Operations Officer (COO) of SpaceX also admitted that this deal could bring potential benefits. Reply CNBC in June, she said merging the two companies “could make Elon’s life a little easier,” by streamlining leadership activities between his companies.

However, this deal will also face huge barriers. Also in the above report, JPMorgan said the two companies will have to seek approval from regulatory agencies, especially in China. At that time, concerns about national security due to SpaceX’s relationship with the US Government could cause obstacles.

In addition, the fact that Musk holds significantly greater voting power at SpaceX than at Tesla can make corporate governance issues more complicated.