SpaceX and Tesla Inc. have moved from discussing whether to combine to haggling over terms, people familiar with the talks said, putting Elon Musk within reach of a merger that would be the largest in corporate history.
Boards and advisers at both companies are working through the price and the governance of a combined business, the people said. An announcement could come as soon as December, although the companies have also discussed a timetable that pushes it into early 2027. Neither company has confirmed an agreement. Tesla shares rose as much as 1.9% when the talks were first reported on Thursday.
SpaceX would be the buyer
A central question is how many SpaceX shares each Tesla holder would receive, which points to SpaceX absorbing the carmaker rather than the reverse. That fits the numbers: SpaceX has a market value of about $1.9 trillion after its June listing, while Tesla is worth about $1.5 trillion. Either figure would make the deal far larger than the $183 billion takeover of Mannesmann by Vodafone in 2000.
Both companies formed special committees of independent directors in October to evaluate a combination, and any agreement would need their backing. SpaceX has said its controlling shareholder must also approve. Bank of America analysts have estimated that, with a 20% premium, Tesla investors would own roughly 47% of the combined company, while Barclays has estimated Musk would control about 56% of the votes. Tesla holds its annual meeting on Dec. 3.
China and the index
The biggest hurdle may be regulatory. SpaceX holds large U.S. defense and government contracts, while Tesla builds more than half its cars in Shanghai. People familiar with the talks said one open issue is how to wall off the China business.
The deal could also reopen a path into the S&P 500 for SpaceX, which the index committee declined to fast-track after the June listing. Tesla is already a member, and index rules allow a combined company to be considered case by case. But the profitability and seasoning tests that blocked SpaceX in June would still apply, and the committee has the final word. A share exchange would, however, greatly expand the amount of SpaceX stock that trades freely, which was under 5% at the listing.
Musk has kept SpaceX busy with large financings this fall. A December announcement would start a long approval process rather than end one.
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