NEW YORK – SpaceX held the biggest initial public offering of all time, but Wall Street may be expecting something even bigger from Elon Musk, the rocket company’s chief executive.
Many of his fans and investors expect him to merge SpaceX with Tesla, the maker of electric cars where he is also CEO, joining most of his businesses into a single roughly US$4 trillion (S$5 trillion) tech conglomerate, a sort of Elon, Inc.
Investors, analysts and even a top SpaceX executive have talked about the merits of such a deal on social media, in research notes and in a TV interview. The two companies have long shared executives and other resources and are jointly developing multibillion dollar projects.
Because Musk controls SpaceX and is Tesla’s largest shareholder, he would essentially be making a deal with himself. That would raise legal issues and probably prompt lawsuits claiming that he ran roughshod over the interests of other shareholders.
But no legal action is likely to stop Musk, legal experts say. Corporate law in Texas, where Tesla and SpaceX have their corporate domiciles after moving from Delaware, makes it very difficult for unhappy investors to challenge management decisions.
In Delaware, any aggrieved shareholder can take a company to court. To file a lawsuit in Texas, shareholders must hold at least 3 per cent of a company’s stock.
The only shareholders likely to come close to that threshold are large investment firms such as Vanguard and Fidelity that do not usually engage in such lawsuits.
Shareholders can band together to form a 3 per cent bloc, but even that is a formidable hurdle. At Tesla’s current market value of US$1.5 trillion, dissident investors would have to collectively own shares worth US$45 billion.
“Basically he’s gotten to the point where he can do almost anything he wishes,” said Charles Elson, the founding director of the Weinberg Center for Corporate Governance at the University of Delaware.
Tesla and SpaceX did not respond to requests for comment. A representative of Tesla’s board of directors declined to comment. SpaceX did not respond to a request for comment.
Experts expect that SpaceX, as the larger company by market valuation, would offer to trade its shares for Tesla shares to form the new company.
Under Texas law, two-thirds of Tesla shareholders would have to approve the merger. Musk already controls about 20 per cent of the votes. Many of the remaining shareholders have a deep admiration for Musk and recently approved a pay package for him worth almost a trillion dollars, if he meets ambitious goals.
Tesla’s board of directors also has a history of backing Musk’s ideas. The carmaker and SpaceX have long had some of the same people on their boards, many of whom have long friendships or business relationships with Musk.
On June 17, SpaceX named Roelof Botha, who previously worked with Musk at PayPal and whose venture capital firm has invested heavily in other Musk companies, to its board.
Musk “has got this cheering section who will follow him to the gates of Hades or gates of heaven, wherever he leads them,” Elson said.
Gwynne Shotwell, president and chief operating officer of SpaceX, has not discouraged merger talk. Combining SpaceX and Tesla “might make Elon’s life a little easier,” she told CNBC last week. “There’s no question that there are synergies between Tesla and SpaceX in our futures.”
SpaceX’s regulatory filings acknowledge the possibility of a merger, warning that acquisitions or partnerships “may present significant challenges, including aligning operations, systems, and cultures, which could result in inefficiencies, increased costs, or failure to realize anticipated benefits.”
The rocket company already has various links to Tesla. They plan to jointly produce AI chips at a proposed factory called Terafab and develop AI software through another project called Macrohard.
Tesla had also invested in xAI, Musk’s AI company, which was merged with SpaceX in February, and sold hundreds of millions of dollars worth of batteries and cars to the rocket maker over the past two years, according to SpaceX’s IPO filing.
“We plan to explore other areas of strategic collaboration with Tesla in the future,” the document said.
From a SpaceX perspective, any merger would need the blessing of only one person: Musk. The trillionaire has more than 82 per cent of the shareholder votes in his company because he owns a special class of share that gives him 10 votes to every one vote assigned to the class of shares other investors own. The company also has entered into various agreements designed to preserve his power.
Some investment managers who own Tesla and SpaceX shares say a merger just makes sense.
Tesla’s expertise in semiconductors and data centre construction would mesh with SpaceX’s plans to build data centers in space, said Tasha Keeney, director of investment analysis and institutional strategies at ARK Investment Management. Ark’s funds own both stocks.
SpaceX has reduced the cost of sending cargo into space, a prerequisite to building solar-powered orbiting data centers. If SpaceX succeeds in proving the space data centre concept, Keeney said, its AI unit would gain a competitive advantage against Anthropic, OpenAI and other AI companies.
Lawyers, politicians and some shareholders will probably try to block the merger, even if doing so would be difficult.
Shareholders might claim fraud in federal court if they can demonstrate that Musk or the Tesla or SpaceX boards withheld information ahead of shareholder votes. But such a suit would probably succeed only if the merged company is a flop and shareholders lose money, experts said.
Federal regulators could, in theory, try to block the merger on antitrust grounds because both companies are in the AI business.
Regulators could also object on national security grounds. “It’s hard to ignore the national security implications for a deal involving two significant companies that combine AI, robotics, communications and space,” said Eric Talley, a professor at Columbia Law School.
But US regulators are unlikely to object while Donald Trump is president, Talley added. Musk has donated hundreds of millions of dollars to Republican candidates, including Trump, and the administration has declined to challenge several other big deals. NYTIMES
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This article originally appeared in The New York Times.
