Musk confirms the formation of a two-star merger committee: a good idea but not inevitable

According to Woofun AI, SpaceX (SPCX.US) and Tesla (TSLA.US) have set up a special committee to study the possibility of a merger. Musk characterized the dynamic as a 'good idea' when confirming this development on Tuesday, but clearly warned the market that it should not be viewed as an inevitable outcome.

In the SpaceX (SPCX.US) third quarter earnings conference call held on Tuesday, Musk faced intensive questions from investors about the prospects of the merger and described himself as “feeling like tap dancing in a minefield” and must be extremely cautious. He revealed that in response to shareholders' requests, both companies formed committees composed of independent directors to evaluate this plan. As a core stakeholder, Musk said he was excluded from discussions and unable to participate in the decision-making process. He likened this state of affairs to “a strange cabaret show” where two groups of people were talking but he was unable to join. In response to the “merger is inevitable” rhetoric circulating in the outside world, Musk directly refuted that it was an “exaggeration”. Although he personally acknowledged the value of the merger, the procedural complexity made the outcome full of uncertainty.

According to data compiled by Woofun AI, the deal faces an extremely high voting threshold and must receive 50% support from all Tesla (TSLA.US) shares, rather than just counting the actual number of votes cast. Musk admits that this standard is “extremely high and difficult to meet.”

Currently, the special committee “has not agreed on any terms of the deal”, and there is no guarantee that an agreement will be reached in the future. Musk pointed out that if the merger comes true, fields such as super-intelligent software, chip design, Terafab projects, robotics, and Starlink networking will benefit significantly.

This statement is in contrast to previous attitudes: in the July Tesla (TSLA.US) second-quarter earnings conference call, Musk responded to questions from Wells Fargo (WFC.US) analysts, saying that the merger should not be discussed at the earnings conference and should be handled through a formal process. In fact, the two companies have had business and financial ties for many years, and even shared some employees and board members, which provided a potential basis for the merger, but the progress of the formal process still depends on the committee's plan and shareholder vote.

In terms of performance, SpaceX (SPCX.US)'s third-quarter revenue reached US$14.58 billion, exceeding analysts' expectations of US$12.74 billion; earnings per share were 35 cents, higher than expectations of 12 cents. Revenue from its Super Smart Business segment increased 830% year over year to $7.6 billion. Driven by this strong data, SpaceX (SPCX.US) shares rose 2.35% to close at $151.26 in after-hours trading. While digesting rumors of mergers, the market is paying more attention to substantial growth in fundamentals. This shows that even if the merger prospects are uncertain, the ability to expand core businesses is still a key variable supporting valuation.