(Deutsche Welle Chinese website) Elon Musk, the founder of Tesla and SpaceX, said on Tuesday (October 21) that merging his two companies would be a "good idea" and that both parties have established a special committee to discuss relevant matters, confirming long-standing speculation that the two companies may merge.
The news also pushed SpaceX's stock price up 8% in after-hours trading, while Tesla's stock price rose 1.8%.
Previously, Barclays analyst Dan Levy predicted that the merger may be announced before Tesla's annual shareholder meeting in December, further triggering market speculation about the merger of the two companies.
In this regard, Musk said in an investor conference call, "I think this would be a good idea, but ultimately it will be decided by the special committees of the two companies." He also pointed out that due to conflicts of interest, he was not actually able to participate in the discussions of the special committee composed of independent directors.
Musk told investors that the establishment of the special committee was at the request of shareholders, and the final merger must be approved by shareholders. If the transaction is to be completed, at least 50% of Tesla shareholders must support it.
Gene Munster, managing partner of Deepwater Asset Management, pointed out, "Before this, I thought the chance of some kind of integration happening in the next two years was about 90%. Now I think it has increased to 95%, and it may even happen within the next year. Obviously there is a push for this within the company, and it will probably eventually happen."
Why does Musk want to push for a merger?
If the two companies merge, they will create a company that is at the core of Musk's long-term vision: an integrated technology and manufacturing empire spanning the fields of artificial intelligence, energy, robotics, communications and transportation, and covering the earth and space.
Musk said on Tuesday: "I think there is great value in integrating the two companies. As we are gradually approaching the technological singularity of super intelligence, cooperation will bring huge benefits in areas such as super intelligence software development, chip design, Terafab manufacturing systems, robotics, large-scale orbit capabilities through the Starmind satellite constellation, and communication connectivity."
In addition, according to Reuters, given that Musk has long argued that he needs greater control of Tesla to promote AI and robotics strategies, Musk's influence may be further concentrated after the merger of the two companies. He currently holds nearly one-fifth of Tesla's shares and has voting control of SpaceX.
However, Musk also emphasized that it is still "too early to say" to assume that the two companies will definitely merge.
Justus Parmar, CEO of the American venture capital company "Fortuna Investments," analyzed that for investors, the merger of Tesla and SpaceX will form a single entity, which will bring almost all of Musk's companies to the same place.
Parmar pointed out, "This can also avoid business overlap, reduce his time traveling back and forth between the two companies, and at the same time reduce the management expenses, legal costs and administrative burden of listed companies."
In addition, Tesla operates a high-margin automotive business that generates stable cash flow... cash flow that helps support SpaceX's profitability and fund its highly capital-intensive space exploration and launch program.
Is Tesla’s Chinese market a risk?
Although the merger of the two companies will become one of the largest mergers in the history of the market, with a combined market value of approximately US$3.5 trillion. But perhaps one of the biggest challenges is geopolitical and regulatory issues.
SpaceX is an important contractor for the U.S. military, intelligence agencies and NASA. However, Tesla is highly deployed in the Chinese market, and its super factory in Shanghai is an important base for global production and sales. A merger between the two companies would likely increase scrutiny from U.S. regulators, national security agencies and the Chinese government.
Founder ETFs portfolio manager Michael Monaghan also believes that “since SpaceX is an important U.S. defense contractor, Tesla’s business in China may need to be formally cut off, or strict operational and information firewalls must be established to respond to related national security concerns.”
