Elon Musk publicly endorsed a potential merger between Tesla and SpaceX on Tuesday, saying during SpaceX's third-quarter earnings call that he thinks it would be "a good idea." Both companies have since formed special committees to explore a transaction.
Musk acknowledged the sensitivity of his public comments, describing the situation as "tap dancing through a minefield." The endorsement immediately dominated Wall Street conversation, overshadowing Tesla's latest earnings report.
Tesla's earnings showed declining auto revenue and a steeper drop in its energy business. The company is repositioning around robotaxis and humanoid robots rather than traditional auto sales, though self-driving technology remains in development, the Robotaxi service is in early stages, and Optimus robots are not yet ready for high-volume production.
Tesla shares fell 3 percent Thursday and are down 17 percent for the year. SpaceX stock plunged 9 percent Thursday, wiping out prior gains and dropping below its June market debut opening price.
Analysts at William Blair said in a Thursday note that Musk's pursuit centers on control rather than business strengthening. "We are hard-pressed to find a material opportunity that could only be achieved by an official combination," they wrote, noting that Musk already operates both companies as a single entity.
Governance structures differ significantly. At SpaceX, Musk holds 10-to-1 supervoting shares, giving him nearly 80 percent voting control. SpaceX operates as a controlled company, meaning its Class A shareholders lack corporate governance protections mandated by Nasdaq rules.
Tesla's ownership structure is different. Musk beneficially owns 19.8 percent of Tesla shares, and a merger would require a 50 percent vote of all shares—not just those voting. "That's quite a high hurdle," Musk said on the SpaceX earnings call.
Musk is recused from the discussions between the two companies because of his conflicted position. During a Tesla shareholder call Wednesday, he said he had addressed the matter sufficiently, and Tesla's head of investor relations told analysts executives would not discuss it further.
