Elon Musk told SpaceX investors on Tuesday that a combination with Tesla would be a good idea, and CNBC reported Friday that talk of a merger has since overshadowed Tesla's own earnings¹.

On SpaceX's third-quarter call, Musk said both companies have formed special committees to explore a transaction¹. Tesla's head of investor relations told analysts before Wednesday's Tesla call that executives would not address the matter¹. Tesla and SpaceX did not respond to CNBC's requests for comment¹.

The Guardian, writing from the same SpaceX earnings release, led with the company's reported results rather than a Tesla combination². It said SpaceX posted $14.58 billion in revenue versus $12.72 billion expected by analysts, earnings per share of 35 cents and net income of $4.4 billion, with a 161% year-over-year revenue increase that it attributed to Starlink and AI². It said the stock rose 2% after hours after starting the day down about 8% for the year².

The Guardian said investors had speculated about a Tesla merger and pointed to that chatter as a backdrop, without reporting Musk's later on-call endorsement or special committees². It also recapped Ukraine's accusation that military-grade Starlink access was restricted, Musk's statement that StarShield is controlled by the U.S. government, and a White House denial that the service was hobbled².

CNBC said Tesla's report showed falling auto revenue and a steeper drop in energy, while Musk has described Tesla's future as tied more to robotaxis and humanoid robots than car sales¹. Tesla shares fell 3% on Thursday and were down 17% for the year, CNBC said; SpaceX fell 9% on Thursday after a Wednesday bounce following its June market debut¹.

William Blair analysts wrote Thursday that they see overlap between the businesses but are hard-pressed to find a material opportunity that would require an official combination, according to CNBC¹. The firms did not independently confirm that note¹.

CNBC said Musk has 10-to-1 supervoting shares and almost 80% voting control at SpaceX, which the company described in its IPO prospectus as a controlled company¹. Tesla's latest proxy, as cited by CNBC, showed Musk beneficially owning 19.8% of Tesla shares¹. On the SpaceX call, Musk said a Tesla deal would need a 50% vote of all shares, not just those who vote, and that he is a conflicted party who cannot sit in the talks¹.

SpaceX's market cap was close to $2 trillion and Tesla's around $1.5 trillion, CNBC said, which would make SpaceX the likely acquirer in a stock swap¹. Columbia law professor Eric Talley told CNBC a merger could ease investor concern about where Musk spends time and which company houses robotics and AI work¹.

Former Tesla board member Steve Westly told CNBC's David Faber that the companies may try to announce a proposal before U.S. midterm elections in less than two weeks¹. He said the open question is what regulators would require and that China is a critical Tesla manufacturing market that accounted for 22% of Tesla revenue last year¹.

Talley said China's national security regulator would likely take interest because of Tesla vehicles on Chinese roads and Starlink's work with the U.S. government¹. Counterpoint Research analyst Kevin Li said in an email to CNBC that antitrust, national security given SpaceX military contracts, and cross-border reviews all present challenges¹. Musk did not give a timeframe, CNBC reported¹.

Sources

1. CNBCWith earnings in rearview mirror, SpaceX-Tesla merger chatter takes center stageOct 23, 7:00 AM
2. The GuardianSpaceX’s revenue jumps in second-ever earnings report amid Starlink turmoilOct 20, 9:10 PM

Read the original at CNBC ↗