LEILA FADEL, HOST:
Two huge companies run by Elon Musk, Tesla and SpaceX, are exploring becoming one company.
A MARTÍNEZ, HOST:
If they merge, it could concentrate even more power in the hands of one of the richest men on Earth.
FADEL: NPR tech correspondent John Ruwitch is here to tell us about it. Good morning, John.
JOHN RUWITCH, BYLINE: Good morning.
FADEL: So these companies seem to do very different things - rockets and cars. Why would they merge?
RUWITCH: The two companies actually have a lot of overlap, and the idea of merging them has been floating around for a while. It came up in this week's earnings calls by SpaceX and Tesla. Here's Elon Musk, who was asked about it on Tuesday's SpaceX call.
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ELON MUSK: Do I think it would be a good idea? Yes. But at the end of the day, the shareholders have to be supportive of this.
RUWITCH: He says special committees have been set up in each of the companies to discuss it, and analysts say it actually could make some business sense. You know, for example, Tesla makes solar panels and batteries that are used in SpaceX satellites. SpaceX runs the Starlink satellite internet system that Tesla's self-driving cars use. They're working on a chip factory together. Brian Mulberry is chief market strategist for Zacks Investment Management, which holds shares in both companies.
BRIAN MULBERRY: Combining the balance sheets and making one company allows Tesla to use that intellectual property, that design and engineering without having to lease it or, you know, write a check, if you will, from the right hand to the left hand in order to be able to use that type of technology.
RUWITCH: Both companies are developing AI, too, and spending a lot of money on it, and analysts say there could be advantages to putting all that under one roof.
FADEL: What would be in it for Musk?
RUWITCH: Well, these are both essential parts of Musk's vision for a tech-enabled future that involves things like robots and space-based data centers, so a merger could give him more control over that. Musk holds nearly half of SpaceX shares and over 80% of shareholder voting power. With Tesla, he has a lot less voting power. And so if these companies merge into one, analysts think he could come out of it with a controlling share. The other thing for Musk, of course, is money. In November, Tesla shareholders approved a trillion-dollar pay package for him, contingent upon meeting some growth targets in the next decade. Analysts think a merger could make it easier for him to hit those targets and get the payout.
FADEL: What could it take to make this merger happen?
RUWITCH: Shareholders would have to approve any deal. That might be a challenge on the Tesla side, where half of all shareholders would have to be in favor of it. Analysts think they could demand higher share price. You know, some institutional investors might not love the idea of forfeiting more control to Musk. Also Tesla has bigger revenues than SpaceX, so those would be diluted in the combined company. And shareholders who invested in Tesla because they like EVs would have to get really comfortable owning shares in a company with a lot more businesses like rockets, Starlink, the Grok chatbot, the social media site X. Seth Goldstein, a senior equity analyst at Morningstar, says there are also regulatory hurdles. Tesla makes cars in China. SpaceX does work with the Pentagon.
SETH GOLDSTEIN: The U.S. government may not like having a U.S. defense contractor that's relying on the Chinese government for its key manufacturing operations.
RUWITCH: And likewise, Beijing may also not be so keen on an American defense contractor operating in China or running self-driving cars there.
FADEL: With even more money concentrated in one person's hand, if this merger goes through, what could it mean for the public?
RUWITCH: Well, the company would instantly be one of the biggest in the world. The combined market capitalization of Tesla and SpaceX now is about $3.7 trillion. And then, of course, it means Musk may have more power. I mean, he's someone who has not been shy with, for instance, his willingness to get involved in politics.
FADEL: That's NPR's John Ruwitch. Thank you, John.
RUWITCH: You're welcome. Transcript provided by NPR, Copyright NPR.
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