Tesla's merger vote would also divide SpaceX's AI funding bill

Independent committees are exploring a Tesla and SpaceX merger. SpaceX's $16.4 billion quarterly AI capital bill makes future funding central to the ownership split.

Tesla and SpaceX have asked independent board committees to explore a merger. TechCrunch reported that they have not agreed terms. SpaceX's AI construction bill makes those terms consequential: the company spends much more than its operations generate in cash.

Tesla's outside shareholders would decide how much of that future bill they accept. The exchange ratio, which sets each side's ownership in the merged company, would divide both the businesses and their funding needs. Shareholders must judge whether their proposed stake compensates them for the spending commitments they would share.

Elon Musk described the committees during SpaceX's October 20 earnings event. CNBC's live coverage says each consists of independent directors and that Musk is excluded because he is conflicted. He supports the idea, but called assumptions of a certain merger overstated.

The circulated $3.5 trillion figure gives investors no agreed purchase price. Adding the companies' market values shows their combined size, but the exchange ratio determines what each shareholder keeps. Until the committees propose that ratio, investors cannot know how much of either company's future they would surrender.

Musk needs votes beyond his own holding. He told the call that Tesla would need support from 50% of all shares, including those that do not vote.

Tesla's October proxy lists Musk's holding at 699.6 million shares, or 19.8%, excluding unearned award shares. His stake alone would leave substantial support to obtain elsewhere.

Other shareholders would need to supply 30.2 percentage points if Musk votes yes. That equals roughly 38% of the shares outside his holding, assuming ownership and voting eligibility stay unchanged. The calculation uses Musk's stated threshold; the eventual proposal would determine the applicable legal terms.

Starlink supplies most of SpaceX's current operating profit. The third quarter release shows revenue of $14.6 billion and operating income of $2.8 billion. About $2.4 billion of that income came from connectivity, alongside an infrastructure business expanding with very different cash needs.

AI absorbed most of the quarter's construction spending. SpaceX spent $19.6 billion on capital projects, including about $16.4 billion in its AI segment. That computing build now shapes financing needs even for shareholders originally drawn to satellites and launch services.

The AI segment's current earnings cannot fund that build. It recorded $431 million of operating income against the much larger capital outlay.

Construction consumes cash before its eventual returns become clear. Depreciation then spreads equipment costs through later accounts, while customers pay as they use the infrastructure. New capacity can become valuable, but accounting profit and construction cash flow follow different schedules.

SpaceX's nine month cash shortfall was roughly $35 billion. Operations generated $13.1 billion while property and equipment absorbed $48.1 billion. That gap makes available funding and financial commitments as important as the quarter's net profit.

The stock market listing supplied much of the money to invest. SpaceX raised $85.7 billion of net IPO proceeds during the period, and borrowed $51.8 billion while repaying $39.8 billion.

Cash and marketable securities stood at $89.9 billion on September 30. Those resources provide substantial room to invest; the speed of construction determines how quickly SpaceX uses it.

Spending during the negotiations changes the business shareholders would receive. Cash used before completion reduces the cash entering the combined company, while new borrowing gives lenders claims ahead of shareholders. A bargain based only on market values when talks began would miss both changes.

Computing contracts give SpaceX a credible case for spending ahead of revenue. It guided first quarter 2027 revenue to $33 billion to $37 billion, citing greater visibility into those contracts. Delivering that growth would improve returns on the infrastructure and strengthen the valuation case; the contracts still require execution.

Tesla already owns part of SpaceX and sells it equipment. Its June quarterly filing records a $2 billion March investment representing less than 1% ownership, plus sales of Megapack products. A merger would bring that existing investment and commercial relationship inside one company.

The boards also share a director. SpaceX's leadership page lists Ira Ehrenpreis as an independent director and committee chair; Tesla's proxy lists him on its board too. Investors will need to assess the merger committees' members and powers when judging how each side evaluated a deal involving the same chief executive.

Combining the businesses could reduce the cost and friction of working together. Shared infrastructure, energy equipment and AI development offer possible benefits. Those gains must compensate whichever shareholders accept more future spending; compatible businesses alone do not establish a fair ownership split.

The merger contract could divide the risk of spending before completion. A fixed exchange ratio sets how many shares each side receives. That gives both sides a clear ownership bargain, but later cash spending can change the value behind those shares.

Adjustments for cash or debt can shift some financing risk between the two sides. Agreed limits on spending before completion can also preserve the financial assumptions on which the committees agree.

Protecting shareholders can also restrict the build. Spending limits could delay capacity whose value depends on early delivery, and protection for one side changes what the other receives. The committees would be negotiating both price and operating freedom. Governance therefore forms part of the commercial bargain both sets of shareholders must evaluate.

Tesla's December 3 annual meeting has no merger on its existing agenda. A transaction would need separate shareholder materials and a financial explanation that withstands outside scrutiny.

SpaceX will already be well into its next spending quarter by then. Investors should assess the proposed ownership split against that changing funding position, rather than market values quoted before negotiations began.