Tesla and SpaceX Form Special Committees to Weigh a Merger: How a Share-Exchange Deal Works

On SpaceX's third-quarter earnings call on October 20, 2026, after the US close, Elon Musk said the boards of SpaceX and Tesla had each formed a special committee of independent directors to evaluate a possible combination. Musk, who runs both companies, is not on either committee. The committees have not agreed on the terms of any transaction, and Musk cautioned that a deal is not a certainty. TechCrunch.

What Actually Happened

This is the start of a formal review, not a merger announcement. Musk said there is "no guarantee" of a deal, but "a lot of merit" to a tie-up. Yahoo Finance. He pointed to AI software, chip design, robotics and the Terafab chip plant the two companies are developing jointly. Fortune.

Fortune put the two companies' combined market value at about $3.5 trillion at Tuesday's closing prices: about $2 trillion for SpaceX and nearly $1.5 trillion for Tesla. That is the market's value today, not a deal price.

The same evening SpaceX reported quarterly revenue of about $14.6 billion, up 161% from a year earlier, and net income of $4.4 billion, compared with a loss of $1.1 billion a year earlier. Los Angeles Times via Yahoo Finance.

SpaceX shares rose after hours, by more than 5% according to Fortune and by nearly 8% according to the Los Angeles Times; Tesla gained about 1%. Both stocks were higher in premarket trading on October 21. SpaceX's move also reflects its strong results, so it cannot be attributed to the merger news alone. In a typical takeover, the target's shares rise toward the offer while the acquirer's often stall, because the acquirer pays any premium; here it is not yet clear which side would play which role.

How a Share-Exchange Merger Works

Companies of this size would most likely combine through a stock-for-stock deal: shareholders of one company receive shares of the other (or of a new holding company) instead of cash. The key number is the exchange ratio, the number of new shares received per share held.

A made-up example: company A is worth $100 with 10 shares, company B is worth $50 with 10 shares. If A issues 5 new shares to B's holders (a ratio of 0.5), A's owners hold 10 of 15 shares of a $150 company, still worth $100. Their percentage fell, their value did not.

At a ratio of 0.6, B's holders get 6 new shares and A's owners hold 10 of 16 shares: $93.75. That gap is value dilution: the ratio moved wealth from one group of shareholders to the other. The ratio, not the headline value of the combined company, is what matters.

Why the Controlling Shareholder Steps Aside

Musk is on both sides of any deal. Fortune estimates he owns about 20% of Tesla and about 45% of SpaceX, with about 82% of SpaceX's voting power. Because his stake in SpaceX is larger, a ratio generous to SpaceX holders would benefit him more. A deal like this is a related-party transaction, and that conflict of interest is why Musk said he cannot take part in the committees' discussions.

A special committee of independent directors negotiates on behalf of the other shareholders, usually with its own advisers. Critics doubt its independence: Electrek argues the committees are likely to side with Musk. The vote is a further check: at Tesla, a deal would need approval from a majority of all outstanding shares, not just of the votes cast. At SpaceX, Musk's voting control makes approval far easier.

What Shareholders of Each Company Should Watch

• The terms: the exchange ratio, which company is the surviving entity, and any premium to one side.
• Fairness opinions: an investment bank's view that the terms are fair from a financial point of view, and the assumptions behind it.
• The proxy statement: the document sent before the vote, with the committee's reasoning, the negotiation history and the risks.
• The vote itself: shares not voted at Tesla effectively count against a deal, because the threshold is a majority of outstanding shares.

Tesla reports its own third-quarter results after the close on October 21, 2026, per its Business Wire notice. For SpaceX's path to the market, see our earlier post on its IPO filing.

What It Means If You Hold Through a Broker

Many Ukrainian investors hold US stocks through international brokers. In a stock-for-stock deal nothing is done manually: after closing, the broker processes a corporate action, replacing the old shares with new ones at the exchange ratio, and fractions are usually paid out in cash. Before the vote, the broker also passes on the proxy materials and voting options. The tax treatment of a share exchange depends on your tax residence, so clarify it with a tax adviser before any deal closes.

Practical Takeaway for Investors

There is no deal, no ratio and no price yet, so today's price moves reflect expectations about terms that do not exist. Follow official filings rather than headlines, and when terms appear, work out what the ratio means for your share of the combined company. If you own both through broad index funds, the value transfer between the two groups would partly cancel out in your portfolio.