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Tesla and SpaceX take first step towards merger, would dilute all shareholders
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- DeepHorus
Tesla and SpaceX have formed special committees within their corporate boards to explore a potential merger, according to Elon Musk, who serves as CEO of both companies. The announcement came during SpaceX's quarterly earnings call, just months after the space company went public. The merger could have major consequences for shareholders and even retirement savings tied to major stock indices.
Musk has long complained about Tesla's public status and the need to respond to shareholder concerns. His Tesla ownership stands at around 22% after his pay package was restored. The potential merger is seen as a way for Musk to gain greater control over Tesla, which he has sought for years.
Musk has proposed pay packages with impossible operational milestones, such as delivering a million robots, a million robotaxis, and a million Mars colonists. A provision in those packages would automatically deliver shares if a merger occurs, regardless of whether any milestones are met. This means Musk would get his stock while other shareholders are diluted.
The special committees consist of 'independent' board members who are reviewing the deal. Tesla's board has historically supported Musk's interests over those of shareholders. The merger is not certain, but the formal review marks a significant step toward a possible combination.
Shareholders may face dilution from the merger, which could create new shares for Musk and reduce the voting power and value of existing shares. The plan has been criticized as financial engineering designed to benefit Musk at the expense of other investors. The implications extend beyond Tesla and SpaceX to broader stock indices and retirement savings.
Musk's history of promising unrealistic targets has raised concerns about the credibility of his milestones. The automatic share delivery provision in a merger scenario would bypass operational milestones entirely. This could leave shareholders with diluted stakes without any of the promised technological breakthroughs.
The merger review is in its early stages, and no timeline has been announced. If completed, the deal would reshape both companies and Musk's level of control. Investors are advised to watch for further developments from the special committees.
