Tesla (NASDAQ:TSLA) stock climbed on Friday (30 January) on reports of a potential merger with Elon Musk’s reusable rocket company. It’s an exciting prospect, but do investors need to be careful?
It might not happen. But if it does, there are a couple of things that Tesla shareholders need to keep an eye on when it comes to assessing the attractiveness of combining with SpaceX.
Who gets what?
As a business, I like SpaceX much more than I like Tesla. So I think the car/robotaxi/humanoid robot company’s share price going up on news of a potential merger makes sense.
I can also see an obvious attraction of combining the two companies for SpaceX investors. The firm had been exploring going public this year, but this could save on IPO fees.
An obvious question mark, though, concerns who ultimately owns what in a combined enterprise. One idea might be to split it along the lines of the latest market values.
This would give Tesla shareholders 63% of the firm. That sounds like a good deal, but it might have some unwelcome consequences in the context of the CEO’s latest compensation package.
CEO compensation
In November 2025, Tesla shareholders voted to approve a new compensation plan for Elon Musk. But a merger with SpaceX would raise some important questions about this.
A lot of the package is tied to the CEO increasing Tesla’s market value. Merging with an $800bn company would achieve this.
Yet if the new enterprise was divided based on the market value of each business, Tesla stock wouldn’t be more valuable. The firm would be bigger, but it would have proportionally more shareholders.
In other words, it would push the CEO closer to the milestones in the compensation package, but Tesla shareholders wouldn’t benefit in the way they might have imagined. And that’s worth noting.
What could happen?
For obvious reasons, none of the operational milestones in the pay package are directly to do with SpaceX. They’re connected to things like cars, autonomous vehicles, and humanoid robots.
Some of them would, however, be directly affected by the merger. A number of them are to do with reaching certain EBITDA targets and SpaceX would be a contributor to this.
An obvious solution would be to draft a new compensation package reflecting the new situation. But it would be very unusual to do this with the current one approved less than three months ago.
I’m not sure what I think the best way forward in this situation is. I am sure, however, that Tesla shareholders will need to keep a close eye on how the situation develops.
Final Foolish thoughts
There’s a good chance that this comes to nothing – it wouldn’t be the first time something like this has been talked about. But if it does happen, Tesla shareholders need to think through the potential implications.
Merging with Tesla gives SpaceX a cheaper route to market than a traditional IPO. And that’s a reason for investors in that company to take an interest.
Tesla shareholders might think they stand to benefit. But I think the real winner from a deal – if it went through – might be Elon Musk!
