Electric-Car and Space Companies Consider a Major Merger
The head of a major electric-car company and a private space company says he believes combining the businesses could make sense. But he stressed that a deal is not certain and would need support from investors.
Special committees at both companies are studying the idea. They have not agreed on the terms of a possible deal, and there is no promise that they will reach an agreement. The executive, who leads both companies, said he is not part of either committee because he has a personal interest in the outcome.
A Deal With Big Questions
The electric-car company is valued at about $1.5 trillion, while the space company is valued at about $2 trillion. Joining them could create one of the largest business mergers ever.
The executive said a merger could bring important benefits. He also warned that the process would be difficult, comparing even talking about a deal to moving through a dangerous field. Any final decision would belong to shareholders, not just company leaders.
At least half of the electric-car company’s shareholders would have to approve the deal. The executive described that level of support as a high bar. Investors have backed major decisions he supported in the past, including a pay package valued at about $1 trillion.
What the Space Company Does
The space business makes rockets and operates satellites that provide internet service. It also runs a protected satellite network used by governments, including the United States.
That government-related work has drawn attention because of claims that Ukraine’s access to the satellite network was limited. The reported limits raised fears that Ukrainian forces could face greater danger from Russian attacks. The U.S. president denied ordering a slowdown, and the executive said the government may have been responsible for the restrictions.
Satellite and Computing Revenue Grow
The company’s satellite internet service brought in $5.2 billion over a three-month period ending in late September. It had earned $3 billion during the same period a year earlier.
Even so, satellite internet is now smaller than the company’s growing cloud-computing business. That service rents computing power to other technology companies, including firms working on artificial intelligence and online search.
Cloud-computing revenue reached $7.5 billion for the three-month period. A year earlier, it was $813 million, a sharp increase.
Different Paths for the Two Businesses
The electric-car company is best known for its vehicles, but its leader has been shifting more of its resources toward robotics. The space company, meanwhile, has been expanding its work on computer systems needed for artificial intelligence.
The space business became more valuable than the electric-car company on the stock market after it began trading publicly. The executive became the world’s first person whose paper wealth reached $1 trillion after that market debut. A paper fortune is based on the estimated value of assets, rather than cash already received.
Despite its rapid growth, the space company is not profitable as a whole. Its revenue for the first nine months of the year rose to $27 billion, up from $13.7 billion during the same period a year earlier.
Investors React
After the executive discussed the possible merger, shares in the space company rose 8% in trading after the market closed. Shares in the electric-car company gained 2%. The car company was due to release its own quarterly results the following day.
The executive has also been bringing more of his businesses together. Before the space company became publicly traded, it bought an artificial-intelligence company and a social media platform that he already owned.
For now, the committees’ review and the required shareholder vote stand between the merger idea and any completed deal. The companies have not settled on terms, and the outcome remains uncertain.