Elon Musk’s SpaceX said to consider merger with Tesla or xAI

San Francisco – SpaceX is considering a potential merger with Tesla, as well as an alternative combination with artificial intelligence firm xAI, according to people familiar with the matter, a sign billionaire Elon Musk is weighing how to consolidate his empire.

The firm has discussed the feasibility of a tie-up between SpaceX and Tesla, an idea that some investors are pushing, the people said. Separately, they are also exploring a tie-up between SpaceX and xAI ahead of an initial public offering (IPO), some of the people said.

Any transaction could attract sizeable interest from infrastructure funds and Middle Eastern sovereign investors, some of the people said. A deal could also potentially require a large financing component, one of them said.

No final decisions have been made, details could change and the companies could decide to remain separate, the people said. Mr Musk and representatives for SpaceX, xAI and Tesla did not immediately respond to requests for comment.

Different parts of Mr Musk’s grand vision for SpaceX – of the company putting data centres into space to do complex computing for AI – would potentially be served by the various scenarios. xAI could benefit enormously from computing capacity provided by SpaceX’s data centres in orbit, if the company can make the engineering work. 

Tesla’s ability to manufacture energy storage systems could help SpaceX use solar energy in space to run the data centres. Mr Musk has also discussed using SpaceX’s Starship rockets to carry Tesla’s Optimus robots to the moon as well as to Mars.

Tesla shares jumped as much as 4.5 per cent in after-hours trading on Jan 29. The stock had fallen 3.5 per cent during normal hours, giving the company a market value of about US$1.56 trillion (S$1.97 trillion). SpaceX is targeting an IPO that would value the company at about US$1.5 trillion, Bloomberg News has reported. 

Two legal entities with the phrase “merger sub” in their names were set up in Nevada on Jan 21 that count SpaceX chief financial officer Bret Johnsen as officers, Nevada’s business portal shows. 

Reuters reported the potential merger between SpaceX and xAI earlier. Shares of xAI would be exchanged for shares in SpaceX, Reuters said, citing a person familiar with the matter.

Some xAI executives may have the option to receive cash instead ‍of SpaceX stock as part of the merger, Reuters said. 

SpaceX is weighing a June listing, around Mr Musk’s birthday, and could seek to raise as much as US$50 billion, people familiar with the matter have said. That would make it the biggest IPO of all time. Bank of America, Goldman Sachs Group, JPMorgan Chase & Co and Morgan Stanley are expected to have senior roles.

Robinhood Markets, the upstart broker credited with getting young people hooked on trading, is vying for a key role in SpaceX’s blockbuster IPO, Bloomberg News reported on Jan 28.

SpaceX’s Mr Johnsen told employees in December that a potential IPO would help fuel an “insane flight rate” for its developmental Starship rocket and a possible base on the moon. BLOOMBERG