Tech mogul says tie-up has a ‘lot of merit’, given firms’ complementary work on AI.

Elon Musk has revealed that SpaceX and Tesla are exploring a possible merger, a tie-up that would create a corporate colossus worth more than $3 trillion.

Musk said on Tuesday that his two largest companies had established special committees to explore a merger.

The SpaceX and Tesla CEO said the idea had a “lot of merit”, given the companies’ complementary work on artificial intelligence, but the committees had not come to any agreement on a proposal.

“They’ve got to come up with something, and then that’s got to be put to the shareholders as a vote,” Musk said on a SpaceX earnings call.

Musk, the world’s richest man with a net worth of more than $900bn, said that a merger would need to clear the “high hurdle” of a 50 percent vote among Tesla shareholders

“Some people out there assume that a SpaceX and Tesla merger is a certainty, and I think that would be overstating it,” Musk said.

“Do I think it would be a good idea? Yes. But at the end of the day, the shareholders have to be supportive of this.”

Biggest corporate merger ever

A SpaceX-Tesla merger would rank as the biggest corporate tie-up in history, far exceeding the $1.25 trillion union between SpaceX and xAI in February.

At current valuations, SpaceX and Tesla rank as the world’s seventh- and eleventh-largest companies, respectively, with a combined market capitalisation of about $3.5 trillion.

Jerayr Haleblian, an expert in mergers and acquisitions at the University of California, Riverside, said a SpaceX-Tesla merger has “sound logic” to support it.

“In some sense, the core of both businesses are expert manufacturing. From a technology transfer perspective, there should be significant flows of information between businesses,” Haleblian told Al Jazeera.

“Both firms seem to have expertise in robotics, AI, energy infrastructure,” he said.

“Accordingly, the core skills are applicable across industry sectors. The key to success will be synergistic innovation, which I anticipate will follow from acquisition.”

Stock market boost

Shares of SpaceX, which went public in June in the largest Initial Public Offering (IPO) of all time, rose more than 8 percent in after-hours trading following Musk’s comments.

Tesla shares gained 1.8 percent.

Musk’s comments came as SpaceX on Tuesday reported its first quarterly profit, driven by strong growth in its AI and satellite-internet divisions.

Net profit was $4.4bn in the July-September quarter, a reversal from a $1.05bn net loss a year earlier.

Profit in the first three quarters totalled $413m, versus a loss of $2.59bn during the same period a year earlier.