Photo: Trevor Cokley / USAF (archive)
A potential merger of SpaceX and Tesla could give Elon Musk the voting control he has sought over the electric-vehicle maker without first reaching the ambitious operating targets in his Tesla pay package, Reuters reported in an analysis of the two companies’ compensation plans. That does not mean a merger has been agreed, or that Musk would immediately collect the package’s headline $1 trillion value.
Reuters said Musk told a SpaceX earnings call last month that the companies’ boards had formed special committees to discuss a potential merger. The analysis examined what a transaction could mean for his compensation and control, rather than reporting a signed deal. Musk, Tesla and SpaceX did not respond to Reuters’ requests for comment.
Voting power is different from ownership
Barclays analysts estimated in a recent investor note that, at the companies’ current sizes, an acquisition of Tesla by SpaceX could leave Musk with about 37% of the combined company’s economic ownership and 56% of its voting power, Reuters reported. The estimate is a scenario, not an agreed ownership split.
The difference reflects SpaceX’s share structure. Some of Musk’s shares carry ten times the voting rights of ordinary shares, while Tesla does not have that class of stock. Reuters said Musk’s SpaceX compensation plan gave him voting power before he earns the associated economic rights, helping bring his voting control there to 85% without meeting its operating goals.
No automatic trillion-dollar payout
Tesla’s plan links stock awards to market-value and operating milestones. In a change-of-control transaction, Reuters reported, its terms could allow market-value targets to trigger awards without the additional operating goal, such as putting one million robotaxis into service.
Even then, a payout would not be automatic. Reuters put Tesla’s market capitalization at about $1.6 trillion and said it would need to reach $2 trillion in connection with a transaction for Musk to receive any stock award under the plan. The analysis said a merger initially would likely deliver only a small portion of the headline $1 trillion package, based on the plan and interviews with six executive-compensation experts.
What could change after a deal
Reuters reported that SpaceX’s board could adjust Musk’s compensation terms after a transaction. Experts differed over how that might work: one described keeping the plans while changing goals and awards to reflect a larger combined company, while others said the board could have wide latitude to amend the plan.
The issue for investors is therefore control as well as pay. Voting power can determine corporate decisions without giving its holder the same percentage of the company’s financial returns. Any merger, its terms and its effect on Musk’s awards remain unresolved.
JBizNews Desk | New York
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