A potential merger between SpaceX and Tesla could give Elon Musk majority voting control of the combined company without requiring him to achieve several ambitious performance targets tied to his compensation packages, according to a Reuters analysis.
However, the proposed transaction would not automatically trigger a $1 trillion payout for the billionaire, whose compensation arrangements at the two companies have different structures.
According to Reuters, which reviewed the compensation agreements and consulted six executive compensation experts, a merger could provide Musk with a faster route to securing control of Tesla. It would also allow him to bypass some of the operational milestones attached to his pay packages.
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Musk said last month that the boards of SpaceX and Tesla had formed special committees to discuss a possible merger. He has described the combination as a potentially beneficial move, although no final agreement has been announced.
Barclays analysts estimated that if SpaceX acquired Tesla at their current valuations, Musk could own approximately 37% of the combined company while controlling 56% of its voting power.
Different compensation structures at SpaceX and Tesla
The two companies have adopted substantially different approaches to Musk’s compensation.
At SpaceX, Musk received voting rights associated with awarded shares upfront, even though he cannot claim their economic value until he meets specific performance targets. The arrangement has given him approximately 85% voting control of the company without requiring him to achieve the associated milestones.
Those targets include establishing a human colony of one million people on Mars and developing large-scale space-based data centers.
Tesla’s compensation arrangement works differently. Shareholders approved a package potentially worth $1 trillion in stock last year, but Musk must meet a series of market capitalization and operational targets to receive the awards and additional voting power.
He has not yet achieved any of those targets. Even after meeting all of them, his voting power at Tesla would reach only about 29%, according to documents presented by the company’s board.
Merger could change payout conditions
A merger could alter how some of Tesla’s compensation milestones are applied.
Under the terms of Musk’s Tesla pay agreement, a change-of-control transaction could allow him to receive stock awards based on market capitalization targets without meeting certain operational requirements, such as putting one million robotaxis into service.
However, Tesla’s market capitalization would need to reach at least $2 trillion in connection with a merger for Musk to receive any stock awards under the plan. At that valuation, the award would amount to $20 billion in Tesla shares, although its actual value would be lower because the agreement accounts for stock appreciation after September 2025.
SpaceX’s compensation plan also leaves room for changes following a merger. Experts told Reuters that the company’s board could revise the existing targets and awards to reflect the value of the combined business.
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Charles Elson, founding director of the Weinberg Center for Corporate Governance at the University of Delaware, told Reuters that the compensation package was a distraction from the central issue of corporate control.
Musk, Tesla and SpaceX did not respond to Reuters’ requests for comment.
The merger discussions come as Musk seeks to bring together businesses involved in electric vehicles, artificial intelligence, robotics, satellite communications and space technology. Whether the companies ultimately agree to a transaction remains uncertain.