I wrote an article on January 31, 2026, analyzing the outcome of a potential SpaceX–Tesla merger. That piece assumed a more conventional acquisition-style transaction rather than a true Merger of Equals (MoE). Tesla’s 2025 proxy statement, released last September, had already provided full details on the 2025 CEO Performance Award. Since then, the amended SpaceX S-1 has been filed, giving us precise pre-IPO share counts, Elon’s exact ownership figures, and complete mechanics of his SpaceX performance awards. This is the updated analysis (revised on the morning of June 2nd for accuracy) assuming a true 50/50 Merger of Equals with SpaceX as the surviving entity.
How a True Merger of Equals Works in Practice
A Merger of Equals is structured so that neither side pays a traditional takeover premium; instead, shareholders of both companies end up owning roughly equal portions of the new combined company. The exchange ratio is set by the boards (with fairness opinions from investment banks) to achieve that parity.
- It is not an arbitrary “meet in the middle” of current trading prices.
- It is based on the relative fair market values (usually anchored to then-current public market caps post-SpaceX IPO, plus any negotiated adjustments for synergies, growth prospects, etc.).
- Upon announcement, the market prices both stocks toward the implied value of the deal ratio via arbitrage.
Most Probable Outcome: The Lower-Valued Stock “Catches Up”
Assume at announcement:
- Tesla market cap = **T
- Post-IPO SpaceX market cap = S**
The boards would negotiate an exchange ratio such that former Tesla shareholders receive ~50% of the new company and former SpaceX shareholders receive ~50%.
Typical mechanics:
- If T < S, Tesla shareholders would receive a higher number of new combined shares per Tesla share (or SpaceX would issue more shares to Tesla holders). This effectively values Tesla at a higher level to bring the two sides to parity.
- The stock of the lower-valued company (whichever has the smaller market cap relative to the negotiated ratio) tends to rise (“catches up”) toward the implied deal value.
- The higher-valued company’s stock often trades flat to slightly down due to dilution and uncertainty, but the net effect is convergence toward the deal-implied values.
This is the classic MoE pattern seen in deals like Dow-DuPont, CBS-Viacom, or similar “merger of equals” transactions. The market does not split the difference in the middle arbitrarily; it arbitrages toward whatever ratio the companies announce.
**Governance Considerations
**SpaceX has a dual-class share structure, with Elon controlling the super-voting Class B shares. In a Merger of Equals, this dual-class structure would be maintained in the surviving company to preserve Elon’s voting control.
Tesla will need to approve the merger in a shareholder vote at a formal meeting, with the support of at least 50% of all outstanding shares. This means the merger would require a full proxy solicitation and shareholder approval process.
Market Reaction Dynamics
- Announcement → Immediate arbitrage trading aligns the two stocks to the exchange ratio.
- The “cheaper” stock (relative to the announced ratio) rallies.
- Deal spread narrows over time as closing approaches (subject to regulatory approval, shareholder votes, etc.).
- Historical precedent shows the smaller/lower-trading name often sees the bigger percentage pop.
**Bottom Line
Most likely: The exchange ratio is set at announcement to achieve ~50/50 post-merger ownership based on then-prevailing market caps (or a negotiated fair value). The lower-valued stock catches up via the ratio, not **by literally meeting in the middle. The combined entity would eventually (probably 8 - 12 months after the announcement, due to all approvals needed) trade as a single ticker reflecting the blended value plus any synergy premium the market assigns.
This is highly speculative and would be an enormous, complex transaction requiring SEC filings (Form S-4), fairness opinions, antitrust clearance, and shareholder votes under both companies’ governing documents. Elon’s control dynamics and the dual-class vs. single-class structures would be central negotiation points.
The Deal Assumptions
Please keep in mind that these are all only assumptions and simply for the thought experiment!
- SpaceX post-IPO market capitalization at the moment of MoE announcement: $2.5 trillion
- Tesla market capitalization at the same moment: $1.6 trillion
- Combined market capitalization: $4.1 trillion
- Structure: Classic Merger of Equals with exactly 50% / 50% post-merger economic ownership split
- SpaceX remains the surviving legal entity
- SpaceX IPO dilution: 4.3% new Class A shares issued (based on $75b with a $1.75t market cap)
- SpaceX Class B shares have a 10× voting multiplier; Class A carries 1 vote per share
- Elon’s exact pre-IPO SpaceX ownership (amended S-1, page 209):
- Class A common stock: 849,494,440 shares
- Class B common stock: 5,569,053,075 shares
- > Total economic ownership pre-IPO: 51.2%
Post-Merger Economic Ownership for Elon
After the 4.3% IPO dilution, Elon’s SpaceX ownership is reduced to 49.0%.
Tesla's 17.5% is an estimate after the dilution to 4bn Tesla shares after the exercise of the 2018 stock options, due before August 15, 2026
Elon would own approximately 33.25% of the combined company’s equity.
Post-Merger Voting Power
Elon retains all of his Class B super-voting shares in the surviving SpaceX entity (each carrying 10 votes). The shares he receives from Tesla convert only into Class A common stock (1 vote per share).
Estimated voting control: 59–63% — still a commanding majority.
Elon’s Three Major Performance Awards Post-Merger
The $4.1T combined market cap dramatically accelerates the market-cap portions of the two SpaceX awards. The Tesla 2025 award is treated as a Change in Control under the plan language.
1. Tesla 2025 CEO Performance Award (12 tranches) Market-Cap Milestones (in a Change in Control, measured using the deal value attributed to Tesla shareholders — approximately $2.05T total):
- Tranche 1: $2.0T → Immediately earned
- Tranche 2: $2.5T → Not met
- Tranches 3–12 → Not met
Result: Only 1 tranche becomes earned immediately.
Because this is treated as a Change in Control, all operational milestones are disregarded and any unearned tranches are forfeited.
2. SpaceX CEO Award (1 billion Class B shares – 15 tranches) Market-Cap Milestones: increments of 500 billion from 500 billion to 7.5 trillion.
At the 4.1 trillion combined valuation:
- Tranches 1–7 (500 billion to 4.0 trillion) → Immediately earned
- Tranche 8 (4.5 trillion) → Within months
Result: 7–8 tranches earned quickly. The permanent human colony on Mars with at least 1 million inhabitants remains a long-term gating condition.
3. SpaceX AI CEO Award (302.1 million Class B shares – 12 tranches) Market-Cap Milestones: $1.065T to $6.565T in $500B increments.
At $4.1T combined:
- Tranches 1–6 ($1.065T to $3.565T) → Immediately earned
- Tranches 7–8 ($4.065T to $4.565T) → Within months
Result: 6–8 tranches earned quickly. The requirement for non-Earth-based data centers capable of delivering 100 terawatts of compute per year remains a long-term gating condition.
Summary of Accelerated Market-Cap Portions Across All Three Awards
- Tesla 2025 Award: 1 of 12 tranches unlocked (operational milestones disregarded)
- SpaceX CEO Award: 7–8 of 15 tranches unlocked on market cap
- SpaceX AI CEO Award: 6–8 of 12 tranches unlocked on market cap
Total across all three awards: approximately 14–17 tranches become earned (or highly probable) within the first 6 months.
What Happens to the Operational / Strategic Milestones?
For the Tesla 2025 award, they are automatically disregarded because the transaction triggers a Change in Control under the plan language.
For the two SpaceX awards, the operational/strategic milestones (Mars colony and 100 TW orbital compute) remain in force unless the post-merger Board explicitly amends or waives them.
Two important practical points
Even though the default rule in a Change in Control is that operational milestones for the Tesla award are disregarded, the parties in a friendly negotiated Merger of Equals have significant flexibility. The merger agreement itself can provide that the Tesla 2025 award is assumed with its operational milestones preserved or modified, and the post-merger Board (still under Elon’s effective control) can use its administrative authority to keep meaningful performance conditions in place if desired.
The SpaceX performance awards are also already issued. According to page 31 of the amended S-1, Elon holds 1,302,072,285 restricted Class B shares that were issued to him and are held of record in his name. These shares can already be voted by Elon, even though they remain subject to performance-based vesting conditions. This means that when the milestones are achieved, the shares simply vest — they do not result in the issuance of hundreds of millions of new shares. The dilution from these awards has already occurred through their earlier issuance rather than through future share creation upon vesting.
Bottom Line
A true 50/50 Merger of Equals at these valuations will deliver a very large immediate acceleration of Elon’s compensation — but the effect is more nuanced than many headlines suggest. The Tesla award sees only the attributed Tesla value (~$2.05T) for its market-cap test and loses its operational milestones, while the two SpaceX awards benefit from the full $4.1T combined market cap.
The long-term operational and strategic milestones for the SpaceX awards would remain binding unless the new Board takes deliberate action to modify them after closing.
This MoE scenario still represents a massive uplift compared to the more conventional merger structure I analyzed on January 31st, but the mechanics are governed by the precise language in each plan rather than simple addition of the two market caps.
I will continue to update this analysis as more details from the final SpaceX IPO and any further Tesla disclosures become available.
