If SpaceX(SPCX.US) and SpaceX(TSLA.US) merge, Elon Musk's net worth may soar by $110 billion

According to Zhitong Finance APP, Elon Musk confirmed yesterday during the SpaceX (SPCX.US) earnings call that both SpaceX and Tesla (TSLA.US) have each set up special committees to explore a potential merger. This news quickly became the focus of the market, and his response that "merger is a good idea" publicly supported the concept, which could potentially create one of the most valuable companies in the world.

Although electric car manufacturer Tesla and rocket company SpaceX have long been regarded as two fundamentally independent businesses, Musk's ongoing expansion into artificial intelligence (AI), robotics, advanced manufacturing, satellite communications, and computing infrastructure — including data centers on Earth and potentially in orbit in the future — has gradually blurred the line between the two companies.

Musk stated, "I do genuinely believe that merging the two companies offers tremendous value, as we are essentially already at the stage of the superintelligence singularity. In areas such as superintelligent software development, chip design, the Terafab project, robotics, mass transportation of supplies into orbit via the Starmind constellation (orbital data centers), and connectivity, collaboration can bring enormous benefits."

Regarding the specific details of the merger, Musk himself could also reap enormous benefits. According to calculations by the Bloomberg Billionaires Index, if the two companies merge, it may accelerate the vesting of Tesla stock, thereby adding over $110 billion to Musk’s wealth. Under the original plan, these shares wouldn’t vest until 2028. In addition, based on Tesla’s valuation in the transaction, Musk’s 2025 compensation plan could unlock tens of billions more in additional earnings without Tesla needing to meet the originally required operational milestones to trigger the payout.

On Wednesday, driven by the news of merger negotiations and the strong quarterly results announced by SpaceX, shares of both companies surged, causing Musk’s wealth to jump by more than $60 billion in one day.

Ambitious Goals

At 55, Musk last year received one of the largest compensation packages in Tesla’s history, which could be worth nearly $1 trillion if fully realized. The plan, which spans 10 years, includes ambitious performance targets such as delivering 1 million Optimus humanoid robots, deploying 1 million Robotaxis in commercial operations, and delivering 20 million vehicles. Meanwhile, the plan also sets valuation targets ranging from $2 trillion to $8.5 trillion. At present, none of the operational or valuation milestones have been achieved.

Like most executive compensation plans, Musk's plan includes “change of control” provisions. If, after the merger, Tesla’s existing shareholders end up with less than 50% voting power in the surviving company (or its parent), these provisions could be triggered. Given that SpaceX's current valuation is about one-third higher than that of Tesla, such a result is entirely possible, although it will ultimately depend on the specific structure of the deal.

If these provisions are triggered, then the operational milestones mentioned above will no longer apply, and Musk’s final compensation would be calculated based on Tesla’s market value in the transaction. This means that if Tesla is valued at $2 trillion in the merger — the first market cap milestone — Musk would unlock stock worth over $6 billion. Currently, Tesla’s market capitalization is about $1.5 trillion.

Jason Schloetzer, associate professor of accounting at Georgetown University’s McDonough School of Business, said, "Whether these change-of-control clauses are technically triggered will depend on how the deal is structured, but both sets of shareholders should assume that Musk’s incentives lean toward driving a higher transaction valuation, and focus on how the special committees will handle this issue."

Under the current compensation plan, Musk cannot sell the reward shares for five years after they vest, but there are exceptions in cases of change of control events.

Accelerated Vesting

For Musk, an even greater potential gain may come from the accelerated vesting of his 2018 Tesla compensation awards.

Musk’s original “moonshot” compensation plan granted him about 304 million options, but these options required Tesla to achieve specific market value and operational milestones before they could vest — all of which have ultimately been met. Earlier this year, Musk and Tesla’s board negotiated the execution plan, allowing him to exercise these options through a net settlement method, reducing the amount of cash needed for taxes and exercise costs. In exchange, the roughly 286 million shares he receives will not vest until January 2028, as an additional incentive for him to remain with the company.

However, if a change of control occurs, these shares would vest immediately. Furthermore, after vesting, the shares are still subject to a five-year holding period. Nevertheless, there are certain exceptions stipulated in the agreement for change of control events, which might allow Musk to sell some of these shares ahead of schedule. These shares are currently worth more than $110 billion and, since they have not yet vested, are not included in Bloomberg’s wealth index calculation of Musk’s current net worth.

SpaceX Compensation

Musk also has two compensation plans at SpaceX, both of which are likely to be less affected by the potential transaction.

This rocket and AI company has awarded Musk up to 1.3 billion restricted shares, whose vesting depends on a series of market capitalization milestones and operational milestones, the latter being tied to establishing a human colony on Mars and the computing power of the planned space data centers.

The market value milestones can be adjusted by the board to reflect any merger or acquisition event. The SpaceX board made such an adjustment after the company’s acquisition of Musk’s AI startup xAI. This suggests that if Tesla and SpaceX merge, the board might again adjust these targets to prevent the transaction from making them easier to achieve in a formal sense.

However, since most of Musk’s compensation plan at Tesla could be forfeited, and there are currently no clear goals tying Musk’s compensation to Tesla’s traditional business lines, the SpaceX board might face pressure to design another compensation program for the founder.

Jason Schloetzer noted that, given the colossal size of the equity compensation both companies have previously provided Musk, “this seems all but certain,” and “after the merger, the company’s board will be facing the all-too-familiar argument that new incentives are needed to ensure Musk remains fully committed.”