Tesla and SpaceX Could Merge. Three Hurdles Stand in the Way.

Two companies, each worth more than a trillion dollars, and one CEO sitting on both sides of the table. That's the shape of a possible Tesla and SpaceX merger, and it's why former Tesla board member Steve Westly expects the special committees on both sides to move fast.

Here's what matters: Elon Musk says those committees haven't agreed on any terms. Westly, who now runs The Westly Group, flags three things that could slow the whole thing down. Valuation, SEC approval, and China.

Start with price. Tesla trades in public markets, where the share price reacts to delivery numbers and whatever Musk posts at 2am. SpaceX doesn't trade at all. Its marks come from private rounds and internal tender offers. Combining the two means somebody has to defend a swap ratio to both sets of holders, and the base is enormous. The numbers tell the story: a mismatch of even 5% on a trillion-dollar valuation is $50 billion of value shifting from one set of hands to another. That gap ends up in court.

Then there's the market structure piece most people are skipping. Tesla sits in the S&P 500, so every index fund owns it. If Tesla gets absorbed into a private entity, passive holders get cashed out or handed illiquid stock. That's not a corporate action, it's a plumbing event, and it hits a lot of retirement accounts.

Regulatory approval is next. A related-party deal this size, with a controlling shareholder on both sides, draws heavy scrutiny on disclosure and process. Independent committees, fairness opinions, proxy language. Frankly, it's the boring part, and it's the part that eats months.

China is the real problem. Tesla's Shanghai plant is its biggest manufacturing base. SpaceX is a US defense contractor in all but name. So can a rocket company with national security contracts own the factory building China's best-selling EV? Beijing has a vote here, and it doesn't need a proxy card to cast it.

From a risk perspective, valuation and SEC issues get solved with paperwork and money. China doesn't. What to watch: the first 8-K or proxy filing that names the special committees and their advisors. That's when we find out whether this is a real deal or a headline.