Tesla holders face 50% vote hurdle in SpaceX merger review

Tesla and SpaceX set up independent board committees to examine whether to combine, Elon Musk said on a SpaceX third-quarter earnings call reported by TechCrunch on Oct. 20.

The process matters because Musk said Tesla would need backing from 50% of all shareholders, rather than only ballots cast, while he holds more than 50% voting power at SpaceX.

Musk, chief executive and largest individual shareholder of both companies, said the committees were formed after shareholder requests, according to the TechCrunch article. Special committees are board groups often used to separate conflicted executives from transaction discussions.

“Because I’m a conflicted party, I can’t actually be in the discussions of the special committees, so it’s this sort of a … it’s an odd kabuki dance where two groups of people are talking, and I can’t be in the conversation,” Musk said on the call, according to TechCrunch.

Musk said he supports combining the companies but cautioned against treating a transaction as certain. “At the end of the day, the shareholders have to be supportive of this,” he said, according to the article.

Tesla has seven independent directors under Nasdaq listing standards, including board chair Robyn Denholm, Ira Ehrenpreis, JB Straubel, Joe Gebbia, Jack Hartung, James Murdoch and Kathleen Wilson-Thompson, according to Tesla’s Oct. 19 proxy filing cited by TechCrunch. Neither Elon Musk nor Kimbal Musk is independent, the article said.

SpaceX lists six independent directors: Ehrenpreis, Randy Glein, Donald Harrison, Steve Jurvetson, Luke Nosek and Roelef Botha, according to the company leadership page cited by TechCrunch. The article said Ehrenpreis also chairs SpaceX’s compensation and nominating committee.

The review puts governance and valuation questions around two Musk-led companies into sharper focus. TechCrunch reported that SpaceX president and chief operating officer Gwynne Shotwell and Antonio Garcias also sit on the SpaceX board but are not considered independent.

Musk described potential industrial logic in artificial intelligence software, robotics, SpaceX’s Starmind orbital AI data-center project and Terafab, the joint chip manufacturing project between Tesla and SpaceX, according to the article. Those claims come from Musk; no financial terms, valuation, exchange ratio or transaction structure were reported.

The committees have not agreed on any transaction terms, Musk said, according to TechCrunch. The article did not report a timetable for a recommendation, shareholder vote or regulatory filing.