TradingKey - On October 20 Eastern Time, Elon Musk disclosed during SpaceX's (SPCX) third-quarter earnings call that SpaceX and Tesla (TSLA) have formed special committees composed of independent directors to evaluate a potential merger.

Following the announcement, SpaceX shares rose over 8% in after-hours trading, while Tesla gained 1.76%. The two sides have not yet reached an agreement on specific transaction terms, and a merger is by no means certain. As the Chief Executive Officer of both companies, Musk stated that he will not participate in the special committees' discussions.

[Source: TradingView]

In the third quarter, SpaceX's revenue grew 161% year-over-year to $14.58 billion, with net income of approximately $4.4 billion, and adjusted EBITDA surged 306% year-over-year to $8.81 billion. Revenue from the Superintelligence business reached $7.56 billion, up about 830% year-over-year, accounting for roughly 52% of total revenue and becoming the company's largest revenue source for the first time.

SpaceX noted that growth in the Superintelligence business was primarily driven by new cloud service agreements, the completion of the Cursor acquisition, and the expanding adoption of Grok in enterprise and consumer markets.

Connectivity revenue was approximately $5.25 billion with operating profit of around $2.37 billion, remaining SpaceX's primary source of profit; the Superintelligence business posted operating profit of about $431 million.

The company's third-quarter capital expenditures totaled approximately $19.6 billion, of which about $16.4 billion was directed toward the Superintelligence business, mainly for AI computing power, data centers, and related infrastructure, indicating that the company remains in a phase of high-investment expansion.

Musk also posted on the X platform: "Though it sounds unbelievable, achieving $1 trillion in revenue for SpaceX by 2028 is no longer an impossible task."

[Source: X]

Musk believes a merger could enhance synergies between SpaceX and Tesla across areas such as superintelligence software, chip design, robotics, autonomous driving, and satellite communications. Data centers and AI infrastructure could also be potential avenues for collaboration, though no formal transaction proposal exists at present.

Simply summing SpaceX's current valuation of around $2 trillion and Tesla's of about $1.5 trillion yields a combined value of approximately $3.5 trillion for the two companies. However, this figure merely reflects the sum of their market valuations and does not represent an official valuation or exchange ratio for any potential transaction.

Currently, the special committees of both sides have not agreed on specific transaction terms, and whether a merger proceeds remains subject to further negotiations, shareholder approvals, and regulatory reviews. The transaction structure, financing arrangements, potential equity dilution, and post-merger capital expenditure plans also remain to be clarified.

According to Musk, Tesla would need support from shareholders representing 50% of all outstanding shares, rather than just a majority vote of those actually participating. The final approval threshold remains subject to formal transaction documents and applicable laws.

The rapid growth in SpaceX's third-quarter AI revenue may heighten market attention on potential business synergies between the two companies. However, the profitability sustainability of the Superintelligence business, quarterly capital expenditures of around $19.6 billion, and potential conflicts of interest arising from Musk leading both companies simultaneously remain key areas of focus for investors.

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