A potential merger between SpaceX and Tesla could give Elon Musk greater control over both companies without automatically unlocking his widely discussed $1 trillion compensation package.
The proposed deal could offer Musk a faster route to securing voting control at Tesla, potentially reducing the importance of some ambitious performance targets attached to his existing compensation agreements.
According to a Reuters analysis, the structure of Musk’s pay packages at both companies could play a significant role in determining how much control he gains following a merger.
Merger Could Strengthen Musk’s Voting Power
Barclays analysts estimate that if SpaceX acquired Tesla at their current valuations, Musk could own approximately 37% of the combined company while controlling around 56% of its voting rights.
This would largely be possible because certain SpaceX shares carry 10 times the voting power of ordinary shares.
Unlike Tesla’s compensation arrangement, which links additional voting power to achieving specific performance targets, SpaceX’s existing pay structure gives Musk voting rights over awarded shares upfront, even though he cannot immediately claim their financial value.
The $1 Trillion Compensation Is Not Guaranteed
Tesla shareholders approved a compensation package potentially worth up to $1 trillion for Musk, subject to meeting demanding financial and operational milestones.
These include significantly increasing Tesla’s market value, expanding its robotaxi operations and achieving other business targets.
However, a merger could change some of these requirements.
Under Tesla’s compensation agreement, a change-of-control transaction could allow Musk to receive certain stock awards based on market valuation without meeting some operational targets.
Tesla’s current market capitalisation is approximately $1.6 trillion. Its valuation would need to reach at least $2 trillion under the relevant merger provisions for Musk to qualify for an initial award estimated at $20 billion in shares.
This means a merger would not automatically trigger the entire $1 trillion package.
SpaceX Board Could Review His Compensation Plan
Musk’s compensation agreement at SpaceX is also tied to ambitious targets, including establishing a human settlement on Mars and developing large-scale computing infrastructure in space.
However, compensation experts believe SpaceX’s board could revise the agreement following a potential merger with Tesla.
The board could adjust performance targets, share awards and valuation requirements to reflect the size and structure of the combined business.
Some experts believe the existing arrangements could remain in place with revised targets rather than being replaced entirely.
Corporate Control Remains the Bigger Issue
The potential merger raises important questions about executive compensation, shareholder rights and corporate governance.
While Musk may not immediately receive the full financial benefits of his compensation packages, the proposed transaction could significantly strengthen his influence over the combined company.
For investors, the major concern will be how the merger affects voting rights, shareholder interests and the future direction of two of the world’s most closely watched technology companies.
Leave a comment