Would You Pay Your CEO $6 Billion to Sell the Company to His Other Company?

Tesla (TSLA) was up another 4% Tuesday morning, near $407, after Barclays upgraded it Monday on hopes that SpaceX (SPCX) will buy it. At today’s prices, a deal that hands Tesla holders half the combined company works out to roughly $500 a share.

Elon Musk’s pay package has its own magic number. If a takeover values Tesla at $2 trillion, about $506 a share, the first slice of his 2025 CEO Performance Award could vest on the spot, worth roughly $6 billion to Musk, without Tesla hitting a single robotaxi or robot milestone.

That’s a $6 gap between an even split and a $6 billion payday.

Musk confirmed on SpaceX’s October 20 earnings call that both companies have formed special committees to study a merger. I think this deal gets done. Most of the hand-wringing I’m hearing is about Washington, but the number I’d keep my eye on is that $506.

A Gimmick and a Much Bigger Idea

The most recent bear case I’ve read came from The Wall Street Journal’s Heard on the Street column, which argued that a car company would make an already hard-to-price conglomerate even messier and called the SpaceX thrusters on Tesla’s new flying Roadster “little more than a gimmick.”

The Roadster is a gimmick, and I’m not buying a stock because a $250,000 car can jump a Cybertruck. But I keep a 1993 FD Mazda RX-7 on the road, and I’ll admit watching the Roadster flip through the air was one of the coolest things I’ve ever seen a car do. I’d love one that could float over morning traffic, though we’re getting way ahead of ourselves if we think the average car will be zipping above the freeway anytime soon. The stunt does show that when Musk puts his mind to something, he can pull off damn near anything.

On SpaceX’s call, Musk was listing everything the companies could build together, from chip design to robots to Terafab, their joint chip plant, when Gwynne Shotwell cut in with one word: “Connectivity.”

Tesla’s cars and Cybercabs learn from every mile they drive, and Musk says Optimus will eventually be something people buy for their homes. Shotwell says Starlink Mobile is on its way to becoming a major U.S. cell carrier, with service starting in early 2028. Grok runs on top of it all, and SpaceX launches almost 90% of the payload mass that reaches orbit, by Musk’s count. That’s one company owning the car, the robot, the satellites that connect them, and the AI that runs them.

Musk has a personal reason, too. He owns about 20% of Tesla and has said for two years he wants closer to 25% of the vote. Barclays’ Dan Levy, who upgraded Tesla on Monday, thinks a SpaceX takeover would give Musk about 53% to 56% of the combined company’s vote.

The $506 Problem

Levy expects SpaceX, worth nearly $2 trillion to Tesla’s $1.6 trillion, to buy Tesla in an all-stock deal.

Musk controls the SpaceX vote. Tesla’s is harder. As Musk pointed out on the call, the deal needs a majority of all Tesla shares outstanding, so every share that doesn’t vote counts as a no.

Tesla holders would own about 45% of the combined company at today’s prices, and reaching 50% would require about a 23% premium, or roughly $500 a share. Dan Ives told CBS News it’ll take $500 to $550 a share to win the vote. So just about any price that gets this deal approved also values Tesla at $2 trillion or more.

In a change of control, the award’s goals for deliveries, robots, and robotaxis drop out, and Tesla’s value gets measured at the deal price. The first milestone is $2 trillion, and each tranche is about 35.3 million shares, worth roughly $6 billion at $506 after the $334.09-a-share offset Musk has to pay Tesla. Keep in mind that nobody knows yet whether a merger with another Musk company even counts as a change of control. That’ll be something for the committees’ lawyers to decide.

When the man running both companies gets paid more if the price clears $506, the shareholders who don’t work for him ought to be the ones signing off on it.

But there’s another wrinkle.

In September, the SEC approved a program that lets retail holders who sign up have their shares vote automatically with the board. And Tesla’s incorporated in Texas, where a shareholder needs 3% of the stock, about $48 billion, to sue on the company’s behalf.

Somebody’s bound to ask whether Tesla could skip the vote with written consents. Its Texas charter allows that only if every shareholder signs, changing that takes two-thirds of the stock, and Texas law would still require a majority of outstanding shares anyway. The auto-vote program is as close as it gets, voting signed-up holders’ shares with the board the moment Tesla files its proxy, before most of them have even opened it.

A Blue Congress Can’t Stop This Deal

Democrats could sweep next week’s midterms and hold all the hearings they want, but Congress doesn’t approve mergers. The antitrust review runs through the FTC and the Justice Department, both led by Trump appointees, and they’re unlikely to fight a deal between two companies that mostly sell different things. Blocking it by law would take Trump’s signature or a veto-proof Congress.

The Washington risk I’d watch comes after 2028, when a future administration could pursue the same connectivity play that makes this deal worth $3.6 trillion. Sen. Cory Booker (D-N.J.) has already told Reuters that “when one person controls the infrastructure that governments and militaries depend on, his business decisions become national security decisions, too.”

That’s why Musk wants to close this fast. Bloomberg reports the plan is to announce a deal in the first half of 2027 and close it before Trump leaves office in January 2029. China is a separate headache, since Beijing won’t love a Pentagon contractor owning Tesla’s Shanghai plant.

How I’d Trade It

I don’t own either stock, but I’m looking to buy Tesla, especially on any weakness after this two-day pop. I think a deal will be announced sooner than Bloomberg’s timeline suggests, because Musk and both committees know time isn’t on their side. A $506 deal would be about 24% above Tuesday morning’s price, though I don’t plan to stick around for all of it.

I care a lot less about whether this deal clears Tesla’s shareholders than about how the stock trades when the terms come out, and I’d plan to sell into the first run-up. In an all-stock deal, once the exchange ratio is set, Tesla trades as a slice of SpaceX, and if SpaceX stumbles before closing, Tesla does too. The biggest risk is news that no deal will happen, and with Tesla’s net income down 43% last quarter, I’d keep the position small enough to live with that.

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At the time of publication, Byrne had no positions in any securities mentioned.