Elon Musk recently announced during SpaceX’s earnings call that Tesla Inc. and SpaceX have established special committees to investigate the possibility of a merger. He indicated that there are significant advantages to collaboration between the two companies, stating, “We are pretty much in the super-intelligence singularity.” The implications of such a merger could be substantial for Musk, potentially adding over $110 billion to his wealth through accelerated vesting of Tesla shares.

According to the Bloomberg Billionaires Index, a merger could enable Musk to access Tesla shares that are not scheduled to vest until 2028. Additionally, depending on the valuation of Tesla in the merger, Musk could unlock further financial benefits from his 2025 compensation package without needing to meet the operational milestones typically required for such payouts.

Neither Tesla nor SpaceX has responded to requests for comments regarding the merger discussions. Following the announcement, Musk’s fortune reportedly surged by over $60 billion, attributed to rising share prices of both companies amid strong quarterly earnings from SpaceX.

Compensation Structure and Performance Goals

Musk, aged 55, received a record-breaking compensation package from Tesla last year, which could potentially be valued at nearly $1 trillion if all performance goals are met. This package spans ten years and includes ambitious targets such as delivering a million Optimus robots, having a million robotaxis operational, and delivering 20 million vehicles. These goals are coupled with market capitalisation targets ranging from $2 trillion to $8.5 trillion.

As with many executive compensation plans, Musk’s package includes change-in-control provisions. A merger may activate these provisions if Tesla’s existing shareholders retain less than 50 per cent of the voting power in the new entity. Given that SpaceX’s current valuation is approximately one-third higher than Tesla’s, the outcome will depend on the structure of the merger.

If these provisions are triggered, the operational milestones would be disregarded, and Musk’s payout would be calculated based on Tesla’s market value in the merger. For instance, if Tesla is valued at $2 trillion, Musk could unlock shares worth over $6 billion.

Potential Benefits from Accelerated Vesting

Another significant advantage for Musk may arise from the accelerated vesting of his 2018 Tesla compensation award. This original pay package granted him around 304 million options contingent on Tesla meeting specific market-cap and operational milestones, all of which have been achieved. Earlier this year, Musk and the board negotiated terms that allowed him to net-settle these options, reducing the cash required for taxes and exercise costs.

However, the approximately 286 million shares he received will not vest until January 2028, serving as an incentive for him to remain with the company. If a change-in-control occurs, these shares would vest immediately, although they would be subject to a five-year holding period with exceptions for change-of-control events.

Currently valued at over $110 billion, these shares are not included in Musk’s net worth calculation on Bloomberg’s wealth index as they have not yet vested. In addition to his Tesla compensation, Musk holds two packages at SpaceX that are less likely to be impacted by the merger discussions.

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