SpaceX and Tesla, Adding It Up: The State of the Merger, Updated

The shelf has followed the two companies since spring: The $8.5 Trillion Grease Gun and The $10.25 Trillion Hypothesis in May; The Three Layer Cake the same month; The Cost of Not Beginning and The State of the Merger in July; The $430 Billion Cash Gap in August; Terafab Is Stateless on October 3; and The Hyperbole Edition on October 21. This is the update.

What the lenders wrote

On the public record, a third credit rating arrived first, the lenders signed second, the committees were described third, and the document that holds both was filed last.(1)(2)(3) The committees' formation dates are unstated.

On October 20, on SpaceX's call, Musk said both boards had formed special committees of independent directors: "It's an odd kabuki dance where two groups of people are talking and I can't be in the conversation."(4) The next afternoon, on Tesla's call, he said he had said "everything that should be said yesterday," and investor relations took no questions on a merger.(5) [REPORTED] That evening Tesla's 10-Q put the committee in writing and filed the credit agreements Tesla had signed on September 29, which its current report that day had described as carrying "covenants that are customary for facilities of this type."(1)(2) [FILED]

Tesla's previous revolver, from January 2023, let Musk cross half of Tesla's vote without a change in control, with no condition attached. It permitted only Tesla's own subsidiaries to merge into Tesla, so any other merger needed the lenders' consent at the time, by amendment or waiver.(6) [FILED] The September 29 agreements write a combination with a Musk company into the definitions, consent to it in advance, and attach one condition to that consent and to the carve-out.(1) [FILED] The lenders' consent moved. In 2023 they would have answered a specific deal when it came; in 2026 they answered in advance, on a rating.

• "Permitted Holder" now names "the Elon Musk Revocable Trust dated July 22, 2003, the Musk 2017 Sprinkling Trust, the Mission Trust." Musk's ownership filing at SpaceX's listing shows SpaceX shares held through those three trusts.(7) [FILED] The agreements name SpaceX zero times; they name the trusts that hold it.
• A "Specified Merger" is a combination of Tesla with an entity "owned or Controlled, directly or indirectly, by Permitted Holders." Tesla may also become the wholly owned subsidiary of a holding company they control.
• Either is permitted only if Tesla holds investment-grade ratings from two of Moody's, S&P and Fitch from the first announcement through the 90th day after it, longer while any agency has Tesla on watch or on a negative or developing outlook. If the ratings fail, the deal becomes a change in control, an event of default, at completion or 60 days after the ratings trigger date, whichever is later.
• The facilities are undrawn, so within these three agreements a failed test lets the lenders end the commitments, $30 billion of standby liquidity, rather than stopping a combination.(1)(2) [OURS]

A full-text search of EDGAR for one of the new terms, "Qualified Permitted Holder," returns three documents, and all three are these agreements.(8) [OURS]

The ratings sit close to the line. Tesla carries BBB at S&P and BBB at Fitch, the Fitch rating assigned on September 21, eight days before the agreements were signed. At Moody's it carries Baa3, the lowest investment-grade step on that agency's scale.(3) [REPORTED] The test survives one agency falling below investment grade, and Moody's is one notch from that line.

SpaceX's credit documents write no condition of their own on a combination with Tesla. We read in full its $5 billion revolver, its March bridge loan and the indenture for its $25 billion of June bonds.(9) [FILED] None of them names Tesla. The revolver treats an outsider reaching 35 percent of the vote as a change of control and lets SpaceX merge with "any other Person" so long as SpaceX survives. The bonds carry no change-of-control repurchase right. The revolver also carries general cross-default and cross change-of-control clauses at $500 million, measured including undrawn commitments.(11)

SpaceX's lenders protect the controller. Tesla's lenders protect the rating. In the structure analysts describe, an all-stock purchase of Tesla by SpaceX, SpaceX survives and Musk keeps control, so the only condition either company's lenders have written for a Musk-company combination sits on Tesla's side.(10) [REPORTED; OURS]

Where these clauses meet, the questions belong to lawyers.(11) We are not lawyers. These are hypotheticals we are not able to answer and are not attempting to.

The committee, and the person

Tesla's board "has formed a special committee... comprising disinterested directors to explore deepening Tesla's relationship with SpaceX, which could be through certain arrangements including without limitation a business combination (a "Transaction")."(1) [FILED] The mandate is wider than a merger: it reaches every tie in our July inventory, the chip plant first. The paragraph gives no formation date, no members and no advisers. SpaceX's committee remains a spoken one; its third-quarter 10-Q was absent from EDGAR at 11:12 am Eastern on October 22.(12)

The vote is on the filed record. Tesla's charter requires a majority of all outstanding shares, which Musk called "quite a high hurdle."(13)(4) His beneficial ownership, as the proxy measures it, is 19.8 percent of Tesla, and the 423.7 million unearned shares of his 2025 award are voted in proportion to all others.(14) [FILED]

We have written about the law before, on SolarCity and Delaware in July and on Tesla's charter and the Texas code this week, and both states wrote new rules in 2025. Tesla is a Texas corporation. Texas lets a board form a committee for a deal with a controlling shareholder and ask a court, before the deal, to determine whether that committee is independent and disinterested, after notice to the shareholders and a hearing; a governance center at SMU reported in May that no court had yet applied the route.(15) [REPORTED] Delaware's amended statute gives a controller's deal a safe harbor if a committee of disinterested directors or a majority of the votes cast by disinterested stockholders approves it, and requires both when the controller takes the company private; its Supreme Court upheld the amendments in February, answering certified constitutional questions. Delaware's courts had rewarded the same two protections, together, since 2014.(16) [REPORTED] Both states now run on statute: Delaware's has been tested in its Supreme Court, and Texas's awaits its first application. Which route Tesla follows will show up in a filing.

A process can separate the approvals. The roles stay in one person. The same individual is chief executive of both companies, controls SpaceX's vote, beneficially owns nearly a fifth of Tesla, and holds Tesla awards whose terms respond to a change in control: unearned shares under the 2025 award "may become Earned Shares based solely on market capitalization milestones"; "Earned Shares will vest upon the change in control," and the rest are forfeited; and 286.4 million restricted shares from the 2018 award vest early if he is then serving as chief executive or as an executive officer responsible for product development or operations.(14) [FILED] Whether a SpaceX combination would count as a change in control under those awards is for their terms and counsel. Each role carries its own duties, aims and conditions.

Who pays for what

In July we set out Tesla's side of the chip plant: its chief executive had said Optimus depends on it, while Tesla held $43.5 billion of cash and had named Terafab in none of its filings this year.(17)(19) [FILED; REPORTED] The day before, The Cost of Not Beginning priced the same plant from SpaceX's side. On Tesla's call this week:

"We've got to figure out what the relative split is between SpaceX and Tesla in terms of who pays for what at Terafab." (chief executive)

"The first set of equipment for the fab which Tesla is building, we've actually already placed most of the orders." (chief financial officer)(5) [REPORTED]

The chief executive put the bill at "tens of billions" of equipment through early 2028 and "north of $100 billion long term," against the $10.37 billion to $16.8 billion for the first phase in the state and company records we read in October.(5)(18)

Tesla is now paying first, and the split comes later. Its balance sheet carries the spending without naming the project.(1) [FILED; OURS]

• AI computing infrastructure, which the 10-Q labels SI, for super intelligence, rose from $6,816m at December 31 to $10,956m at September 30, and construction in progress from $8,786m to $11,211m.
• Other non-current assets rose by $7,554m. The SpaceX stake, bought in March for $2,002m, is $2,865m of it at September 30;(1) the 10-Q leaves the other $4,689m unitemized and is silent on whether any of it is deposits on fab equipment.
• The 10-Q names Terafab zero times. In its 2026 filings, Tesla first names it in the October 19 proxy materials: "our Terafab initiative."(19)

Any split agreed later is a transaction between affiliates, under Tesla's Related Person Transactions Policy and a new covenant requiring arm's-length terms.(1) [FILED] Meanwhile the dependency widened: Tesla plans 400 megawatts of training compute by year end against SpaceX's 2.5 to 3 gigawatts, Grok rides in the Cybercab, and Tesla's Ashok Elluswamy runs a joint venture with SpaceX called Digital Optimus.(20)(21) [FURNISHED; GUIDED]

The record also runs the other way. Tesla's cash rose $1.9 billion in the quarter to $45.4 billion, free cash flow was positive, and the $30 billion of new facilities are undrawn.(1) [FILED] What the record supports is specific: Tesla is paying for a shared plant before the share is agreed, and its products lean further on its neighbor's compute. Whether that is a cost of not beginning is the reader's call.

The ties, counted again

• The mark. Because SpaceX's shares trade, Tesla marks its stake to the market every quarter, up or down, and discloses it plainly. The one cushion, a discount for restricted shares, was released in the third quarter. The mark added $1,005m to Tesla's second quarter and took $142m from its third, a swing larger than the third quarter's $956m of pre-tax income; at the October 21 close the stake sat about $160m above its September 30 value, with two months of the quarter to run.(1)(22) [FILED; OURS] Reported earnings carry the full swing; non-GAAP figures exclude it.
• The commerce. Tesla sold SpaceX $626m of Megapacks in nine months, and at September 30 SpaceX owed Tesla $729m, including capacity reservations. If Tesla's over-10-percent receivables test runs on gross balances, SpaceX alone clears it; the 10-Q leaves the customer unnamed.(1) [FILED; OURS]
• The people. Ira Ehrenpreis sits on both boards.(10) [REPORTED]

What we are waiting for, and when

• By November 16: SpaceX's third-quarter 10-Q, due on a 45-day deadline. Whether it files its own committee paragraph, what its related-party note says about Tesla, and whether any credit agreement signed since June carries terms like Tesla's.(12) [OURS]
• Any day: a rating action on Tesla or SpaceX. The lenders made the rating the price of keeping $30 billion of commitments through a combination.
• When terms exist: a Form 8-K under Item 1.01 or 8.01, or a Rule 425 filing, and with it the route: a deal put to the shareholders other than Musk, or a Texas court petition on the committee's independence, which the statute requires Tesla to make known to its shareholders other than the controller, by a current report if it chooses, with a preliminary hearing on their counsel at least 10 days later.(15)
• December 2026: the end of the listing restrictions on Tesla's SpaceX shares, and the fourth-quarter mark.
• The first half of 2027: commissioning at the Austin research fab, the one "Tesla is building," and with it the first sign of who pays for what.(5)

Free to read, no paywall. Corrections run in daylight, dated, in a comment or in the following piece.

Analysis: Cape Fear Advisors.