Inside Tesla–SpaceX merger plan: Elon Musk may gain massive $110 bn from a $3.5 trn deal but what will shareholders get?

“There’s a lot to be gained from cooperating.”However, the potential merger raises several questions, including what Tesla shareholders could receive from a transaction and how it would affect executive compensation.How the merger could unlock $110 billion for MuskAccording to Bloomberg, a change-in-control event could trigger the vesting of approximately 286 million Tesla shares awarded to Musk under an earlier compensation arrangement.

These shares are currently worth more than $110 billion, and are excluded from his net worth calculation as they have not yet vested.Musk’s original “moonshot” pay package gave him about 304 million options contingent on Tesla meeting certain market-cap and operational milestones, all of which were met. Musk and the board negotiated an implementation package earlier this year that allowed him to net-settle the options, reducing his need for cash to pay taxes and exercise costs.

In return, the roughly 286 million shares he received won’t vest until January 2028 as an added incentive for him to stay at the company.Under the agreement, the shares would vest immediately following a change-in-control event.Musk’s 2025 compensation package could also benefit. The award, potentially worth nearly $1 trillion if fully earned, includes targets such as delivering 20 million vehicles, putting one million robotaxis into commercial operation and delivering one million Optimus robots.However, if a merger triggers the package’s change-in-control provisions, operational milestones would be disregarded and his payout would be calculated using Tesla’s market value in the deal.If Tesla is valued at $2 trillion, the first market-capitalisation milestone, Musk would unlock shares with a net value exceeding $6 billion.

Tesla is currently valued at approximately $1.5 trillion.What will shareholders get?The merger’s implications for shareholders will depend on its structure. Change-in-control provisions could apply if Tesla’s existing shareholders end up with less than 50% of the voting power in the surviving company or its parent.“Whether these change-in-control provisions technically trigger will depend on how the deal is structured,” said Jason Schloetzer, an associate professor at Georgetown University’s McDonough School of Business.He added that shareholders on both sides should scrutinise the proposed valuation and the committees’ response to Musk’s incentives.Tesla and SpaceX did not respond to requests for comment.Meanwhile, Musk’s SpaceX compensation awards could be adjusted to account for the merger.

Schloetzer said a fresh compensation package for Musk would “seem a foregone conclusion”, given the companies’ history of granting large equity awards.“The combined company’s board would face the familiar argument that new awards are needed to keep Musk engaged,” he said.