Musk Recused Himself From Talks His Boards Already Share

Independent directors at Tesla and SpaceX have opened talks on a combination that would be worth about $3.5 trillion at current market values. Elon Musk, chief executive of both companies, said on SpaceX’s third-quarter call on October 20 that he is staying out of the room because he is a conflicted party.

The process is the one Delaware told Tesla to use the last time it bought a Musk company. Tesla’s annual proxy filed October 19 already shows the director who chairs Tesla’s pay and conflict committees has sat on SpaceX’s board since February, and Tesla still lists him as independent.

Musk Calls the Talks a Kabuki Dance

Deutsche Bank analyst Edison Yu asked Musk on the call how he weighed a Tesla combination and what might block it. Musk said it was the kind of question that left him tap dancing through a mine field, then described a setup in which two groups of independent directors talk while he sits outside.

Both SpaceX and Tesla have formed special committees to discuss this idea at the request of shareholders. And these special committees are consist of independent directors. And because I’m a conflicted party, I can’t actually be in the discussions of the special committees. So it’s sort of, it’s an odd kabuki dance where two groups of people are talking, and I can’t be in the conversation.

Elon Musk, SpaceX third-quarter earnings call, October 20, 2026

He called a merger a good idea and then pulled the other way in the same answer. Some people treat a SpaceX-Tesla deal as a certainty, he said, and that would be overstating it. On the Tesla side, he said the companies would need a 50% vote of all shares, not just of the shares that are voted, which he called quite a high hurdle. The committees have not agreed on terms, and he said there is no guarantee they will.

The industrial case he did put on the table was specific: super-intelligence software, chip design, the Terafab plant, robotics, mass to orbit, and connectivity. SpaceX president Gwynne Shotwell added connectivity while he was listing the pieces. The committees, he said, have to come up with something, and then shareholders vote.

Those comments landed on a quarter that already gave SpaceX its own story, with or without Tesla.

SPACEX’S THIRD-QUARTER SCORECARD

• Revenue: $14.6 billion, up 161% from $5.6 billion a year earlier.
• Net income: $4.4 billion, a $5.5 billion swing from a $1.1 billion loss in the prior-year period.
• Super Intelligence: $7.6 billion, ahead of $5.2 billion in connectivity and $1.8 billion in space.
• Starlink consumers: 13.6 million subscribers, with 1.6 million net additions in the quarter.

SpaceX shares, which had closed at $147.79 on October 20, rose to $160.7 in premarket trading on October 21, an 8.74% jump. Tesla, which closed at $373.71, traded at $381.3, up 2.03%.

The Independent Director Who Already Sits on Both Boards

Musk did not name the directors on either special committee. The independence problem is already in Tesla’s proxy, before any committee list is published.

Ira Ehrenpreis, 57, has been a Tesla director since 2007. He chairs the compensation committee and the nominating and corporate governance committee, the panel whose job includes considering conflicts of Tesla directors and officers. Tesla’s proxy states that he has served on SpaceX’s board since February 2026. Tesla’s investor site repeats the same line and still labels him an independent director.

The Tesla board says it reviewed commercial, family, and fund ties and found no Nasdaq disqualifying factor for Ehrenpreis, Joe Gebbia, Jack Hartung, James Murdoch, or JB Straubel. Elon Musk and his brother Kimbal Musk are the two directors Tesla does not call independent. Kimbal’s biography in the same filing says he has served on the boards of SpaceX and Chipotle.

TESLA DIRECTORS WITH SPACEX TIES

• Elon Musk: Tesla chief executive and, since 2002, SpaceX chief executive, chief technical officer, and chairman.
• Kimbal Musk: Tesla director since 2004 whose proxy biography says he has served on SpaceX’s board.
• Ira Ehrenpreis: Tesla pay and governance chair, SpaceX director since February, still classed independent at Tesla.

That is three of Tesla’s nine directors. SpaceX’s public independent roster also includes Ehrenpreis. If both special committees are drawn from directors each company calls independent, the two rooms already share a person, or they are negotiating across a table that includes Tesla’s own conflict chair on the SpaceX side.

A recusal by the chief executive only disciplines a related-party deal if the people left in the room are independent of both companies, not merely absent from the call. Tesla’s filing puts Ehrenpreis on both sides of that test and still uses the independent label.

SolarCity Was Tesla’s Last Musk-Company Deal

Tesla has run this play before, at a much smaller size, and the court record is why special committees exist this time.

In 2016 Tesla bought SolarCity, the solar installer chaired by Musk and founded by his cousins, in an all-stock deal valued at $2.6 billion at signing. Musk was the largest holder of both companies. Tesla’s board did not form a special committee. It did require a vote of a majority of disinterested Tesla stockholders. In November 2016, 85% of Tesla stockholders who cast votes approved the deal.

Shareholders then sued, arguing Tesla had overpaid to rescue SolarCity. After trial, Delaware Vice Chancellor Joseph R. Slights III held in 2022 that the price was entirely fair and that Musk had not breached his duties, while also finding Musk was more involved in the process than a conflicted fiduciary should have been. The Delaware Supreme Court in 2023 affirmed that Tesla’s 2016 SolarCity deal was entirely fair.

The trial court still wrote the sentence that now hangs over the SpaceX talks. Musk, it said, likely could have avoided judicial review of his conduct as a Tesla fiduciary had he followed the ground rules of good corporate governance in conflict transactions, including allowing a special committee of indisputably independent directors to negotiate the deal.

THE SOLARCITY-TO-COMMITTEE TIMELINE

1. November 2016: Tesla closes the SolarCity purchase after a stockholder vote, with no Tesla special committee.
2. April 27, 2022: The Court of Chancery holds the deal entirely fair and criticizes the missing committee.
3. June 6, 2023: The Delaware Supreme Court affirms.
4. February 2026: Ehrenpreis joins the SpaceX board; SpaceX completes its acquisition of xAI Holdings.
5. May 13, 2026: CalPERS, New York State, and New York City pension chiefs warn SpaceX about its planned public-company charter.
6. October 19, 2026: Tesla files a proxy with no merger proposal on the December 3 ballot.
7. October 20, 2026: Musk says both boards have now formed special committees.

The lesson Tesla took from SolarCity is visible: form the committees, keep Musk off them, and talk about a high stockholder hurdle. The live question is the adjective the court used, indisputably independent, which is harder to claim when Tesla’s governance chair already holds a SpaceX seat.

What Tesla Shareholders Would Inherit at SpaceX

Tesla is a single-class company. SpaceX is not. A combination would not only mix car, robot, rocket, and compute businesses. It would ask Tesla’s public holders to live under the charter SpaceX took to market in June.

Musk owns about 45% of SpaceX and controls roughly 82% of its voting power through Class B shares that carry 10 votes each. Only Class B holders can remove him as chief executive, chairman, or director. SpaceX uses the controlled-company exemption to skip a majority-independent board and independent nominating and pay committees. It reincorporated from Delaware to Texas in 2024. Its charter sends stockholder claims into mandatory arbitration and limits derivative suits to holders of at least 3% of the stock.

On May 13, New York State Comptroller Thomas DiNapoli, New York City Comptroller Mark Levine, and CalPERS chief executive Marcie Frost wrote Musk, Shotwell, and finance chief Bret Johnsen that the planned offering would be the most management-favorable governance structure at this scale ever brought to the U.S. public markets. Their funds oversee more than $1 trillion.

WHAT THE PENSION FUNDS FLAGGED IN MAY

• Super-voting stock: Class B shares at 10 votes, with public Class A stock at one vote.
• Removal: Musk could be taken off the board or out of the chief-executive job only by Class B votes he controls, which they called making him unfireable without his own consent.
• Arbitration: Federal securities claims forced into binding arbitration, cutting off class actions.
• Texas 3% bar: Derivative standing set at a stake that, at SpaceX’s size, is worth tens of billions of dollars.
• Related-party rule they asked for: Independent-committee approval plus a non-waivable majority-of-the-minority vote on deals with Musk’s other companies, including any SpaceX-Tesla combination.

SpaceX listed anyway. The May letter is the checklist Tesla holders would be voting on, in practical terms, if a combination folds them into that charter. Musk’s stated Tesla hurdle is 50% of all outstanding shares. That is not the majority-of-the-minority vote the pensions said a Tesla deal should require.

SpaceX’s board also tied a founder grant to market-cap milestones of up to $7.5 trillion and to a permanent human colony on Mars with at least 1 million inhabitants. Tesla holders who take SpaceX paper would be sitting inside that pay design as well as inside the vote math.

A Majority of Every Outstanding Tesla Share

Musk is right that 50% of all Tesla shares is a hard number. Tesla’s own proxy shows how hard.

In 2025 the board put up a proposal to drop supermajority voting rules in Tesla’s certificate and bylaws. Turnout on that item reached 73.6% of shares, among the company’s higher participation rates. The proposal still received only about 39.4% of total outstanding shares entitled to vote, and it failed. The board is not bringing that reform back on December 3.

A merger that needs 50% of every outstanding share has to clear a bar the board could not clear on a governance cleanup it supported. Musk’s own Tesla block would count toward that 50% unless the companies impose a stricter disinterested-share test than the one he described. He did not describe one.

Tesla is also building a voluntary retail voting program, with an SEC staff no-action letter, to make it easier for retail holders to vote. The December 3 annual meeting, set for 3 p.m. Central Time at Gigafactory Texas and online, is not the merger vote. Shareholders of record as of October 13 will elect Musk, board chair Robyn Denholm, and Straubel to three-year terms, take a non-binding vote on 2025 pay, and ratify the auditor. The proxy includes no merger proposal.

SpaceX Is Already the Larger Company

Any exchange ratio starts from a fact the market already priced on October 20: SpaceX is the bigger company. Tesla would be walking into a combination as the smaller equity slice unless the committees extract a premium large enough to flip that.

TESLA AND SPACEX AT TUESDAY’S CLOSE

RBC Capital Markets analyst Tom Narayan has modeled a SpaceX purchase of Tesla at $480 a share, a price that would lift the combined firm to $3.74 trillion in his note. That $480 figure is a modeled offer, not a committee term, and the committees have not published terms.

SpaceX priced its June 12 initial public offering at $135 and closed its first session at $161.11. The October 20 close of $147.79 sits below that first-day print and still leaves SpaceX larger than Tesla. A Tesla holder who votes yes is not absorbing a small rocket affiliate. The holder is joining the bigger, super-voting company.

The xAI Vote Did Not Stop the Check

Tesla stockholders have already watched a Musk-company investment move ahead after a vote that did not pass.

In November 2025 they weighed a non-binding proposal for Tesla to invest in xAI. About 1.06 billion shares voted for it and 916.3 million against, with more than 473 million abstaining. Tesla’s bylaws count abstentions as votes against, so the measure failed. In January Tesla disclosed a $2 billion investment in xAI anyway. Musk said the company was pretty much doing what shareholders asked. Days later SpaceX acquired xAI in a deal that valued the combined company at $1.25 trillion. Tesla’s proxy records that xAI Holdings became a SpaceX subsidiary in February 2026, the same month Ehrenpreis joined the SpaceX board.

Transparency Lab, reading Tesla’s SEC filings, tallied more than $573 million of Tesla business with Musk-controlled companies in fiscal 2025, including $430.1 million of Megapack battery sales to xAI and $143.3 million of Cybertruck sales to SpaceX. Tesla’s audit committee treated those sales as arm’s-length. The figures are the run-up, not a finding of illegal conduct.

Special committees are a better process than Tesla used on SolarCity. They are not a different set of people from the boards that already share Ehrenpreis, already routed Tesla cash into xAI, and already sit inside SpaceX’s 10-vote charter. Musk can stay off the calls. The overlap does not stay off the proxy.

The December 3 Tesla ballot still has no merger on it. Until the committees publish terms, Tesla holders are being asked to trust a recusal that the company’s own filing has already qualified.

Disclaimer: This article is news reporting and analysis of public filings, an earnings call, and market prices. It is for information only and is not investment advice, a recommendation to buy or sell Tesla or SpaceX securities, or an opinion on whether any combination should be approved. Readers who are considering a vote or a trade should consult a licensed financial adviser or securities lawyer who can review their own holdings and the final deal papers, if any are issued. Share prices, committee membership, and deal terms can change, and the figures here reflect the cited sources as of the dates given in the article.