Elon Musk says Tesla and SpaceX are weighing a $3.5 trillion merger—without him in the room

It’s official: Tesla and SpaceX are in talks.

Independent board members at the two Elon Musk-led companies have formed special committees to hash over a possible merger, Musk told investors during SpaceX’s third-quarter earnings call Tuesday.

“These special committees consist of independent directors, and because I’m a conflicted party, I can’t actually be in the discussions of the special committees,” said Musk, who was asked about a potential combination during the call.

“This is definitely the kind of question where I feel like I’m tap dancing through a minefield.” Tesla stock rose just over 1% in after hours trading, while SpaceX rose above 5% following the Q&A with Wall Street analysts featuring Musk, SpaceX president and COO Gwynne Shotwell, and chief financial officer Bret Johnsen.

Musk said the committees haven’t reached any kind of an agreement on the terms of a potential transaction, and there’s no guarantee that they will.

He noted that “some people out there assume that a SpaceX and Tesla merger is a certainty, and I think that would be overstating it.” Musk also has to walk a fine line as a conflicted party.

As the CEO of both companies, he owns a roughly 20% stake in Tesla and 45% of SpaceX—and wields control over about 82% of the voting power at the latter.

“It’s an odd kabuki dance where two groups of people are talking and I can’t be in the conversation,” said Musk.

At the same time, Musk has made clear he believes a tie-up would be a fine idea.

He cited collaboration on AI software, chip design, robotics, and connectivity, plus the planned Terafab chip plant, which is a colossal manufacturing complex being developed by SpaceX and Tesla jointly.

The committees were formed “at the request of shareholders,” said Musk and on the Tesla side it would need support from a majority of all outstanding shares, which Musk described as “quite a high hurdle.” Tesla filed its annual shareholder proxy report on Monday, and it doesn’t include a merger proposal for shareholders to vote on.

Rumors of a tie-up, however, have swirled for months, even before SpaceX’s blockbuster IPO in June.

A $3.5 trillion company At Tuesday’s closing prices, a combined Tesla-SpaceX would have a total market value of about $3.5 trillion, with SpaceX at about $2 trillion and Tesla at nearly $1.5 trillion.

A formal deal price wouldn’t come until much further down the road, if at all.