Elon Musk told Tesla shareholders on Wednesday that, when it comes to a potential merger with SpaceX , he'd already " said everything that should be said." Tesla's head of investor relations told analysts before opening the call to their questions that execs "will not be addressing" the matter.
A day earlier, Musk had already ensured that a tie-up between his trillion-dollar companies would be a dominant topic of conversation on Wall Street for the foreseeable future, after he endorsed a potential merger on SpaceX's third-quarter earnings call. "Do I think it would be a good idea? Yes," Musk said Tuesday, revealing that both companies have formed special committees to explore a transaction.
While Musk said he was "tap dancing through a minefield" by publicly commenting on the issue, analysts, investors and fans have long been enamored by the " Muskonomy " and the prospect of a conglomerate that would bring electric vehicle and humanoid robot development together with reusable rockets, satellite communications and artificial intelligence.
Merger chatter overshadowed Tesla's earnings report, which showed declining auto revenue and an even steeper drop in the company's energy business. Musk has been selling Wall Street on a future for his electric vehicle maker that's built around robotaxis and humanoid robots more than auto sales. But the company's self-driving technology is still in development, its Robotaxi service is very early and its Optimus robots aren't ready for high-volume production.
Tesla shares fell 3% on Thursday and are now down 17% for the year. SpaceX plunged 9%, wiping out its gains from Wednesday, and putting the stock back below its opening price that followed the company's market debut in June.
Analysts at William Blair wrote in a note on Thursday that Musk's quest for a merger is all about control, not strengthening his businesses.
"We fully respect the overlap and collaboration potential, but view this is a truly unique case where Musk runs both companies almost as if they are one entity already," the analysts wrote. "We are hard-pressed to find a material opportunity that could only be achieved by an official combination."
Tesla and SpaceX didn't respond to requests for comment.
At SpaceX, Musk calls the shots. The world's richest person has 10-to-1 supervoting shares and almost 80% voting control. Because it's a "controlled company," Class A shareholders don't have the same "protections afforded to shareholders of companies that are subject to all of the corporate governance requirements" of the Nasdaq, SpaceX said in its IPO prospectus .
Tesla is a different story. According to the company's latest proxy filing , Musk beneficially owns 19.8% of the shares. On SpaceX's earnings call, Musk said at Tesla, "we will need a 50% vote of all shares — not just those who vote — but of all shareholders, and that's quite a high hurdle."
He said he's a "conflicted party," and can't be in the discussions between the two sides.
SpaceX currently has a market cap of close to $2 trillion, while Tesla is valued at around $1.5 trillion. That would make SpaceX the acquiring company in a stock swap, and potentially give Musk the best chance of controlling a combined entity.
Eric Talley, a law professor at Columbia University and corporate law expert, told CNBC that a merger could alleviate shareholders' worries about where Musk is spending his time and his companies' resources.
Talley said one concern among both investor bases is which entity should house various initiatives around robotics and AI as the two have converged in those areas.
"That caused dyspeptic feelings amongst shareholders, and some lawsuits," Talley said. "I do think that shareholders of both companies stand to gain in resolving this, and it also protects against litigation over divided loyalties."
Even if the respective boards come to terms for a merger, regulatory hurdles could be steep, experts say.
Former Tesla board member Steve Westly told CNBC's David Faber on Thursday that he thinks the companies will move quickly to announce a merger proposal, ideally "before the elections if they possibly can." The midterms in less than two weeks could flip Congress in favor of Democrats.
The big question is going to be, "What are regulators going to say, and what will SpaceX have to do to get this done," Westly said.
Outside the U.S., Westly said the companies have to deal with China. That's a critical market for Tesla in terms of vehicle manufacturing, and it also accounted for 22% of the company's revenue last year .
Talley noted that China's national security regulator would likely have particular interest in such a deal because there are "probably hundreds of thousands of Teslas, computers on wheels, driving around right now," he said. Meanwhile, SpaceX has satellites in its Starlink constellation that are constantly feeding data to the U.S. government, he said.
Kevin Li, an analyst at Counterpoint Research in Beijing, said in an email that, " Antitrust scrutiny, national security considerations (given SpaceX's military contracts), and cross-border regulatory reviews all present significant challenges."
While Musk didn't provide a timeframe for getting a deal done, he's been highly transactional of late, including bringing his own companies together. Earlier this year, SpaceX acquired Musk's xAI in a deal that valued the combined entity at $1.25 trillion and set the stage for a record IPO. Last year, Musk brought together xAI and X, formerly known as Twitter, which he purchased for $44 billion in 2022.
And in August, SpaceX closed its $60 billion purchase of AI coding startup Cursor.
Last Thursday, just days before Musk floated the merger idea, he unveiled a prototype of Tesla's refreshed Roadster , which relies on SpaceX technology so it can hover. The event was livestreamed from a SpaceX test site, adding to merger speculation that had been building for months.
Ahead of SpaceX's IPO in June, COO Gwynne Shotwell told CNBC that a merger "might make Elon's life a little easier."
"There's a convergence of what we're all trying to accomplish in the future," Shotwell said. "But right now I'm focused on keeping the lights on here."
WATCH: Oppenheimer analyst says SpaceX-Tesla merger is 'pretty inevitable'
