{"text":[[{"start":6.16,"text":"As the chief executive of SpaceX, Elon Musk may one day find himself in line for not one but three outsized pay awards."}],[{"start":15.22,"text":"Their value would depend not on the usual sober metrics devised by remuneration committees, but on market value as well as criteria such as whether he can establish a permanent colony on Mars, send data centres into orbit, launch fleets of robotaxis and sell more than one million humanoid robots. The potential payout: around $1.7tn."}],[{"start":38.84,"text":"If this reeks of intergalactic ambition and wealth beyond earthly imagining, you would expect nothing less from the man who has come to embody the vast aspirations of late-stage techno-capitalism."}],[{"start":50.76,"text":"Musk has put himself back at the centre of US politics recently, pouring $442mn into backing the Republicans in the midterm elections and allegedly making life-and-death decisions about Starlink satellite services in Ukraine."}],[{"start":null,"text":"

"}],[{"start":65.66,"text":"This week, the world’s richest man switched back to the corporate agenda, setting out plans for a potential union of SpaceX — the rockets, satellites and AI company that went public this summer — with his electric-car maker Tesla."}],[{"start":79.92,"text":"The deal, which would be the world’s largest ever merger and lay the ground for gargantuan pay awards, would combine most of his business interests into what amounts to a single publicly traded Musk Inc."}],[{"start":91.8,"text":"Such a transaction could one day come to define a singular period in tech and stock market history. For Musk’s backers, it would amount to nothing less than the birth of a new type of 21st-century conglomerate, with the production of artificial intelligence at its core and a leading position in industries ranging from space exploration to robotics."}],[{"start":113.42,"text":"To achieve his ambitions he will need not only to overcome formidable technological barriers but also raise astronomical sums of money. It is hard to think of a bigger bet on AI."}],[{"start":124.96,"text":"“This sets up high emotions for investors: what they’re doing defines the future,” says Gene Munster, an investor at Deepwater Asset Management. “There’s never been a company like it of any scale.”"}],[{"start":null,"text":""}],[{"start":138.08,"text":"But to Musk’s detractors, the merger would be one more example of his penchant for promising giant tech breakthroughs that often remain out of reach, and the final chapter in a spate of opportunistic dealmaking that is emblematic of a stock market consumed by a bubble."}],[{"start":152,"text":"Based on the companies’ combined value of around $3.5tn, a deal would make SpaceX one of the top five most valuable companies on the planet, even though its business is far smaller than the other tech groups leading the AI charge."}],[{"start":166.8,"text":"“You could argue that $2tn of that [valuation] is just puffery,” says Ross Gerber, who was once among Tesla’s most enthusiastic investors and who still holds SpaceX stock. “Will the market eventually get to that? It’s not my job to understand why it has such a premium for Elon, but it does.”"}],[{"start":184.8,"text":"Wall Street has expected a union of SpaceX and Tesla for some time, though even with the support that Musk expressed for the idea this week, it is far from a foregone conclusion. Along with the backing of independent board committees that both companies have set up to consider the idea, it would require the support of a majority of Tesla’s shareholders and approval from regulators around the world."}],[{"start":206.52,"text":"Conflict of interest rules preclude Musk from speaking to the board committees. But even as he said on a call with investors that discussing the deal publicly was like “tap-dancing through a minefield”, he made it clear he wants the proposal to go ahead."}],[{"start":220.32,"text":"According to one person close to Musk, what the SpaceX boss described as a “kabuki dance” of guarded public support for the transaction was “the only way he can legally apply any pressure” to the board committees without whose go-ahead the idea will die."}],[{"start":234.52,"text":"Consolidating his personal control over his corporate empire would be one significant outcome. According to a person close to Tesla’s board, a deal would “undoubtedly” involve SpaceX, where Musk exerts 85 per cent control through a special class of super-voting stock, issuing shares to buy Tesla, where his stake is 20 per cent."}],[{"start":253.64,"text":"Such a deal would leave him with majority control over the combination, ending the drawn-out legal battles with shareholders that have bedevilled his last decade at Tesla. These included a successful legal challenge to a giant stock option award he was given in 2018, as well as a long fight over Tesla’s purchase of SolarCity, a struggling solar company of which Musk was the chair."}],[{"start":null,"text":""}],[{"start":278.08,"text":"He would be able to “finally retire the corporate governance structure at Tesla, which has been a pain in the ass for Elon and the board: shareholder approval for everything,” the person says. Ending this “is not the reason to do the merger, but it’s certainly a huge benefit”."}],[{"start":294,"text":"Like several previous Musk deals, folding Tesla into SpaceX is seen in some quarters as an opportunistic attempt to shift investor attention from an underperforming business on to more promising parts of the Muskverse. That echoes the SolarCity deal, as well as last year’s merger of the former Twitter, now known as X, into xAI."}],[{"start":315.16,"text":"Tesla has been losing ground in electric vehicles and its robotics ventures have yet to pan out, leading to weakening financial performance and giving Musk a strong incentive to combine it with SpaceX, says Gerber. By contrast, the market has warmed to SpaceX, whose shares have largely remained above their issue price despite some volatility."}],[{"start":null,"text":""}],[{"start":334.84,"text":"Musk’s space company can point to “10 opportunities that could grow at 25 per cent a year for the next decade,” says Munster at Deepwater Asset Management, guaranteeing strong interest from growth-minded investors."}],[{"start":348.36,"text":"As always, a strong corporate narrative — or what detractors dismiss as hype — has played a big part in Musk’s latest plans, with sci-fi-sounding ambitions such as launching data centres into space. According to Munster, an enlarged SpaceX would be the ultimate meme stock, its futuristic range of businesses a powerful lure for many on Wall Street."}],[{"start":370.42,"text":"Yet even if the dealmaking and the hype help Musk’s businesses show their best face to Wall Street, the pressure to perform will be unavoidable. A SpaceX/Tesla deal would mark the last chance to combine large Musk-owned businesses, adding to the pressure to show that he could make this ultimate manifestation of his business empire work."}],[{"start":389.46,"text":"Simplifying the corporate structure and making it easier for his different businesses to work together or pursue shared investments — such as their ambitious joint project to develop advanced chipmaking — are widely recognised benefits of a potential deal."}],[{"start":null,"text":""}],[{"start":403.6,"text":"Countering this, however, the enlarged SpaceX could face the sort of scepticism that Wall Street has tended to apply to conglomerates, valuing them at a discount to their constituent parts on worries that managers will lose focus or be less effective than the market at allocating capital between the constituent businesses."}],[{"start":422.54,"text":"Tying Musk’s pay to three separate parts of the business could be one answer to the threat of conglomerate malaise. He is already partway to such an arrangement: after folding xAI into SpaceX earlier this year, Musk kept his separate compensation plans for each part of the business, tying them to different performance targets."}],[{"start":441.08,"text":"That left him with two pay deals, one worth up to $550bn tied to the existing SpaceX role and another worth a maximum $150bn linked to his former xAI role. The third element of his pay has been a restricted stock plan at Tesla worth up to $1tn. If that plan were also rolled over into SpaceX after a merger, it would take the total potential payout to $1.7tn and provide a powerful incentive to make sure the electric car business hit its targets."}],[{"start":null,"text":""}],[{"start":470.68,"text":"The sheer breadth and scale of the combined SpaceX and Tesla operations would also intensify pressure on Musk to demonstrate that he can complete the many futuristic-sounding projects the two companies have already promised once they operate under one roof while meeting financing needs that are rising steeply."}],[{"start":487.92,"text":"Critics such as Gerber point to a history of overpromising by Tesla, which has struggled for years to release advanced self-driving software and failed to follow through with promised new vehicles."}],[{"start":498.56,"text":"Yet the delays have been accompanied by impressive engineering feats, including the first launch of the giant Starship rocket to orbit — and the completion earlier this year of the first data centre to consume more than 1GW of power. That propelled SpaceX into the booming market for selling wholesale access to AI infrastructure."}],[{"start":null,"text":""}],[{"start":516.36,"text":"Successes like these have been enough to sustain Musk’s reputation for pulling off engineering achievements that most rivals would not even attempt, says Aswath Damodaran, a professor of corporate finance at New York University. “He’s able to deliver enough of the vision to keep that going,” he says. “A combined company is a chance for an even bigger vision.”"}],[{"start":539.96,"text":"The scale and cost of that vision have been rising steeply. Outlining his plans to investors this week, Musk raised his forecast for AI data centre construction next year to 10GW of new capacity, a figure that looms large when compared to the 25-50GW forecast for the entire US market in 2027. With the cost per GW generally put at around $50bn, the total bill could reach half a trillion dollars."}],[{"start":567.88,"text":"“The investment phase next year, before the machine starts printing money, may be nothing short of mind-blowing,” says Deepwater’s Munster."}],[{"start":576.36,"text":"Going all-in on meeting the soaring demand for AI computing capacity could make or break the company. If demand holds up and Musk is able to come anywhere close to his construction goals, it would catapult SpaceX into the top ranks of AI infrastructure providers."}],[{"start":null,"text":""}],[{"start":592.2,"text":"That would give the group a leading position in what is shaping up to be the most profitable part of the AI industry, says Damodaran at NYU. “If you can supply that, you get to be in the driver’s seat. You’re going to be the Nvidia for the next phase” of the AI boom."}],[{"start":608.6,"text":"Doubling down, Musk is also betting that the price of renting out AI computing capacity — known in the industry as “compute” — will continue to rise."}],[{"start":617.52,"text":"SpaceX relies on rental contracts where terms are reset frequently, compared with its more established cloud competitors like Amazon, Microsoft and Google, which prefer to lock clients into multiyear contracts. If Musk is right about the trajectory of compute pricing, SpaceX will be able to rent out the same capacity more profitably in the future."}],[{"start":637.68,"text":"Musk predicted this week that the continual improvements in AI models would push the intelligence per watt of electric power ever higher, making the infrastructure increasingly valuable to customers."}],[{"start":649.04,"text":"Renting out compute at ever-higher prices would create a financial flywheel to support SpaceX’s growth. The company’s executives said that its latest contracts were earning back the cost of building new capacity inside a year. If that continues, it may quickly be able to generate much of the cash needed to finance its continued expansion."}],[{"start":null,"text":""}],[{"start":669.2,"text":"Musk’s upbeat forecasts, however, do not take account of other factors that could weigh on pricing. Bottlenecks in the adoption of AI by businesses, for instance, could prevent them from reaping economic value from the technology and limit demand."}],[{"start":685,"text":"Committing his company to renting out its AI infrastructure would also represent a significant change in strategy, says Damodaran. SpaceX’s IPO filings envisaged using its data centres to support its own AI services. Musk still argues that SpaceX will be able to do both, but limited capacity in the short term has led it to delay the training of its own AI models."}],[{"start":708.72,"text":"Another large dollop of risk, another sharp turn in the narrative. It’s all par for the course for an executive whose expansive tech visions are matched by a restless opportunism."}],[{"start":719.36,"text":"But on past experience, loyal shareholders will be more than happy to go along for the ride."}],[{"start":724.96,"text":"Data visualisation by Patrick Mathurin and Ray Douglas"}],[{"start":729.04,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1792823628_8953.mp3"}