Musk backs SpaceX-Tesla merger idea as both boards form special committees

Elon Musk said on SpaceX's ( SPCX ) third quarter earnings call late Tuesday that he thinks merging the company with Tesla ( TSLA ) would be a good idea and revealed that both companies have formed special committees to study a deal.

Answering an analyst question on the call, the SpaceX and Tesla CEO took on the 800-pound gorilla in the room — a merger of his biggest companies.

"This is definitely kind of a question where I feel like I'm tap dancing through a minefield," Musk joked, before adding some new information.

"I think both SpaceX and Tesla have formed special committees to discuss this idea," Musk said. "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."

SpaceX stock soared in premarket trading following the company's Q3 earnings release. But it was the merger speculation that garnered much attention.

Committees of independent directors are the standard structure when a controlling shareholder sits on both sides of a deal.

Despite the caveats, Musk said he thinks a tie-up would likely be a good thing.

"I don't think we should necessarily assume that I think some people out there assume that a SpaceX and Tesla merger is a certainty. And I think that would be overstating it. Do I think it would be a good idea? Yes," he said.

Last week, Barclays analyst Dan Levy said in a note to clients that a tie-up "has increasingly become the consensus expectation," Yahoo Finance reported .

Tesla must hold its annual general meeting (AGM) by Dec. 6, per SEC rules, and Barclays sees that as the appropriate avenue for shareholders to vote on a proposal.

Levy said a merger announcement that slips later into October or early November "may increasingly challenge merger approval as part of the AGM." In that case, a deal could instead come in the next six to 12 months, since investors see an advantage in closing under the Trump administration's friendly M&A environment.

Musk owns around 20% of Tesla, compared with about 48% of SpaceX, where supervoting Class B shares give him around 82% of the vote. SpaceX is worth about $2.1 trillion and Tesla about $1.5 trillion.

If SpaceX bought Tesla at those values, Musk would own about 37% of the combined company and control 56% of the vote, Levy said. That's well above the 25% Tesla stake he has long said he wants.

That's why Barclays expects SpaceX to be the buyer in an all-stock deal. At current values, each Tesla share would be worth about 0.7 SpaceX shares before any takeover premium.