SpaceX weighs Musk empire tie-ups before IPO

SpaceX is weighing internal consolidation across Elon Musk’s corporate universe as it prepares for what investors describe as one of the largest public listings ever attempted, with discussions touching on potential combinations involving Tesla or the artificial intelligence venture xAI, according to people familiar with the matter. The deliberations, still exploratory, reflect a broader strategy to position SpaceX as the backbone of a vertically integrated space, energy and computing platform ahead of an eventual flotation that some bankers believe could value the company well above $1 trillion.

At the centre of the talks is SpaceX’s growing ambition to move beyond launch services and satellite connectivity into data-intensive businesses tied to its Starlink constellation. The company has outlined plans internally for orbital data centres that would use low-latency satellite networks to support AI training, real-time analytics and secure communications. Executives and advisers see potential synergies with Tesla’s energy storage systems and xAI’s large-scale compute needs, particularly as demand for power and processing becomes a binding constraint for AI expansion on Earth.

SpaceX, founded in 2002, has transformed the economics of spaceflight through reusable rockets and has built Starlink into the world’s largest satellite network by count, with thousands of spacecraft in low Earth orbit. Cash flow from Starlink subscriptions has strengthened the company’s balance sheet, allowing it to fund capital-heavy projects such as the Starship launch system without relying on public markets. That financial independence has enabled management to consider structural options that would be difficult for a cash-constrained firm.

People briefed on the discussions say one scenario involves closer operational integration rather than a full legal merger, particularly with Tesla. The electric vehicle maker’s expertise in batteries, power management and manufacturing automation aligns with SpaceX’s needs for energy-dense systems to support space-based infrastructure. Tesla’s Megapack storage units are already used in large-scale energy projects, and proponents argue that similar technology could underpin orbital platforms and ground stations supporting Starlink and future space data services.

Another option under review is a transaction involving xAI, the AI company Musk launched in 2023 to compete with established players in generative models. xAI has been ramping up its compute capacity and training ever-larger models, a process that requires vast amounts of energy and low-latency data transfer. Integrating xAI more tightly with SpaceX could, in theory, allow AI workloads to be distributed across space-based and terrestrial systems, reducing bottlenecks and offering redundancy for sensitive applications.

Despite the industrial logic, any deal linking SpaceX with Tesla raises immediate governance and valuation questions. Tesla is a publicly listed company with a diverse shareholder base, while SpaceX and xAI remain privately held and closely controlled by Musk. Analysts warn that a merger or asset transfer could trigger scrutiny over self-dealing, pricing fairness and the use of Tesla shareholder capital to support ventures with different risk profiles. Past transactions between Musk-led companies have drawn legal challenges and regulatory attention, particularly where disclosure and independence were questioned.

Market participants say these concerns are one reason discussions remain at an early stage. Advisers are said to be modelling structures that would limit conflicts, such as spin-ins of specific assets, long-term commercial contracts or joint ventures rather than outright mergers. Such arrangements could allow SpaceX to highlight technological linkages in its IPO narrative without forcing Tesla into a complex and potentially contentious transaction.

The timing of any public listing remains fluid. Musk has repeatedly said SpaceX will go public only when Mars missions become more predictable, a milestone still several years away. Even so, preparations have accelerated as private market valuations climb and early investors look for liquidity. Secondary share sales have implied valuations in the hundreds of billions of dollars, and bankers argue that positioning SpaceX as a combined space, communications and AI infrastructure play could justify a far higher figure at flotation.