If the SpaceX (SPCX.US) and SpaceX (TSLA.US) merger materializes, Musk's net worth could surge by $110 billion.

Elon Musk confirmed yesterday on the SpaceX (SPCX.US) earnings call that SpaceX and Tesla, Inc. (TSLA.US) have each established special committees to explore a potential merger. The news quickly became a market focus, and his response that "a merger would be a good idea" publicly endorsed the concept, which could create one of the most valuable companies in the world. Although the electric vehicle manufacturer Tesla, Inc. and the rocket company SpaceX were once viewed as two largely independent businesses, the boundaries between the two companies have gradually blurred as Musk continues to expand into areas such as artificial intelligence (AI), Siasun Robot&Automation, advanced manufacturing, satellite communications, and computing infrastructureincluding data centers on Earth and potentially future data centers deployed in orbit. Musk said: "I do think there would be a lot of value in combining the two companies, because we are basically already in the superintelligence singularity phase. Cooperation can bring enormous benefits in areas such as superintelligent software development, chip design, the Terafab project, Siasun Robot&Automation, large-scale transport of materials into orbit via the Starmind constellation (orbital data centers), and connectivity." Depending on the specific details of the merger, Musk himself could also gain enormously. According to calculations by the Bloomberg Billionaires Index, if the two companies merge, it could add more than $110 billion to Musk's wealth by accelerating the vesting of Tesla, Inc. shares. Under the original plan, those shares would not vest until 2028. In addition, depending on the valuation of Tesla, Inc. in the transaction, Musk's 2025 compensation package could also unlock billions of dollars in additional gains for him without Tesla, Inc. having to achieve the operating milestones originally required to trigger that compensation. On Wednesday, driven by the news of merger talks lifting both companies' share prices and by SpaceX's strong quarterly results, Musk's wealth surged by more than $60 billion in a single day. Ambitious goals Musk, now 55, received one of the largest compensation packages in Tesla, Inc.'s history last year, one that could be worth nearly $1 trillion if fully realized. The package has a 10-year term and comes with ambitious performance targets, including delivering 1 million Optimus humanoid Siasun Robot&Automation, putting 1 million Robotaxis into commercial operation, and delivering 20 million vehicles. At the same time, the package sets market capitalization targets ranging from $2 trillion to $8.5 trillion. Currently, none of the operating or market capitalization milestones have been achieved. Like most executive compensation plans, Musk's compensation package also includes "change of control" provisions. If existing Tesla, Inc. shareholders receive less than 50% of the voting power of the surviving company or its parent company after the merger, the merger could trigger these provisions. Given that SpaceX's current valuation is about one-third higher than Tesla, Inc.'s, such an outcome is entirely possible, but it would ultimately depend on the specific structure of the transaction. If the relevant provisions are triggered, the aforementioned operating milestones would no longer apply, and the compensation Musk could ultimately receive would be calculated based on the market valuation of Tesla, Inc. in the transaction. That means if Tesla, Inc. is valued at $2 trillion in the mergerthe first market capitalization milestoneMusk would unlock shares worth more than $6 billion. Currently, Tesla, Inc.'s market capitalization is about $1.5 trillion. Jason Schloetzer, an associate professor of accounting at Georgetown University's McDonough School of Business, said: "Whether these change-of-control provisions would technically be triggered will depend on how the transaction is designed, but shareholders on both sides should assume that Musk's incentives favor pushing for a high transaction valuation, and should pay attention to how the special committee will handle this issue." Under the current compensation plan, Musk cannot sell these award shares for five years after receiving them, but there are also exceptions for change-of-control events. Accelerated vesting For Musk, a larger potential benefit may come from the accelerated vesting of his 2018 Tesla, Inc. compensation award. Musk's original "moonshot" compensation plan granted him about 304 million options, but these options required Tesla, Inc. to achieve specific market capitalization and operating milestones before they could be realized, and all of those targets were ultimately achieved. Musk and Tesla, Inc.'s board negotiated the exercise plan earlier this year, allowing him to exercise these options through net settlement, thereby reducing the cash needed to pay taxes and exercise costs. In exchange, the roughly 286 million shares he received will not vest until January 2028, as an additional measure to incentivize him to remain at the company. But if a change of control occurs, these shares would vest immediately. In addition, after vesting, these shares are subject to a five-year holding period. However, the agreement provides certain exceptions for change-of-control events, which may also allow Musk to sell these shares early. These shares are currently worth more than $110 billion and, because they have not yet vested, are not included in the Bloomberg Wealth Index's calculation of Musk's current net worth. SpaceX compensation Musk also has two compensation packages at SpaceX, and these are less likely to be affected by the potential transaction. The rocket and artificial intelligence company granted Musk up to 1.3 billion restricted shares, the realization of which depends on a series of market capitalization milestones and operating milestones, the latter related to establishing a human colony on Mars and the computing power of its planned space data centers. Market capitalization milestones can be adjusted by the board to reflect any merger or acquisition transaction. After SpaceX acquired Musk's artificial intelligence startup xAI, the board made such adjustments. This suggests that if Tesla, Inc. and SpaceX merge, the board may adjust these targets again, thereby preventing the transaction from making these targets formally easier to achieve. However, given that most of Musk's Tesla, Inc. compensation package could be forfeited, and there is currently no clear target linking Musk's compensation to Tesla, Inc.'s traditional business lines, the SpaceX board may face pressure to design another compensation package for its founder. Jason Schloetzer said that considering both companies have previously offered Musk extremely large equity compensation, this "seems already a foregone conclusion," and "the board of the combined company will face a familiar argument, namely the need to provide new awards to ensure Musk remains fully committed."