Public enthusiasm expressed by Elon Musk regarding a potential merger between electric vehicle maker Tesla and aerospace company SpaceX has alarmed individuals close to the negotiations. According to a Reuters report citing sources familiar with the matter, Musk’s public declarations created internal “turmoil,” raising concerns that Tesla shareholders will demand intense scrutiny that could significantly delay or derail the deal’s execution.

Musk currently serves as Chief Executive Officer of both enterprises and holds commanding equity stakes in each—holding roughly 20% of Tesla and just under 50% of SpaceX. A combination of the two entities would forge an industrial behemoth valued at approximately $3.5 trillion. To navigate the obvious governance hurdles and conflicts of interest, Musk revealed that a special independent board committee has been formed to review the proposal, confirming he is not participating in its discussions. However, advisors worry that Musk’s public advocacy jeopardizes the process, as independent directors typically require an undisturbed environment to assess fiduciary fairness.

The heightened anxiety stems in part from historical precedent. Tesla’s 2016 acquisition of SolarCity—another company in which Musk held a major stake—triggered years of bitter shareholder litigation questioning his influence over the board. Nevertheless, preliminary discussions between the two companies are progressing with the assistance of hired financial advisors. SpaceX reportedly initiated the approach to Tesla in recent weeks, with parties weighing several transaction models, including a direct acquisition of Tesla by SpaceX, the creation of a new umbrella holding company, or a pure stock-for-stock exchange.

Evaluating the legal exposure, Eric Talley, a law professor at Columbia University, noted that a merger could ultimately serve shareholder interests by eliminating the divide in Musk’s executive attention. Talley also highlighted that Tesla’s transition of its corporate registration from Delaware to Texas introduces a wild card into potential litigation, as Texas actively seeks to establish a business-friendly jurisdiction. Ultimately, Talley emphasized that litigation risk will depend on the final valuation metrics and transaction terms—specifically, which set of shareholders captures the superior end of the deal.