India, Oct. 22 -- Tesla and SpaceX, two of Elon Musk's largest companies, are exploring a merger that would create a business worth about $3.5 trillion. The terms of any deal would decide how much Tesla shareholders are paid, how much control Musk keeps, and whether the deal can win a demanding shareholder vote.

At shareholders' request, both companies have set up special committees of independent directors to examine a combination. Musk runs both companies, has called himself a "conflicted party" and is staying out of the committees' discussions. The committees have not agreed terms, and Musk has said that assuming a merger is certain would be overstating the situation.

His public backing for the idea has also worried people involved i...