In this guide7 sections
Reports in early 2026 that SpaceX was exploring combinations with xAI and Tesla were followed by SpaceX announcing it had acquired xAI and, according to news reports, going public in June 2026; as of October 2026, a Tesla combination was being explored but had not been agreed. For California employees of companies in a merger, the biggest questions are usually what happens to your job and your equity. Your stock options and RSUs are controlled mainly by your plan documents and the deal terms, while California law protects your wages, your right to change jobs and your right to review what you sign.
Key takeaways
- What happens to options and RSUs in a merger depends on your equity plan, your award agreement and the merger agreement; ask for the written treatment of equity awards.
- Non-compete clauses are generally void for California employees, with a narrow exception tied to selling a business or your ownership interest (Bus. & Prof. Code §§16600, 16601).
- An employer generally cannot require a California employee to agree to resolve disputes outside California or give up California law as a condition of employment (Labor Code §925).
- If a merger leads to layoffs, Cal-WARN notice, final pay and severance-review rules apply.
What was reported
In late January 2026, news reports said SpaceX was exploring merger paths involving Tesla and xAI. In early February 2026, Elon Musk announced that SpaceX had acquired xAI, combining the two companies. News reports said SpaceX went public on June 12, 2026. In October 2026, news reports said Musk confirmed that SpaceX and Tesla had formed special committees to explore a possible merger, while cautioning that a deal was not certain and no terms had been agreed.
Your stock options and RSUs
Common merger outcomes for equity awards include:
- Assumption or conversion: your awards are converted into the buyer’s equity, usually keeping the same vesting schedule.
- Cash-out: vested awards are paid out in cash or stock at the deal price.
- Acceleration: some plans speed up vesting at the deal (single trigger) or only if you are also let go within a set period (double trigger).
- Cancellation: some plans allow unvested awards to be cancelled, sometimes with replacement grants.
After an IPO, lockup periods and trading blackout windows may limit when you can sell. If you leave, check how long you have to exercise vested options. Missing a short exercise window can mean losing them.
Example (hypothetical): Alicia, an engineer, holds options in a private company that is acquired. The merger summary says vested options convert to the buyer’s shares and unvested options continue vesting, with acceleration only if she is let go without cause within 12 months. She saves the summary, grant notice and plan, which control her rights.
California protections during a merger
- Non-competes: California generally voids agreements that restrict you from working in your field, and §16600.5 bars enforcing them even if signed in another state. A narrow exception applies to non-competes signed when selling a business or your entire ownership interest in it, so get advice before signing one as part of a deal. See non-compete agreements in California.
- Out-of-state law and forum clauses: if you primarily live and work in California, Labor Code §925 lets you void a required term that sends California disputes to another state or strips California law, unless you had your own lawyer negotiate it.
- Pay changes in writing: changes to your pay rate or payday generally must be given to you in writing within seven calendar days unless shown on a timely pay stub (Labor Code §2810.5(b)).
- Fair selection for cuts: redundancy decisions cannot be based on age, disability, pregnancy or other protected traits, or on retaliation. See age discrimination.
- Benefits: plan changes are often governed by ERISA. Our ERISA overview explains your rights to plan documents and vested benefits.
If the merger leads to layoffs
A covered California establishment generally must give 60 days’ written notice before a mass layoff of 50 or more employees within 30 days (EDD Cal-WARN guidance). Final wages, including unused vacation, are due on your last day. A separation agreement must tell you that you may consult a lawyer and give you at least five business days to consider it, and your employer cannot require a release to get wages you are already owed. Read our severance agreement guide before you sign.
Frequently asked questions
Does a merger mean I will be laid off?
Not automatically, but mergers often prompt reviews of overlapping roles. Keep your reviews and pay records.
Will my unvested RSUs vest when the deal closes?
Only if your plan, award agreement or the deal terms provide for it. Many awards simply convert and keep vesting on the old schedule.
Can I be asked to sign new agreements after the merger?
Yes. Read arbitration, confidentiality and choice-of-law terms closely, and ask for time to review.
Can a new parent company enforce a non-compete against me?
Generally not if you work in California, unless a narrow sale-of-business exception applies.
Talk to a California employment lawyer
Employees First Labor Law represents workers exclusively. If a merger changed your job, pay or equity, or you were asked to sign a new agreement, we offer free virtual consultations. Contact us or call (310) 853-3461.
This article is general information about California law as of 2026, not legal advice for your situation. Reading it does not create an attorney-client relationship.
