SpaceX IPO adds second Musk stock – it’s a problem for Tesla

For years, there was only one way for mom-and-pop investors to buy into Elon Musk’s vision: shares of Tesla Inc. That’s about to change — and it’s a serious risk for Tesla investors.

With the imminent initial public offering of Space Exploration Technologies Corp., better known as SpaceX, the market will have an additional entry point for the “Muskonomy.” Wall Street pros see investors’ attention and capital inevitably being siphoned away from Musk’s electric-vehicle maker and to his shiny new toy.

“This cannot be a positive for Tesla,” said Joe Gilbert, portfolio manager at Integrity Asset Management. “We believe that Musk’s focus will predominantly be lasered on SpaceX. Musk has proved to be able to balance multiple initiatives simultaneously in the past, but it feels like SpaceX is his new baby at the expense of Tesla.”

Indeed, the seemingly inherent competition between Tesla and SpaceX is a key reason why Musk is reportedly considering merging the two companies.

Depending on your perspective, Tesla appears to be either in a holding pattern or slight decline, with slowing sales growth and withering fundamentals. But financial performance has never really been the driver behind the stock, which was seen as a proxy bet on Musk’s ambitions. While the shares are down 8.9% this year after soaring 265% from the beginning of 2023 to the end of 2025, they still trade at about 195 times earnings over the next 12 months, the second most expensive valuation in the S&P 500 Index.

That sky-high multiple is based on investors’ belief in Musk’s ambition to transform Tesla into an autonomous vehicle and robotics company that also makes EVs. It’s a crowded field. The EV business faces competition from Chinese manufacturers abroad and traditional gas guzzlers in the US. Its robotaxis compete against Alphabet Inc.’s Waymo, which is already in operation. And numerous tech firms are working on building humanoid robot assistants.

Still, Tesla’s $1.5 trillion market capitalization dwarfs its rivals. The combined market value of Rivian Automotive Inc., Uber Technologies Inc. and Boston Scientific Corp. — among the leading competitors to Tesla’s EVs, robotaxis and robotics products — is about $250 billion.

SpaceX, however, is different for a bunch of reasons. Its business is distinct from Tesla’s, it’s the clear leader in its field and its growth potential appears boundless at the moment.

“We expect SpaceX to come to market with an astronomical valuation, pun intended,” said Gilbert, whose firm doesn’t own Tesla because the stock doesn’t meet its value investing criteria. “It has no true competitors.”

SpaceX may even end up with a loftier market capitalization than Tesla, according to Gilbert. “Any Musk company will always embed a call option in its valuation for vision,” he added.

Musk has long been a fascination of the retail crowd, which is comprised of ordinary investors who buy stocks on their own. But even that enthusiasm seems to be waning. Since December, when SpaceX confirmed its intentions for a 2026 IPO, the stock has seen net retail inflows of about $1 million according to data compiled by Vanda research through May 18, with roughly equal days of inflows and outflows, according to data through May 13.

Retail investors own about 40% of Tesla shares, according to estimates by BNP Paribas analyst James Picariello. The SpaceX IPO will weigh on the stock by “‘splitting’ the pro-Musk retail shareholder base,” the analyst, who has an underperform rating on Tesla, wrote in a note to clients last month.

That said, the SpaceX IPO could also “strengthen the broader ‘Musk ecosystem’ narrative,” said Ivan Feinseth, chief investment officer at Tigress Financial Partners, which holds Tesla shares in accounts it manages for clients.

“Tesla and SpaceX are fundamentally different businesses, and investors who believe in Musk’s vision will want exposure to both,” said Dave Mazza, chief executive officer of Roundhill Financial, which owns Tesla shares. “However, SpaceX is the new shiny object, and we expect some capital will rotate​​​​​​​​​​​​​​​ away from Tesla to SpaceX to capture the current excitement.”

It will likely take around three months for SpaceX’s impact to materialize in Tesla shares, as institutional investments shift slowly and early trading after an IPO can be messy, said Nicholas Colas, co-founder of DataTrek Research. Tesla also could benefit, at least initially, from its membership in the S&P 500, considering all of the passive investments that are tied to the index, Colas added.

For most companies, a 50-50 split between present and future value is baked into the stock price, according to Colas. Tesla is different, however, because it trades far more on Musk’s dreams than the company’s actual financial performance.

“For Tesla, it has been 90-10 future-to-present value for as long as I’ve looked at it,” said Colas, who previously worked as an auto analyst. “The vast majority of that company’s valuation is based on future hope, not current reality.”

Since that future hope hinges on Musk, it makes little sense to have two companies in the market with the same fundamental draw, Colas said, noting that a merger between them probably makes the most sense.

“If I were advising anyone, I’d be like, let’s just get all this under one roof,” Colas said. “People want to own your vision, let’s make it simple.”

Should they stay separate, however, the dynamic ultimately should benefit SpaceX over Tesla, since the former has “a more clear, competitive advantage in its core business,” he said.

“You’ve already got this big systematically important public company, and you’re about to launch a second one,” Colas said. “I’m not sure what the value is of having two. If your pitch is, Elon runs the company, then the best approach is to have one company.”

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