NEW YORK: 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 (IPO) 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 (EV) 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 United States.
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 US$1.5 trillion market capitalisation 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 US$250bil.
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 capitalisation 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 US$1mil according to data compiled by Vanda research through Monday, 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. — Bloomberg
