Musk squeezes SpaceX’s IPO plans to shore up Tesla’s stock
Elon Musk is selling investors on a future of self-driving cars, robotic assistants and life on Mars. The problem for investors is that there is only one way to buy into that vision and that is through Tesla stock. The electric vehicle manufacturer titles have risen more than 4% this Thursday, to $489 per share, after setting their first annual record last Tuesday. From the lows of last April 8, at the height of stock market panic Due to the tariffs decreed by the White House, the stock has skyrocketed almost 120%, placing it among the 20 stocks with the best performance in the S&P 500 index.
He ‘rally’ shows Wall Street’s faith on Musk’s AI ambitions, especially as Tesla’s core auto business struggles. But it has also made the actions of Tesla are extremely expensive. At 214 times expected earnings for the next 12 months, the stock has the second-highest valuation in the S&P 500, behind only Warner Bros. Discovery and well ahead of number three, Palantir Technologiesanother high-flying stock trading at 178 times forward earnings as of Wednesday’s close.
“Valuation doesn’t make any sense,” says Vikram Rai, portfolio manager and macro trader at First New York, which sold its position at Tesla earlier this year following the very public confrontation between Musk and US President Donald Trump on social media. With SpaceX possibly going public next year, the stock traders seeking “Musk exposure” They may soon find a way to obtain it. The space exploration company is planning a stock sale among insiders that would value it at 800,000 million dollars, making it the company most valuable private property in the world. Its initial public offering would be the largest in history.
“A SpaceX IPO could put some selling pressure on Tesla shares,” argues Dmitry Shlyapnikov, Horizon Investments analyst who works with portfolio managers. “There are investors who own Tesla because of the exposure to Elon’s ideas and not because of the car company associated with the ticker,” he adds. But there is also another school of thought which supports that a Space X IPO would put the American tycoon in the spotlight, giving Tesla another boost, at least in the short term.
“Historically, when one of Musk’s companies reaches a milestone Importantly, it tends to raise sentiment toward each other,” said Adam Sarhan, CEO of 50 Park Investments, adding that “an IPO of the profile of SpaceX could attract a new wave of investors seduced by its history of innovation, and that enthusiasm often carries over to Tesla. For now, Tesla’s share price is benefiting from the hype around SpaceX, according to Bloomberg Intelligence analyst Steve Man.
The missions of both companies are interconnected, he said, describing a future in which Tesla’s Optimus robots help Tesla’s ambition. Musk to colonize Mars, and the Starlink satellite system of SpaceX reinforces the connectivity of vehicles on Earth. The companies also share high valuations. But Tesla skeptics question whether the company’s fundamentals can sustain those numbers over time. Its sales are slowing and profits are falling, as regulations and consumers increase They spend less on cars. “If you’ve been long Tesla stock, you’ve made money, no doubt about it,” says Thomas Thornton, founder of Hedge Fund Telemetry, which has a small short position in Tesla.
Optimists, on the other hand, see Tesla’s growth prospects as opportunities in autonomous driving and robotaxis. Musk’s goal is to transform Tesla from a car manufacturer into an artificial intelligence and robotics company. The businessman has recently admitted that 80% of the company’s profits will end up coming from robots.
“We believe that the benefits of Tesla will grow between 30% and 35% in the next two or three years based on the innovation they have in the automotive segment,” specifies Brian Mulberry, client portfolio manager at Zacks Investment Management, which owns shares of the company. If Musk achieves that, Tesla’s stock valuation It would make more sense. If you don’t make it, that’s where SpaceX comes in. SpaceX’s listed securities would give investors the opportunity to own a part of Musk’s vision without the burden of Tesla.
The reality for investors is that Tesla is the only way to bet on Musk’s vision. However, the risk is the valuation of the stock, which begins to approach dangerous territory. On a technical level, the stock was close to being considered overvalued earlier this week. The last time they reached that level, in early October, the stock plummeted around 10% in seven sessions. “It’s probably ready for a period of some cooling after we hit that all-time high,” Mulberry said.
But for long-term Musk defenders, valuation may be a concern. In the coming years, however, many see Tesla as a buy regardless of price, possibly even more than SpaceX. “I firmly believe that at some point there will be a commercial mission to Mars, but probably not in my lifetime,” emphasized Mulberry, who is 51 years old. “Does that mean you want to invest in that stock today? You would have to take a very long-term view, while the impact of robotaxis and robots can probably be seen in the next three to five years,” he underlines.
