SpaceX IPO adds second Musk stock. It’s a problem for Tesla

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Retail investors own about 40 per cent 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.

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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.

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“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.”

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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.

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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.

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“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.”

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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.

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“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.”

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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.

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“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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