🚀 Will Tesla shareholders take off for SpaceX stock?

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For years, the Tesla and Elon Musk faithful have piled into the stock, driving huge gains even when results were uneven and pushing the company to a market value of more than $1 trillion. As Musk has shifted the company’s priorities away from producing cars, its core revenue engine, and toward an even more ambitious AI and robotic growth story, it hasn’t dampened retail enthusiasm. In fact, this year Tesla has been the second-most-traded stock by value among retail investors, data from Vanda Research shows. 

But that loyalty has never really been tested by a true alternative — so what will happen to Tesla when SpaceX goes public? We asked some experts:

• Nothing: Melissa Otto, head of research at S&P Global Visible Alpha, says SpaceX’s value proposition won’t hurt Tesla’s. “Investors want to get behind stories where they feel like the company is going to create a lot of shareholder value: it’s going to outperform the index. It’s going to make great use of free cash flow and drive momentum in a way that delivers outsized returns,” she told Sherwood, adding that it’s not a zero-sum game.

• Something: Seth Goldstein, a senior equity research analyst at Morningstar, said he expects retail investors to be enthusiastic about both SpaceX and Tesla. But he sees limited retail funds as a potential downside for Tesla.

• Everybody wins: After a sell-off in the fall, retail investors have been buying Tesla again in recent weeks, according to Viraj Patel, deputy head of research at Vanda. And sure enough, the stock is up more than 20% over the past month after losing about 30% of its value from mid-December to early April.“Could it be SpaceX? Could it be some pre-positioning of earnings? Could it be their love for Tesla has just come back again? Something has happened,” he said.

In case you’re wondering what Wall Street thinks more broadly, analysts’ price targets for Tesla’s stock had been trending down since late December, before recovering some of their ground recently.

The Takeaway

When considering how the SpaceX IPO will go, one comparison that keeps coming up is the SPAC rush of 2021. Back then, retail investors piled into celebrity-led blank-check companies that raised money first and figured out what to buy later. “It didn’t matter what the company was — if a certain individual was linked to it, retail bought it,” Patel said. “Rather than looking at the valuations or the bottom-up or the accounts, the sort of meme stock nature of this trade is going to attract interest.”

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