TSLA Stock Sinks As SpaceX IPO Nears — Analyst Says Investors Are Selling Tesla To Catch A Day-1 Pop In Next Musk Trade

Black expects a strong debut, saying Goldman Sachs and Morgan Stanley could "engineer a Day 1 pop" for SpaceX investors.

• Gary Black said retail traders may be selling TSLA shares to fund purchases of SpaceX.
• SpaceX's IPO has reportedly attracted over $250 billion in demand, more than 4x the shares available.
• Black called SpaceX "richly priced" and advised investors to wait for shares to "come back to earth."

Shares of Tesla, Inc. (TSLA) logged their second straight session of losses on Wednesday as Wall Street's attention shifted to SpaceX's blockbuster IPO, with investor Gary Black saying that retail traders may be selling Tesla shares to fund purchases of the market's next big Elon Musk trade.

TSLA stock fell 4% on Wednesday to $381.59, with shares on track to post a second consecutive week in the red. 

TSLA Holders May Be Rotating Into SpaceX

Black, managing director of The Future Fund, attributed Tesla's recent decline on X to broader weakness across long-duration tech stocks amid a higher-for-longer interest-rate environment. However, he believes that SpaceX's IPO may be creating an additional source of selling pressure on Tesla shares: "I believe many retail investors buying $SPCX this week will lighten up on their TSLA positions to fund their SPCX shares," he said.

The comments come as investor demand for SpaceX's IPO has reportedly exceeded $250 billion, more than 4x the shares available. SpaceX is offering 555.6 million shares for $135 per share, seeking to raise $75 billion at a valuation of about $1.8 trillion. The deal is expected to eclipse Saudi Aramco's $29.4 billion debut in 2019 and become the biggest IPO ever.

Black believes investors are rushing into the offering partly because they expect a strong opening-day rally: "I continue to believe that lead bankers $GS and $MS will engineer a Day 1 pop for SPCX IPO investors," he said. According to Black, Wall Street banks have significant incentives to ensure a successful debut given the "huge potential paydays from Anthropic and OpenAI in the months ahead."

SpaceX Frenzy Revives Tesla Merger Talks

The IPO has also reignited talks about a potential merger of Musk's two most valuable companies. Tesla owns 19 million SpaceX shares, while the companies already collaborate on AI initiatives, chip development, and computing infrastructure. Tesla is also mentioned 87 times in SpaceX's latest S-1 filing.

Wolfe Research recently said that the possibility of a Tesla-SpaceX merger has "increasingly moved into the mainstream," with some investors now citing the thesis as a key reason for owning Tesla stock. Morningstar has gone even further, suggesting that Tesla shareholders could ultimately emerge as the winners in a potential deal and estimating they could control as much as 66% of a combined entity. 

Black Warns SpaceX IPO Is 'Richly Priced'

Despite his optimism about a SpaceX rally on its Friday debut, Black cautioned that SpaceX's valuation appears stretched: "I continue to view SPCX as richly priced," he said. Based on Black's estimates, SpaceX’s IPO valuation is equal to 300x its estimated 2025 earnings before interest, taxes, depreciation, and amortization (EBITDA) and 120x its projected 2026 EBITDA of $15 billion. 

Given expected long-term EBITDA growth of 35% to 40%, Black believes investors may eventually get a more attractive entry point: "I would wait for the stock to come back to earth post-IPO before buying shares post-IPO," he said.

ARK Sees A $3 Trillion Future For SpaceX

While some investors worry SpaceX is debuting at an aggressive valuation, ARK Invest expects SpaceX to hit an enterprise value of $2.5 trillion by 2030, nearly 7x its December 2024 funding-round valuation. In the firm's bull-case scenario, SpaceX could be worth $3.1 trillion by the end of the same period. The investment firm also estimates that SpaceX could eventually generate $300 billion in annual revenue once Starlink's satellite constellation is fully deployed, capturing 15% of global communications spending.

Most notably, ARK said that "Mars will account for a growing portion of SpaceX's enterprise value over time." The firm's model assumes Starlink's cash flows will ultimately fund large investments in Mars infrastructure and settlement.

How Do Retail Traders Feel About TSLA And SpaceX?

On Stocktwits, retail sentiment for TSLA has turned 'bearish' amid ‘normal’ message volume, while SpaceX sentiment remains 'extremely bullish' with message volume at ‘extremely high’ levels. 

One user said, “$TSLA all those people who sold to buy spacex will be jumping right back in here when get assigned 1 share or none.”

View this Stocktwits post

Another user said, “If I'm and original SpaceX investor and sitting on insane profits at this IPO valuation, I'm absolutely dumping my shares on Elon fanatics before he tries to bail himself out by merging $TSLA.”

View this Stocktwits post

So far this year, TSLA stock has lagged its “Magnificent Seven” peers, making it the group’s second-worst performer, down 15%.    

For updates and corrections, email newsroom[at]stocktwits[dot]com.<