“Listen, stranger, this town ain’t big enough for the two of us.”
That was Yosemite Sam to Bugs Bunny in the cartoon Bugs Bunny Rides Again. The episode aired in 1948, but the idea is strangely valid today, except that it’s Elon Musk squaring off with himself.
SpaceX is on the cusp of its initial public offering, which will raise a record amount of money. Some of that money could come from Tesla stock, creating a headwind for shares of Musk’s other trillion-dollar company.
The reasons feel obvious. SpaceX plans to offer a relatively large amount of its stock to smaller retail investors, the same ones who hold Tesla shares. Those shareholders might face a tough choice: sell Tesla stock to buy SpaceX. Then there is the problem of size. SpaceX will be valued at $2 trillion or more, which beats Tesla. That’s a lot for the market to absorb.
To be sure, it’s a risk, but not a big one. For starters, the market doesn’t have to absorb $2 trillion. SpaceX is estimated to be raising $75 billion. That number could go up. Still, it’s a small fraction of the overall market value and a small fraction of Tesla’s $1.9 trillion market value, based on its fully-diluted shares outstanding, which include Musk’s vested stock options.
The question isn’t how you find a home for $2 trillion. It’s is there enough interest in SpaceX to find a home for $75 billion? The answer is almost assuredly yes. Investors have been pining to own SpaceX for years. CEO of Gerber Kawasaki Wealth and Investment Management Ross Gerber says interest in the IPO is very high.
As for Tesla, the daily value traded in its stock is routinely $20 billion. That number leads to Tesla’s typical stock volatility. More trading equals more volatility. Shares traded roughly $90 billion on June 5, 2025, sending the stock down 14% after a feud broke out between President Donald Trump and Musk, the administration’s one-time government efficiency tsar. Theoretically, if all the money came out of Tesla stock in one day, heading to SpaceX, investors could be looking at a 10% dip.
That isn’t how things will happen, though. What’s more, Tesla stock had fully recovered the presidential dip in less than three weeks.
At the end of the Bugs Bunny cartoon, Bugs left for Miami voluntarily. It was a twist no one saw coming. That’s the way it will be with the SpaceX IPO and Tesla stock. Something else will be moving Tesla shares.
Investors, of course, are waiting for AI progress from the EV maker. Tesla launched its AI-trained robo-taxi service in Austin, Texas, almost a year ago. Tesla has robo-taxis in four cities now. More added would likely boost the stock. Tesla’s unveiling of an impressive third generation of its Optimus humanoid robot could also please investors.
The biggest risk for SpaceX stock boils down to valuation. It will likely be priced at north of 80 times the estimated 2026 sales. Tech IPOs at that value don’t perform all that well. After a huge first-day pop, shares drop almost 50% over the subsequent three years, leaving shares at roughly the original IPO price, according to data compiled by University of Florida professor Jay Ritter.
Of course, the tracked IPOs didn’t have Musk at the helm. Typical valuation rules don’t always apply to his companies. Tesla stock trades at about 200 times expected earnings over the coming 12 months, despite a declining EV business.