Investment Logic under the Expectation of a Musk Empire Merger: Sell SpaceX, Buy Tesla?

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After SpaceX went public, its stock price continued to fall, while Tesla defied the trend and grew stronger. The valuation gap between the two companies is causing investors to re-examine the allocation logic of “Musk concept stocks.”

On June 22, Tesla’s stock rose 1% to $405.05, while SpaceX tumbled 16% in one day to $154.60, marking its third consecutive trading day of decline. Although SpaceX’s stock price remains above its IPO price of $135, this round of declines has sparked doubts about whether its post-IPO valuation can hold. Meanwhile, SpaceX launched a large-scale debt financing immediately after its IPO, further highlighting its high capital consumption business attributes.

Expectations for a future merger of Musk’s companies are becoming a key logical support for some investors shifting to Tesla. In this narrative framework, buying Tesla at a relatively lower valuation is seen as a more cost-effective path to get ahead in “building the Musk empire.”

Valuation Gap: SpaceX Premium Far Outstrips Tesla

Both companies enjoy a huge valuation premium thanks to Musk’s personal brand, but the gap is significant.

According to The Information, SpaceX’s current market cap is over 100 times its projected 2025 revenue ($18.7 billion); Tesla’s, based on $95 billion revenue, has a price-to-sales ratio of about 14.

This comparison means that the “Musk premium” paid by investors for SpaceX is far higher than for Tesla in absolute terms. SpaceX bulls are betting on Musk’s grand vision—including orbital data centers and large-scale settlements on the Moon and Mars. But Tesla’s story is ambitious as well: late last year Musk publicly stated that his Optimus robot will “eliminate poverty,” make work “optional,” and provide “excellent medical care” for everyone.

With both companies driven by grand narratives, the valuation gap itself forms a potential arbitrage opportunity.

Merger Expectation: Arbitrage Window May Be Limited

Another key factor pushing funds from SpaceX to Tesla is rising expectations of an eventual merger between the two companies.

Musk and SpaceX President Gwynne Shotwell both publicly hyped up the possibility of a merger before the IPO. This expectation is not groundless—Musk has historically integrated his assets faster than the market expects. At the beginning of 2025, SpaceX, xAI, and X were still independent private companies; the pace of integration has since accelerated. Currently, SpaceX and Tesla already share employees and collaborate on projects such as AI agents and chip manufacturing, with both parties stating that these collaborations will benefit both companies.

If a merger does happen, the current arbitrage opportunity between SpaceX and Tesla will disappear. For investors seeking early exposure to “Musk Inc.,” buying Tesla at a lower valuation appears more attractive—for now, but the market’s time window may not be wide.

Besides merger expectations, SpaceX’s own fundamental pressures are dragging down its stock. Its large-scale debt financing post-IPO made the market aware of SpaceX’s cash-burning business model. Rocket launches, satellite internet infrastructure, and long-term deep-space exploration plans all demand continuous large-scale capital investment. This contrasts with Tesla’s relatively mature automotive and energy business, which already provides more stable cash flow.

Some of the decline may be normal post-IPO pullback, but the timing of the debt financing certainty deepened investor concerns about SpaceX’s capital needs and, in the short term, reinforced the relative value logic of “selling SpaceX and buying Tesla.”

Risk Warning and DisclaimerThe market has risks and investment should be made cautiously. This article does not constitute personal investment advice and does not consider the unique investment goals, financial situation, or needs of individual users. Users should consider whether any opinion, viewpoint, or conclusion herein suits their particular situation. Investing based on this article is at one’s own risk. ```