At the Friday close, SpaceX’s market cap was about $2.1 trillion, and Tesla’s market cap was about $1.27 trillion.
All of this suggests that Elon Musk’s wealth might rest on a foundation of investor euphoria rather than strong fundamentals.
I noted that Tesla’s stock would have shown long-term underperformance but for the aftermarket.
However, the stark contrast between trading-hour returns and overnight returns suggests more drives Tesla’s stock than investor faith in Musk.
How Retail Investors Shape These Stocks Tesla and SpaceX are both meme stocks, where retail investors remain especially active.
NEW YORK, NEW YORK - JUNE 12: Elon Musk, founder and CEO of SpaceX, speaks via video before the ringing of opening bell at the Nasdaq Marketsite at the launch of the company's initial public offering (IPO) on June 12, 2026 in New York City. SpaceX is set to begin trading under the ticker SPCX following what is expected to be the largest initial public offering in history. Elon Musk, who also serves as chief executive of Tesla, could become the world's first trillionaire. In a filing with the Securities and Exchange Commission, the company said it plans to raise $75 billion by selling 555.6 million shares at $135 each. (Photo by Spencer Platt/Getty Images) Getty Images
Elon Musk’s new trillion‑dollar status now hinges on two companies whose valuations might be driven more by market sentiment than fundamentals. With SpaceX’s record‑setting IPO and Tesla’s still‑lofty multiple, investors face a landscape where enthusiasm, not cash flow, is doing most of the work.
With SpaceX’s IPO last Friday, Elon Musk became the world’s first trillionaire. Over 95% of Musk’s wealth is concentrated in SpaceX and Tesla. At the Friday close, SpaceX’s market cap was about $2.1 trillion, and Tesla’s market cap was about $1.27 trillion. Musk’s stake in SpaceX is about 70% of his wealth, and his stake in Tesla is over 15%.
Why These Valuations Look Inflated Plausibly, the market caps of both SpaceX and Tesla comprise a significant sentiment‑driven valuation, in the sense of being far above their respective fundamental values. In this regard, both SpaceX and Tesla qualify as being high-sentiment beta stocks. Typically, high-sentiment beta stocks are difficult to value on fundamentals and difficult to arbitrage. In addition, companies with high-sentiment beta stocks are associated with exciting narratives that lead their stock prices to run high relative to their earnings. SpaceX’s earnings are currently negative. Tesla has positive earnings, but its P/E is over 370. All of this suggests that Elon Musk’s wealth might rest on a foundation of investor euphoria rather than strong fundamentals. This does not mean that Musk’s wealth is in danger of imploding soon. Euphoria carries momentum and responds to hype, especially the kind surrounding the largest IPO in history. MORE FOR YOU
What Investors Should Revisit About Tesla With that said, investors might benefit from focusing on some key facts about Tesla that have gotten buried in the SpaceX attention. Consider the following: Tesla’s free cash flow history. A company’s fundamental value is determined by its forecasted free cash flow stream and its current cash holdings. Except for the five-year stretch between 2018 and 2022, Tesla’s free cash flows have been negative. Analyst forecasting errors. Analysts have consistently overestimated future free cash flows for Tesla. This trend does not bode well for Tesla’s outlook or fundamental value. Behavioral IPO patterns. As I discussed before, three behavioral finance phenomena often accompany IPOs: hot-issue markets, first-day price pops and long-term underperformance. While Tesla’s 2010 IPO did not occur in a hot-issue market, its stock had a first-day price pop of more than 40%. I noted that Tesla’s stock would have shown long-term underperformance but for the aftermarket. In fact, Tesla’s cumulative return, based only on returns generated during trading hours, is negative. The stock’s strong long-term performance comes entirely from the aftermarket. Day‑of‑week return patterns. A day-of-the-week pattern in stock returns is especially strong for meme stocks like Tesla. Overnight returns are strongly positive from the Monday close to the Tuesday open. As I discussed in a previous piece, some theorize that this pattern reflects price support by some institutional investors. Notably, while Monday returns during trading hours tend to be strong, Tuesday returns tend to be weak. The theory holds that some institutional investors support their holdings between the Tuesday open and the Wednesday close, as trading-hour returns tend to be weak during these two days. Overnight returns from the Wednesday close to the Thursday open tend to be negative, perhaps because some institutional investors unwind their trades from the previous Monday close. Interpreting Tesla’s P/E. Some investors might view Tesla’s high P/E ratio as a testament to investors’ faith in Elon Musk. It is plausible that many investors hold Tesla stock for this reason, despite the firm’s negative free cash flows. However, the stark contrast between trading-hour returns and overnight returns suggests more drives Tesla’s stock than investor faith in Musk.
How Retail Investors Shape These Stocks Tesla and SpaceX are both meme stocks, where retail investors remain especially active. Musk included retail investors in the IPO allocation process for SpaceX shares. Factoring out week-to-week market fluctuations, for the average meme stock, only one trading day shows positive returns during the trading day. That day is Monday, after retail investors have had time over the weekend to research and think about their trades.
Why IPO Concerns Keep Repeating At the time of Tesla’s IPO in 2010, investors expressed concern that Tesla operated at a loss. Now, investors express the same view about SpaceX. In neither case did negative earnings prevent a first-day price pop. Stocks of firms that have IPOs typically rise in the first six months. So far, SpaceX has followed the behavioral IPO script — a hot-issue market and a first-day price pop — and it remains to be seen whether SpaceX continues to stay on script.
