Key Takeaways
- Tesla shares fell 4% today, along with SpaceX, after Democrats won control of the House and the Senate in Tuesday’s midterms.
- Congress has no vote on a Tesla-SpaceX merger, but hearings and subpoenas into Musk’s companies could slow a deal that already faces a hard shareholder vote.
- Analysts expect Tesla to earn $3.24 a share in 2028, still below what it earned in 2022, so much of the stock’s price rests on bets beyond the car business, the SpaceX deal among them.
- The next markers are Tesla’s Dec. 3 annual meeting and any terms from the two companies’ special committees.
Tesla (TSLA) shares fell 4% in early trading today, and SpaceX (SPCX) fell 4% too, after Democrats won the House and the Senate on Tuesday night.
The timing isn’t great for Tesla holders. Both companies have special committees looking at a merger, and the new Congress has Elon Musk’s businesses in its sights.
Musk’s $446 million bet didn’t pay off
Musk gave $446 million during the 2026 midterm cycle, mostly to Republican-aligned groups. Now Democrats will control both chambers.
They’ve already threatened to investigate Musk’s time leading DOGE and his federal contracts, and lawmakers have asked for a probe into reported limits on SpaceX’s communications in Ukraine. Bloomberg Intelligence has identified more than 200 companies that Democrats sent letters or public inquiries to over the last couple of years. Before the vote, its senior US policy analyst Nathan Dean said even SpaceX “may get tested.” In a Bloomberg interview, he added: “Elon Musk may get called up just to talk about what his discussions with the White House have been.”
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Tesla’s earnings don’t explain its price
Analysts expect Tesla’s normalized EPS to go from $1.66 in 2025 to $3.24 in 2028:
Even that 2028 figure is below the $4.07 Tesla earned in 2022. And nothing in Tuesday’s vote should change these car and battery numbers.
Even so, Tesla traded at 189x forward earnings on Monday, against a three-year average of 137x:
(Today’s drop brings it down a little, but it’s still well above its usual level.)
Part of that premium is Robotaxi and Optimus. I suspect part of it is also the hope that SpaceX pays up for Tesla in a merger. On Monday, Gary Black of The Future Fund put a fair premium at 20-25%.
Congress can slow the deal down
Alexandra Merz, a Tesla investor and CEO of L&F Investor Services, said it plainly overnight: “Congress cannot simply veto a private merger.”
She’s right. A stock-for-stock deal between two Musk companies goes through the special committees, regulatory reviews and a shareholder vote. Congress has no say in any of them.
But hearings and subpoenas can slow every one of those steps, and the vote was already a high bar. A deal needs a majority of all 3.953 billion Tesla shares outstanding, which is nearly 1.98 billion yes votes. Merz counts 700 million shares that Musk can vote directly. “Every share that does not vote counts against us,” she wrote this week.
My read: months of Washington headlines give the holders who usually sit out one more reason to stay home, or to vote no.
A slower deal is a smaller premium
Then there’s the payment itself. In a stock-for-stock deal, Tesla holders would get their premium in SpaceX shares. Black already warned that “arbs will whittle down the SPCX price (and hence deal premium) after the announcement,” as happened to Lumentum holders in Marvell’s all-stock deal.
The election also hits SpaceX’s own business. Dan Ives, a partner and managing director at Yorkville, wrote that Democratic wins will slow the AI data-center build, especially in Texas, where Democrat Gina Hinojosa beat Gov. Greg Abbott. “SpaceX and Musk are clearly caught front and center in this spiderweb,” he wrote.
Analysts expect SpaceX’s revenue to go from $48.9 billion this year to $336 billion in 2028:
That’s the growth Tesla holders would be trading into. If probes and a slower Texas build push it out, the SpaceX shares they’d get in a deal are worth less, and so is the premium.
Here’s where I land: a Tesla-SpaceX deal is still possible, but its premium now looks smaller and further away than it did on Monday. At 189x forward earnings, I wouldn’t buy Tesla for the merger.
Of course, the committees could move faster than Congress. Watch for disclosures before Tesla’s Dec. 3 annual meeting and the first formal deal terms. Either one would put a real number on the premium.
So what is Tesla stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
