Here's Why Tesla Stock Soared in May (And What the SpaceX IPO Means to Tesla Investors)
Key Points
Tesla's robotaxi expansion is driving recent optimism in its share price, but the rollout pace may slow until major software upgrades are in place.
Speculation about a SpaceX IPO and possible merger impacts Tesla's outlook.
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Shares in Tesla (NASDAQ: TSLA) rose by 14.2% according to data from S&P Global Market Intelligence. The move comes down to a wave of optimism over the company's robotaxi expansion. There is reason to be optimistic for Tesla investors. Still, it needs to be grounded in reality, and investors also need to consider what the forthcoming SpaceX IPO might mean for Tesla investors.
Tesla's expanding robotaxi fleet
The robotaxi expansion is the most important part of Tesla's foundational growth aspirations this year. That's why investors got excited when the unsupervised full self-driving (FSD) robotaxi fleet expanded from just nine in Austin at the start of April to 39 (28 in Austin, 5 in Dallas, and 6 in Houston) by the end of the first week of May.
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However, according to robotaxitracker.com, the expansion suddenly stopped on May 10. And so did the share price. Indeed, the stock was actually up 16.6% in the month to May 11. The speculation around the robotaxi rollout is understandable, and there remains some confusion about its likely cadence. I want to clarify that now.
During the recent earnings call, CEO Elon Musk fielded a question on whether the current v14.3 software was the last piece of the puzzle before "large-scale FSD" is available or "do we now have to wait until v15?"
Musk replied that v14.3 was indeed the last piece of the puzzle, then raised a point about "safety and convenience," and then stated that "I think it's not going to make sense for us to deploy unsupervised FSD or Robotaxi at large scale when we know that there are major architectural improvements to the software that can improve safety."
Image source: The Motley Fool.
Tesla Director Askok Elluswamy then added, "We continue to expand based on the v14.3 base for a while until v15 lands. v15 is going to be a major upgrade." Clearly, investor expectations of a massive rollout ramp should be tempered here, as when Musk talked of "writing that software, validate it, and release it before going to large-scale unsupervised FSD," he's clearly not talking about v14.3.
Still, any rollout expansion is good news and helps create valuable data and raise confidence before v15 hits, hopefully later this year.
What about the SpaceX IPO?
It would be remiss not to mention that Tesla stock is down 6.5% in June as I write, likely due to rising speculation that, following SpaceX's initial public offering (IPO), there might be a move toward a merger or acquisition of Tesla. While this is purely speculative and any merger/acquisition should be judged on the value of the deal, there's a strong case that such a deal would not be great news for Tesla investors.
Image source: Tesla.
After all, if Tesla is about to unlock value from robotaxis and Optimus in the coming years, it doesn't naturally follow that they should want to dilute their impact by becoming part of SpaceX, a company that will require substantial capital investment.
Speculation has been fueled by a recent amendment in its IPO filings stating, "We may issue a significant amount of equity in connection with future transactions." While it's simply legalese at face value, it does raise awareness of the potential for SpaceX to raise equity on the back of a favorable post-IPO valuation, and that's enough to cause concern for Tesla investors.
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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
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