Musk's political setbacks spark pressure on space stocks and merger questions

Space stocks fall after midterm results

Stocktwits reported that shares of SpaceX, AST SpaceMobile and Rocket Lab fell overnight as concerns grew about possible political fallout for Elon Musk after Democrats made midterm gains. The article said SPCX, RKLB, ASTS, Planet Labs, Redwire and Intuitive Machines each declined between 2% and 6% before Wednesday’s trading session. It also said the wider market weakened, with Nasdaq futures down 0.4%, S&P 500 futures off 0.3% and Dow futures down 0.1%.

Stocktwits said Democrats won the Senate and are projected to take the House. According to the article, that outcome raised expectations of closer scrutiny of Musk’s dealings with the government. It also said the selling was not limited to space names, since broader futures were lower heading into Wednesday.

Merger questions and political scrutiny

The article said satellite communications and spectrum consultant Tim Farrar raised the possibility that Musk could announce a business deal to shift attention away from politics. Stocktwits quoted him asking, “Will Musk/SpaceX announce some business deal tomorrow to change the focus away from politics?” It said Farrar had earlier speculated that SpaceX could pursue EchoStar’s remaining business through a share-based transaction involving wireless assets and spectrum.

Stocktwits also reported that Alexandra Merz, CEO of L&F Investor Services, criticized Musk’s political spending. The article said Musk contributed $446 million during the 2026 midterm election cycle, mostly to Republican-aligned groups. Merz said Democratic gains could lead to more hearings, subpoenas and review of government contracts, which she said could complicate a Tesla-SpaceX merger, though not automatically prevent one. She said, “Congress cannot simply veto a private merger,” and added that the deal would not be off the table by itself.

Merz identified shareholder approval, special committee work and regulatory review as the main obstacles. Stocktwits said both companies have already formed committees to evaluate a merger. Merz pointed to possible committee updates, disclosures before Tesla’s Dec. 3 annual meeting and formal deal terms as the next items to watch.

Political risks and comments from investors

Stocktwits said Musk’s ties to Trump and his former role leading DOGE increased the political stakes. The article said Democrats have threatened investigations into his government work and federal contracts, and lawmakers have also sought a probe into reported SpaceX communications restrictions in Ukraine. It added that Trump recently said he would consider pre-emptive pardons for Musk and other allies, quoting him as saying, “I would if I needed to, sure.”

The article said investor George Noble urged more bearish bets on Musk-linked companies. Stocktwits quoted him saying Musk was the biggest loser from the election and that he wanted to add to short positions in SPCX and TSLA. Noble had previously called short positions on Tesla and SpaceX last month, citing cash burn, heavy spending and high valuations. He said then that Tesla had fallen since his call while SpaceX had risen, and he added that the election did not solve the AI funding issue.

Stocktwits also cited Grant Cardone, founder and CEO of Cardone Capital, who said political risk could matter if Democrat James Talarico defeated Republican Ken Paxton in Texas. The article said Talarico did defeat Paxton, ending Democrats’ statewide losing streak in Texas that dated to 1994.

Bullish view, stocktwits sentiment and company exposure

Stocktwits said Morgan Stanley offered a more positive view in a note shared by Tesla investor and influencer Sawyer Merritt. According to the article, the firm said SpaceX would trade cheaper than the S&P 500 in fiscal 2028. Using a $140 reference share price and projected 2028 adjusted earnings of $109 billion, Morgan Stanley put SpaceX at 17.6 times estimated earnings versus 17.7 times for the S&P 500. It also raised its 2027 revenue forecast to $175 billion and its 2028 revenue and operating-income estimates to $289 billion and $119 billion, respectively.

The firm said it now expects positive free cash flow by 2031, compared with a prior expectation of negative free cash flow until 2035. It also lowered projected borrowing through 2031 to $390 billion from $670 billion through 2035, while noting that the forecasts cover different periods.

Stocktwits said sentiment on SPCX, ASTS and RKLB was bearish, with low message activity across all three. One user blamed Musk’s political activity for linking share prices to politics, while another said Democratic scrutiny could favor funding and contracts for companies outside Musk’s business group. The article noted that AST buys SpaceX launch services while also competing in satellite-based mobile connectivity, and that Rocket Lab competes with SpaceX for launches and supplies spacecraft and components to government customers, leaving the two stocks with different political exposure. A separate user told investors to hold their positions, citing historically strong third-year presidential market performance.