Tesla Made a Car Fly. Wall Street Shrugged.

0:00A car that flew, a stock that didn't

Last Thursday night, at a SpaceX rocket site in Texas, Tesla drove its new Roadster up a curved wall, hung it upside down, and then flew it, on jets of compressed air, over a parked semi-truck.

Tesla's website now says it plainly. So yes, it can fly.

When pre-market trading opened at 4 the next morning, Tesla's stock was up 4.5%. Just before sunrise, it was up more than 5. In thin early trading, the flying car had added about $78 billion to Tesla's value.

Then, as the morning went on, the gain began to melt. By 10:52, it was gone. By the close, Tesla was down 2%. So was the entire Nasdaq.

So what is a flying car worth to a company valued at $1.4 trillion? One Wall Street model puts it at about six cents a share of profit. And yet it might be the most important thing Tesla showed this year. Just not for the reason you'd think.

This is Dominomics. We take one big story and follow its chain reaction all the way to your money.

Today we follow a car that flew for a few seconds. Onto the trading floor, into the trillion dollar story behind Tesla's price. Over to the rocket company next door. And into the index fund you probably own.

1:21Five hours of flying

Here's that Friday, minute by minute. The orange line is Tesla. The blue line is the Nasdaq-100, America's biggest tech stocks.

Before the bell, Tesla was flying on its own, while the rest of the market barely moved. That gap is what traders, at four in the morning, thought a flying car was worth.

But early trading is thin. Most big investors wait for the opening bell. And by 11 o'clock, Tesla was moving in lockstep with everything else.

That afternoon, everything else fell. A broad sell-off hit tech stocks. And the Nasdaq lost about 2%. So did Tesla. The flying car didn't sink the stock. Compared with the market, it did almost exactly nothing.

2:09The reveal-day curse

For Tesla, that's actually unusual.

Here are Tesla's big shows since 2019. And what its stock did the next trading day. The Cybertruck, with its shattered windows, down 6%. Battery Day: down 10. The first AI Day: up 1. Investor Day: down 6. And two years ago, the robotaxi event, We, Robot, down 9.

Counting this one, five of those six shows were followed by a falling stock. And on average, Tesla did about five points worse than the Nasdaq on the same day.

Why would a stock fall right after a company shows off its best work? Because a share price isn't a reward for what a company has done. It's a bet on what it will do. Before a big reveal, investors price in the best version they can imagine. The reveal swaps that dream for details. A date. A spec sheet. A delay. And the details are almost always smaller than the dream.

Traders call it, buy the rumor, sell the news. The Nobel Prize winning economist Robert Shiller has a bigger name for it. Narrative economics. Stories spread like viruses and they move markets long before the numbers arrive.

So why did the flying car escape the curse? Because nobody's math depended on it. The Roadster was years late and mostly forgotten. There was no dream to disappoint. And when expectations are zero, a car that flies is pure upside. For about five hours...

3:35Six cents

Let's put a number on it anyway. Tesla first unveiled a new Roadster in 2017. It promised deliveries in 2020, and asked its first thousand buyers to pay $250,000 up front. Since then, at least eight delays, and still no price. Production is now planned for 2028.

We entered production in 2028, actually. Actually, for real.

The fund manager Gary Black ran the numbers. Say Tesla sells 3,000 Roadsters a year at $100,000 of profit each. That adds 6 cents to his estimate of Tesla's earnings per share in 2029. Out of $5.40.

Gene Munster of Deepwater Asset Management called it an engineering flex with no commercial value beyond embarrassing traditional car makers.

Flying cars have always made better stories than businesses. In 1940, Henry Ford reportedly said, Mark my word, a combination airplane and motor car is coming. The Taylor Aerocar was certified in 1956. About six were built. The Moller Skycar spent decades and around $100 million and only ever hovered on a tether.

The new version is the electric air taxi. Investors have poured billions into it. Two of Europe's best-funded, Lilium and Volocopter, went insolvent. And the three listed air taxi makers, Joby, Archer, and EHang, are worth about $8 billion combined. Less than a single percent of Tesla.

Well, a friend of mine, Peter Thiel, once said that the future promised us flying cars, but instead we got 140 characters. Well, not anymore.

But Tesla's flying car doesn't have to work as an aircraft. It flies for a few seconds, then it lands. It only has to work as a story. And at Tesla, the story is the business.

5:29A $1.4 trillion story

Here's what that means. Tesla is worth about $1.4 trillion. That's roughly three times Toyota, BYD, General Motors, and Ford combined.

Yet last year Tesla's revenue shrank by 3% and its profit fell by almost half to $3.8 billion. Toyota earned more than six times as much.

At today's price, investors pay about $330 for every dollar Tesla earned over the past year. For Toyota, it's about 10.

So most of Tesla's price isn't paying for cars. In one recent Morgan Stanley breakdown, cars and energy were less than a quarter of the value. The rest was self-driving software, robotaxis, and humanoid robots. Businesses that barely exist yet.

We even know the exact targets because Tesla's shareholders voted on them. Last November, they approved a new pay plan for Elon Musk, worth up to about a trillion dollars. It pays out in 12 steps, and every step needs Tesla's value to climb. Two trillion dollars for the first. Eight and a half trillion for the last.

Each step also needs operating goals. 10 million self-driving subscriptions. Today, about 1.5 million. A million robotaxis. Today, a few hundred registered in Texas. A million Optimus robots. So far Tesla hasn't reported delivering any.

Notice what's not on the list. There's no flying car.

And to reach even the first step, Tesla's value has to rise by 43%. So why fly a car at all? The answer is in where it flew.

7:07The rocket company next door

Thursday's show wasn't at a Tesla factory. It was at SpaceX's rocket test site. And from the stage, Tesla told the crowd where the flying part came from.

and then we borrowed some technology from SpaceX to do the rest.

That matters, because SpaceX is now a public company too. It listed in June, in the biggest IPO in history, raising more than $75 billion. It had already swallowed Musk's AI company, xAI, and at almost $2 trillion, SpaceX is now worth more than Tesla.

Tesla even owns a small piece of it. Its $2 billion stake was worth $3 billion by June. That $1 billion paper gain was most of Tesla's profit last quarter.

So when analysts watched a Tesla fly on SpaceX hardware, many weren't thinking about cars. Dan Ives said it puts a merger on the table in a tangible way, and he puts the odds at 80% by the end of next year. Barclays wrote, on the day of the show, that SpaceX buying Tesla in an all-stock deal could be announced before Tesla's annual meeting, which is due by December the 6th.

And here's the detail that ties it together. Musk's pay plan has a clause for a takeover. If Tesla is bought, the operating goals are set aside and the deal price counts toward the market value steps. No robotaxis required.

Nothing has been announced. Asked why the two companies stay separate, Musk said. With all this collaboration on so many levels, who can imagine what action one might take?

8:38Your slice

Which brings the chain to you. If you own an S&P 500 index fund, about 1.5 cents of every dollar is Tesla. In a Nasdaq-100 fund, it's about 3 cents. Plus almost 3 more in SpaceX.

The biggest index managers, BlackRock, Vanguard, State Street and Geode, hold about 16% of Tesla, worth around $225 billion. Much of that is ordinary savers' money in funds that never asked them which companies to own.

So the story game we just watched, the stunts, the reveals, the merger talk, isn't happening somewhere far away. A small piece of it is in your retirement account.

9:19What to watch on Wednesday

The bull case is real. Tesla has made impossible sounding things routine before. Its energy business grew by a quarter last year. And robotaxis are already carrying paying passengers in Austin.

The bear case is real too. Last quarter, Tesla kept about one cent of operating profit per dollar of sales. The Roadster is years late. And the price assumes businesses that are still mostly promises.

Three dominoes to watch. One, Wednesday after the close. Tesla reports its third quarter. Wall Street expects about 45 cents a share in adjusted profit, and after 10 of its last 15 reports, the stock moved 8% or more. Two, the annual meeting due by December 6, the window Barclays sees for a SpaceX deal. Three, 2028, when the flying Roadster is supposed to enter production.

Thursday's stunt taught us something real about markets. Prices don't move on how amazing something is. They move on the gap between what happened and what was already expected. On Thursday, expectations were zero, and a car flew. On Wednesday, they're $1.4 trillion high.

So is Tesla a car company, a robot company, or half of a rocket company? Tell me in the comments.

This is Dominomics. I'll see you at the next domino.