Since we first reported on the SpaceX IPO targeting a $1.75 trillion valuation and Morningstar's warning that it's worth less than half that, the financial fallout has started spreading to the broader telecom sector — and Wall Street's back-room maneuvering is getting uglier.

AT&T Is the Named Victim Here

Oppenheimer analyst Timothy Horan downgraded AT&T from buy to perform on Wednesday, June 3. Not a vague sector caution. A direct, named call: AT&T is 'most at risk' among telecoms from Starlink's expansion.

Horan's note says satellite low-earth orbit internet threatens AT&T's long-term broadband subscriber growth — and eventually its mobile business too. His exact words: "We think longer-term broadband subscriber growth and eventually mobile is at risk from rising threat of satellite [low-earth orbit] constellations."

AT&T shares are already down 12% over the past three months. They're flat on the year. That's a stock that has gone nowhere while the broader market moved.

Why is AT&T specifically more exposed than Verizon or T-Mobile? Horan's answer is straightforward: those competitors have less broadband exposure. AT&T has built its identity around fiber and broadband. That's the exact market Starlink is targeting.

The FCC Just Made Things Worse for the Old Guard

This isn't abstract risk. In April, the Federal Communications Commission voted to update satellite spectrum-sharing rules — a change the FCC itself said could boost space-based broadband access sevenfold. FCC Commissioner Olivia Trusty said satellite providers like Starlink "deliver high-speed, low latency broadband" and are "expanding connectivity."

Regulators are actively tilting the field toward satellite. Horan's note flags "strong regulatory support behind satellite, increasing the feasibility for SpaceX to directly enter mobile."

Oppenheimer does note that older broadband still has a short-term window — Starlink's prices remain higher than cable and fiber for most consumers. But the longer view is significant: "In three years, new fiber builds will halt, hitting the entire foodchain." Fiber — the infrastructure AT&T has spent billions deploying — could become a stranded asset within three years if satellite closes the price gap.

Wall Street's Petty Drama: Jefferies Goes Rogue

When SpaceX filed its IPO prospectus in mid-May, Goldman Sachs and Morgan Stanley were listed first on the S-1 cover. Twenty-three banks total made the cut. According to ZeroHedge, Goldman CEO David Solomon reportedly reached out to Elon Musk directly — sliding into his DMs on X — to secure a lead position. The deal is expected to generate roughly $500 million in underwriter fees.

One major bank was conspicuously absent: Jefferies.

Jefferies is the largest U.S. investment bank NOT on the SpaceX S-1. Whether it was excluded due to bad blood with Musk or something else, the firm's bankers reportedly didn't take it well. And now, according to Bloomberg, Jefferies is actively arranging short-selling positions for hedge funds that want to bet against SpaceX once it begins trading.

This is legal. Banks routinely help clients take both long and short positions. But the optics here are something else. A bank excluded from the biggest IPO in history is now helping clients bet it fails. That's not standard portfolio diversification — that's motivated.

Normally, banks helping sell an IPO can't simultaneously arrange shorts — their lawyers get nervous about the conflict. Jefferies has no such conflict. It's free to play pure opposition.

How Musk will respond if Jefferies-arranged shorts tank his debut week is anyone's guess. This man has a long memory and a platform with hundreds of millions of followers.

What Mainstream Coverage Is Getting Wrong

CNBC's framing focuses on the AT&T downgrade as an investment call. Technically true, but it misses the bigger structural picture: satellite internet is receiving active government backing that is deliberately accelerating the disruption of legacy telecoms. This isn't just market competition — regulators are choosing a winner.

ZeroHedge's Jefferies coverage is accurate on the facts but emphasizes the drama angle without pressing the harder question: if Jefferies-arranged shorts contribute to a bad opening week for SpaceX, what does that do to the millions of retail investors who will pile in at or near the IPO price? Goldman needed retail to make this deal work — that's why 23 banks are on the cover. The people most exposed to a coordinated short campaign aren't hedge funds. They're regular investors chasing the hype.

Neither outlet connects the two stories. The same IPO that's crashing AT&T's stock is also drawing institutional money trying to profit from its failure. SpaceX is simultaneously destroying legacy telecom value AND generating a Wall Street food fight over who gets to profit from the chaos.

What This Means for Regular People

If you own AT&T stock, Oppenheimer's message is clear: the long-term thesis just got harder. Starlink is real competition, and Washington is actively helping it win.

If you're thinking about buying SpaceX at the IPO price of $135 per share, remember two things. Morningstar already said it's worth less than half the $1.75 trillion target valuation. And the biggest bank excluded from the deal is now openly arranging bets against it.

That's not a conspiracy. That's just what the incentives look like.