“Space: the final frontier”…… per Capt. James T. Kirk, starship Enterprise
Or is this just the beginning?
The SpaceX Offering has created plenty of buzz and excitement. But what kind of IPO really is this?
20 years ago, IPOs were a source to raise capital for young companies to growth their business early in their life cycle and were fairly high risk. Public investors, including retail investors, could capture that early growth by buying their stock.
Today, there are multiple Venture Capital Rounds to scale the businesses for many years, before going Public. The eventual IPO commands premium pricing to create enough liquidity for Venture Capital Investors & Founders to exit with massive gains. Not complaining, as the VCs/Founders took the initial risk and VCs have plenty of flame outs in their portfolios.
SpaceX will be the grand daddy of IPOs ($1.75 T). There is so much liquidity needed that capital markets are making “special provisions” that will allow it to be added to indices and ETFs right away without the typical restrictions, in effect forcing the Passive Funds to buy it. The Valuation will be what appears sky high at 100x Sales (Note: PLTR traded at 120x Sales in Aug ’25 before peaking).
SpaceX Lost $5B on Revenue of $18B……so investors are really paying for the future and the Orbital Dominance of this company (compute, logistics, immense data centers). You are getting almost 3 companies, ie: Rockets, xAI (former Twitter) and Starlink. Starlink is printing cash while xAI is eating more cash than the rocket business.
To get this fat offering on a platter for retail investors, 30% of the offering is targeted for Retail when typically is 5% allocation. There will also be a 5 for 1 stock split before the IPO Offering to get the price in a lower range for retail investors.
In the Lifecycle Trade book, there are a two noteworthy stats:
20% of IPOs gain 100% in the first year.
90% of IPOs trade below their first Days Low
Many super hyped IPOs (UBER, COIN, HOOD, RIVN, SNOW, BABA, META) took 2-4 years later to reach a new high after the IPO High…….META was the best one at only 16 months.
I have no problem with betting on Elon as he is the Thomas Edison of our time and has rewarded shareholders in previous ventures like PayPal, SolarCity, Tesla and others. So if you plan to hop aboard just after liftoff, just be aware that this may take the public longer to realize gains in SpaceX…..and remember trading is a game of odds.