After record IPO, SpaceX faces new test in its market debut
SpaceX is expected to begin trading on the Nasdaq this Friday (12), after investors injected US$75 billion into the largest IPO (initial public offering) in history, betting that Elon Musk's ambitious actions in the areas of space, communications and artificial intelligence can justify a valuation of US$1.77 trillion.
The historic IPO cemented Musk's status as the first trillionaire in history and propelled SpaceX into the ranks of the world's most valuable companies - even though the company posted a loss of nearly $5 billion last year and generated just a fraction of the revenue enjoyed by similarly valued technology giants.
"Investors will spend years debating whether the IPO price was too high or too low. I foresee a lot of volatility in the coming months," said Mike Alves, founder of VIDA Vision Fund, a SpaceX investor.
The stock's performance will also be a test of the so-called "Musk premium," which has been the driving force behind Tesla's valuation of more than $1 trillion, despite coming under pressure during Musk's active role in President Donald Trump's administration.
"We need to go back 100 years to find comparable entrepreneurs. He is a visionary unlike any other and executes his plans with extreme competence," said Joel Shulman, CEO of ERShares, which manages an ETF with exposure to SpaceX.
With SpaceX widely seen as a dress rehearsal for a new generation of mega-IPOs, market participants will also be watching for signs of investor appetite ahead of upcoming IPOs from AI giants Anthropic and OpenAI.
Stock exchanges and brokers are under pressure to demonstrate that they can handle the extraordinary volumes of listing orders and avoid a repeat of the technical glitches that marred Meta's debut in 2012.
Shares are not likely to begin trading until mid-session as the exchange collects buy and sell orders and investment banks delay trading until supply and demand are balanced. SpaceX priced its IPO at $135 per share and sold 555.56 million shares.
The record-breaking IPO is the culmination of Musk's long-standing ambitions in the space and technology sector, and is notable for rewriting the IPO rules on Wall Street and attracting legions of individual investors to the market.
The world's largest IPO
With a value of US$75 billion, the offering's proceeds were more than double Saudi Aramco's record-setting initial public offering (IPO) in 2019. This will make SpaceX the first American company to debut on the stock exchange with a market value exceeding one trillion dollars and the seventh-largest US company by market value.
"Elon jokes that we do the impossible, only late," said Gwynne Shotwell, director of operations at SpaceX, in an interview with CNBC.
The valuation could increase further if the underwriters exercise their right to sell additional shares, a decision normally made within 30 days of the offering.
While SpaceX may have to wait to join the S&P 500 .SPX, its expected accelerated inclusion into the Nasdaq 100 will soon make it a hot asset for passive funds and ETFs that replicate the index, creating a new source of demand for its shares.
It will take about a month for it to be added to the index under Nasdaq's new fast-track entry rules, rather than the typical wait of up to a year.
Some analysts expect SpaceX's debut to trigger a restructuring of investor portfolios, creating selling pressure on other technology giants as funds flock to the company's shares.
$28.5 Trillion Market Opportunity
Despite all the excitement surrounding the IPO, determining SpaceX's true value remains a complex valuation exercise.
SpaceX stated that its potential market covers US$28.5 trillion, a value it considers the largest in the history of humanity. With its leading position in the space sector - the company says its operations are responsible for more than four-fifths of the mass launched into orbit over the past three years - and Starlink's revenues, some investors have said it has a solid foundation for growth.
John Belton, portfolio manager at Gabelli Funds, stated that the best comparison for SpaceX is Tesla, Musk's electric vehicle company, as both have consolidated businesses and "an extraordinary opportunity on the other side".
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"For Tesla, that means things like humanoid robotics and other future applications. For SpaceX, it's the AI business," he said.
Obstacles to its huge valuation include efforts by rivals such as Jeff Bezos' Blue Origin to accelerate the commercialization of space and seek government contracts in an attempt to unlock new markets beyond Earth. Analysts at Morningstar said earlier this month that its fair market value is around $780 billion, less than half of its initial market capitalization.
"This is not a stock you buy based on fundamentals. For me, the analogy is Amazon. This was a company that changed the way we live," said Nancy Tengler, CEO and CIO of Laffer Tengler Investments. "If the stock drops to $100, it won't be ideal, but it won't change our long-term view. We want to participate."
Shares of space companies rose in premarket trading, with Intuitive Machines, Planet Labs and Satellogic recording gains of between 3.3% and 4.5%.
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Source: CNN