SpaceX IPO: Opportunities and Concerns

Imagine being informed by your brokerage that you could take part in a once-in-a-lifetime opportunity: Elon Musk’s SpaceX is going public. It would seem like a dream, right?

For me, though, it was a straightforward decision to pass.

The offer was intriguing. I could express interest for just one day, hinting at my desire to join this ambitious venture—a company focused on AI, satellites, and even plans to colonize Mars. The catch? Securing shares at the IPO price before they hit the market at a potential $135 per share.

But here’s the crux: I’m a reporter who covers these stocks, not a buyer. Engaging in this could skew market prices, and I want to avoid the pitfalls of folks like Andrew Left, who faced legal trouble for manipulating stock valuations.

So this brings me to a bigger question—if it’s such a stellar deal, why am I being approached?

I may not be at the bottom of the investor totem pole, but being labeled a “qualified investor” merely means I have enough savings to meet certain SEC thresholds. Yet, I know I’m not in the league of big names on Wall Street or in Silicon Valley.

SpaceX pulled off the largest IPO ever, raising a whopping $75 billion. Market analysts valued the company at over $2 trillion. The offering reportedly attracted so much interest from sophisticated investors that it was labeled “four times oversubscribed,” meaning far more buyers than available shares.

Still, I remain skeptical about this oversubscription and the longevity of any price surges. History shows that, with “hot IPOs,” excitement often fades and chaos follows. The extensive PR push stirred up significant interest, creating a buzz around the stock leading up to its trading debut.

Concerns About Retail Investors

What really worries me is the focus on “dumb money,” or retail investors like myself, who are easy targets for Wall Street pros looking to profit after the stock rallies.

Consider the ongoing interest in meme stocks—companies many online investors hailed as the next big thing, despite their shaky financials. Following the wild market ride in 2021, some collapsed, while others remain far from their previous highs. Yet, there’s this persistent hope among the meme crowd for miraculous rebounds.

While SpaceX is not a meme stock, some comparable dynamics are in play. Musk has a record of weathering storms of criticism and skepticism, particularly surrounding Tesla. The electric vehicle company is now valued at around $1.27 trillion, boasting growth exceeding 30,000% since its IPO—a remarkable achievement.

With SpaceX’s IPO underway, Musk’s assets have soared beyond $1 trillion. It’s essential we celebrate innovators who enhance our lives. Musk has had his share of struggles but ultimately succeeded. Tesla is now profitable, although it didn’t start that way, and it took considerable time for investors to recognize his vision.

But let’s not digress. SpaceX’s financial journey might not resemble Tesla’s. Sure, AI is touted as the future, but remember the internet boom? Numerous dot-com companies saw their valuations spike post-IPO, only to falter when actual revenues were due.

SpaceX reported a loss of nearly $5 billion last year, following a modest profit in 2024, all while it worked on integrating its AI infrastructure.

What does SpaceX actually do? Well, it launches rockets and operates satellites for internet services, powered by AI—specifically Musk’s xAI. Then there’s the social media platform, X, previously known as Twitter, which is still far from profitable after recent layoffs.

Maybe this strategy will yield results, or maybe not. When it will succeed remains uncertain. The IPO seems to be on a solid footing, managed by top-tier underwriters like Goldman Sachs and Morgan Stanley, who know how to attract investors.

Hedge funds and savvy traders are likely to profit from the initial offering, but some analysts predict the stock could dip by about 20% in the following months. These drops happen frequently.

I believe the underwriters are well aware of these potential outcomes, which likely explains why retail investors like me received that alert last week.