Should You Get Onboard SpaceX?

This month the world’s richest man, Elon Musk, is planning to launch the biggest initial public offering (IPO) of all time.  His creation, SpaceX (symbol: SPCX), is set to sell 30% of its shares to ordinary or “retail” investors. The norm for IPOs is more like 5% or 10%.  Noted stock market commentator Scott Galloway suggests the motivation for such a large retail allocation is that Musk hopes to maintain a higher valuation for SpaceX than the company’s fundamentals justify by turning it into a meme stock.

If that plan succeeds, it will be at least partly due to Fear of Missing Out on a deal by the man who piloted Tesla to a 29,308% total return from its June 29, 2010 IPO through the stock’s all-time high on November 3, 2025. His fans are brushing aside doubts being raised about the SpaceX deal, pointing out that the skeptics who deemed his previous objectives  impossible have been proven wrong.  They repeat the adage popularized by Peter Thiel and other Silicon Valley stalwarts: “Never bet against Elon.” Still, reservations about the wisdom of hitching a ride on SpaceX are numerous and not easily dismissed. Here are some examples:

Moonshot Valuation

SpaceX’s prospectus puts the company’s 2025 revenue at $18.7 billion.  Musk aims to sell shares at a price equating to a total company market value of $1.8 trillion.  That implies a price-to-sales ratio of 96x.  University of Florida economist Jay Ritter calculated returns for the first three post-IPO years for all U.S. IPOs with sales of at least $100 million from 1980 through 2024 (1). The average return for those with price-to-sales ratios of 40x or greater was -58.5%. (Ritter’s calculation is based on the first- day closing price, which is where retail investors are likely to get in. Even when Ritter calculated the average return according to the insiders’ “offer price,” though, it came to a meager -15.4%.)

SpaceX’s stratospheric expected sales multiple would not be imaginable except in the context of highly optimistic market sentiment like today’s.  In the same 1980-2024 period that Ritter analyzed, the S&P 500’s price-to-sales ratio averaged just 1.55x.  It ended May 2026 more than twice as high, at 3.60x. 

Given the current, lofty market multiples, critics are justified in doubting SpaceX’s ability to replicate the past performance of the current market darlings, known as the Magnificent Seven. Google parent Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla went public at an average price-to-sales ratio, based on first-day closing price, of 13.3x.  Their average return over the next three years was 46.3%.  That number would have been much less impressive if their IPOs had been priced with the kind of dramatically higher sales multiple that SpaceX expects.

SpaceX boosters — human, not the rocket variety — can point to one mitigating factor on the valuation issue.  Nasdaq has changed its rules to enable SpaceX to enter the Nasdaq-100 index very soon after its IPO. Standard & Poor’s is considering a similar bending of its established rules on the new massive-capitalization stock. These steps will ensure large purchases of SPCX by passively managed mutual funds and ETFs. These buyers should provide some ongoing price support. 

Conglomerate Character

SpaceX’s name derives from its involvement in rocket ships and satellites.  Musk has, however, also thrown communications and artificial intelligence businesses into the corporate structure.  There is a good reason why the widely diversified companies of the 1960s Go-Go Years, such as Gulf & Western, LTV, and Textron, were long ago broken up into more focused businesses. They promised to generate massive synergies that would propel their stocks to premium valuations, but instead wound up trading at “conglomerate discounts.”  In the end, investors preferred to diversify their portfolios by owning single-industry companies in a variety of industries, rather than buying multi-industry companies.  Judging by that precedent, SpaceX’s revival of the failed conglomerate model could penalize its future stock price.

Within the corporate hodgepodge, the satellite internet constellation Starlink is a genuine treasure that faces no serious competition.  Unfortunately, SpaceX buyers must also take, as part of the package the artificial intelligence (AI)/social media business xAI.  Galloway labels that component, which is spending furiously on data centers, a “money furnace.”  Its main revenue generator, the social media site formerly known as Twitter, has sales far below what it produced before Musk acquired it.  Unable to find more profitable uses for its AI resources, despite training and selling access to its Grok model, xAI has rented out a huge portion of its capacity to Anthropic.

Furthermore, the value ascribed to Starlink rests on heroic assumptions, including a claim that its total addressable market is equivalent to one-fifth of global Gross Domestic Product. 

Problematic Corporate Governance

Effective control of SpaceX’s board of directors is effectively in the grip of Elon Musk. He holds 85% of the company’s voting power, thanks to a dual-share-class structure, besides serving as Chief Executive Officer, Chief Technology Officer, and Chairman of the Board. These facts raise concern about the board’s ability to exercise independent oversight of Musk’s management of the company’s affairs. Limits on shareholder lawsuits are viewed as yet another objectionable corporate governance feature. A group of pension plan sponsors has called SpaceX’s setup the most management-favorable governance structure ever introduced into the U.S. public markets on such a large scale.

In explaining why this is a problem, Robert Armstrong of the Financial Times notes that Facebook parent Meta trades at a price-earnings ratio discount to Big Tech peers such as Alphabet, Amazon, Apple, and Microsoft, even though it has grown much faster than they have over last 13 years (2).  He attributes Meta’s relative discount to investor mistrust of Chief Executive Mark Zuckerberg’s ability to invest the cash thrown off by company.  Like Musk, Zuckerberg is firmly entrenched and essentially unassailable by virtue of his control of the share voting.

IPO Volume and Market Froth

In addition to SpaceX, OpenAI and Anthropic, Stripe are hoping to launch mega-IPOs this year.  If all of these deals get completed, 2026 IPO dollar volume could break the record set in 2021, although the proceeds would likely be smaller as a percentage of total stock market value in that year.

That prospect causes some investors to worry that the market could be cruising for a bruising, given a historical association of IPO booms and overheated stock prices. For example, Malcolm Baker of Harvard Business School and Jeffrey Wurgler of the New York University Stern School of Business find that an unusually large number of IPOs and high average first-date IPO returns tend to coincide with extreme bullishness and low subsequent returns (3).  Historical examples include the 1998-2000 dot-com frenzy and the 2020-2021 boom in IPOs and special purpose acquisition companies (SPACs).

As discussed above in connection with the S&P 500’s historically high price-to-sales ratio, stocks are currently very fully priced in historical terms.  That does not, however, make a massive selloff inevitable.  Present valuations may be justified if expectations about AI’s impact on productivity and, by extension, corporate profits and economic growth, are fulfilled.  A less optimistic view emphasizes the risk that data center hyper-scalers, which include Big Tech stocks in which the market’s aggregate value is extremely concentrated at present, will earn decidedly unsatisfactory returns on their investments, emerging as much more asset-heavy entities than in the past.

Conclusion

There is a substantial risk that the perceived golden opportunity of obtaining shares in the pending SpaceX IPO will turn out instead to be a poisoned chalice.  Its conglomeration of businesses includes a bona fide jewel in Starlink, to which a questionably high valuation is being assigned, and a money-burning collection of AI and social media operations. CEO/CTO/Board Chairman Elon Musk is exploiting a highly receptive IPO environment to install a corporate governance regime that should make investors cautious.

SpaceX is one of the most eagerly anticipated IPOs in years. Despite its strong appeal, its suggested valuation remains the main risk. Since the price range of the IPO has not been confirmed yet (only rumored), investors should be wise and follow closely the book-building process/offering price indications before making any decisions.

(1) Ritter’s findings were reported in Jeff Sommer, “Sky-High I.P.O. Pricing Isn’t Great for Real People,” New York Times, May 31, 2026., Sec. BU, p. 3.   

(2) Robert Armstrong, “SpaceX and the Zuckerberg Discount,” Financial Times, May 28, 2026, p. 15.

(3) Malcolm Baker and Jeffrey Wurgler, “Investor Sentiment in the Stock Market,” Journal of Economic Perspectives—Volume 21, Number 2—Spring 2007—pp. 129–151.