According to informed sources, SpaceX and its investment banks are set to hold a series of meetings to conduct a "stress test" on the company's targeted $2 trillion valuation. This is a critical step in its journey towards what could be the largest Initial Public Offering (IPO) in history. Two months after completing its merger with xAI, senior bankers managing the IPO for the integrated rocket, satellite, and artificial intelligence company are initiating discussions to assess whether its sky-high valuation remains compelling to investors. The company's valuation is currently projected to exceed $2 trillion, higher than the approximately $1.75 trillion estimate from less than two weeks ago. David Erickson, an adjunct associate professor at Columbia Business School and former co-head of global equity capital markets at Barclays, stated, "One thing you have to be confident of—and this is what they will work on until they file publicly—is continuing to sell the dream; and when it comes to selling the dream, basically no one is better at it than Elon Musk." SpaceX did not immediately respond to a request for comment. Musk appeared to push back against the $2 trillion valuation target in a post on platform X on April 3, stating, "Don't believe everything you read." A market capitalization exceeding $2 trillion would place SpaceX in size just below the top five companies in the S&P 500 index: Nvidia, Apple, Alphabet (Google's parent), Microsoft, and Amazon. Despite SpaceX's revenue being a fraction of these companies, its valuation would surpass that of Meta Platforms Inc. and Musk's own Tesla Motors—both also members of the so-called "Magnificent Seven." According to analyst estimates, such a valuation implies a price-to-sales (P/S) ratio based on the past 12 months of over 100 times. This easily exceeds the high P/S ratio of around 79 times for Palantir Technologies, a favorite among retail investors and already one of the highest P/S stocks in the S&P 500. Bloomberg Intelligence estimates that SpaceX's rocket launch business and Starlink satellite constellation will contribute the majority of its revenue, with related income approaching $200 billion by 2026; meanwhile, revenue from xAI is likely to be under $10 billion. Erickson said, "The reality is, this is not about fundamentals. Mathematically, no one can get to that valuation level based on fundamentals alone; the math doesn't work." Sources previously indicated to Bloomberg that the company plans two more rocket test flights before a potential June listing. Franco Granda, a senior analyst at PitchBook, noted that these two test flights are "critical for the IPO's progression." He said in an interview, "If either of these two flights fails, the IPO might not even happen. This will dictate everyone's attitude and direction regarding the IPO." Musk posted on platform X on Friday that the first flight of SpaceX's latest version of the reusable Super Heavy rocket is expected within the next four to six weeks. PitchBook's Granda said, "It started as a great, capital-intensive company, but is now venturing into some truly science-fiction-like projects, and the numbers for those are not favorable."
Comments