The countdown is on for what could be the largest initial public offering in history, yet the debate over its valuation is equally unprecedented. Optimists compare it to a historic entry window for NVIDIA in its early years, while pessimists, using financial models, argue the current price is overvalued by more than half.
Space Exploration Technologies (SPCX) is scheduled to list on the Nasdaq this Friday, June 12, with a ticker of SPCX. The IPO price is set at $135 per share, aiming to raise approximately $75 billion and giving the company a post-listing valuation of a staggering $1.77 trillion, which would set a new global record. Wall Street is embroiled in a rare and sharp division over this stock. The bullish camp sees it as a generational opportunity, while the bearish camp believes investors are paying a "$72 option premium" for Elon Musk's grand vision.
Wedbush Securities senior analyst Dan Ives has characterized the IPO as "a pivotal moment in the advancement of the AI revolution." He suggests there is an over 80% probability of a merger between SpaceX and Tesla Motors (TSLA), which could create a Musk business empire encompassing core AI ecosystem assets. In stark contrast, Morningstar analyst Nicolas Owens has assigned a fair value of just $63 per share, 53% below the IPO price. He argues the current valuation largely represents a bet on high-risk projects like orbital data centers rather than a reasonable pricing of established business.
The market impact of this IPO is already being felt. The Nasdaq index fell as much as 4% intraday on Tuesday before paring losses to close down 1%, and dropped nearly 2% again on Wednesday, as concerns over liquidity being drained by a mega-IPO persist. Furthermore, about 30% of the IPO shares are being allocated to retail investors—far above the typical 5% to 10% range. Combined with rule changes by the Nasdaq 100 and Russell indices to allow for SpaceX's rapid inclusion, this listing will deeply affect millions of ordinary retirement account holders who own index funds.
The Largest IPO Ever: A Narrative of High Growth and Losses
SpaceX is offering approximately 556 million shares, representing just over 4% of its total equity, to raise about $75 billion at a $1.77 trillion valuation. This surpasses the market capitalizations of Tesla Motors ($1.5 trillion), Meta ($1.4 trillion), and Berkshire Hathaway ($1.04 trillion).
The company's fundamentals show a classic high-growth, high-loss profile: 2025 revenue reached $18.67 billion, a 33% year-over-year increase, but the company reported a net loss of $4.94 billion over the same period. At the IPO price, the price-to-sales ratio is approximately 94 times.
The offering is already oversubscribed, meaning demand exceeds the number of shares SpaceX is willing to sell at the offer price, which could lead to significant price volatility in the first few days of trading. Currently, SpaceX perpetual futures on the Hyperliquid market are quoted around $155, implying about 15% upside from the $135 IPO price.
The Bull Case: AI Infrastructure and Merger Potential with Tesla
The core of Dan Ives's optimism points to SpaceX's tangible progress in AI infrastructure. The company's Colossus data center in Memphis, Tennessee, integrates 220,000 of NVIDIA's top-tier GPUs, providing over 300 megawatts of AI computing power.
This hardware advantage has already translated into substantial commercial contracts. According to previous filing documents, SpaceX has signed an AI compute leasing agreement with Google worth approximately $920 million per month. Anthropic has agreed to pay $1.25 billion per month for exclusive access to the compute power of the Memphis Colossus 1 facility, with the contract running until May 2029, totaling over $40 billion.
On the capital front, Ives notes that SpaceX's acquisition of xAI in February converted Tesla Motors' $2 billion investment in xAI into SpaceX equity, creating a financial link between the two companies. He believes that if SpaceX and Tesla ultimately merge, Musk would gain control of a more complete segment of the AI ecosystem, achieving a "holy grail" level of integration.
The Bear Case: A 53% Discount and Bets on Orbital Data Centers
Morningstar's Nicolas Owens presents a completely different valuation framework. In a report published Monday, he set SpaceX's fair value at $63 per share. This suggests that of the $135 IPO price, about $72 represents an "option premium" investors are paying for the company's yet-to-be-realized, or potentially never-to-be-realized, ambitious projects—primarily orbital data centers and Mars base plans.
Owens defines his base case as the "minimum viable product," assigning it a 50% probability: orbital data centers are technically feasible but face scaling bottlenecks, with SpaceX capturing about 4% of projected global AI compute capacity and generating roughly $47 billion in annual orbital AI revenue by 2035.
The bear case, assigned a 43% probability, is that orbital data centers never materialize or fail to offer a cost advantage over terrestrial solutions. Owens suggests that in this scenario, the company might abandon the project around 2028, similar to how Tesla halted plans for several small car factories. If so, the valuation would contract significantly.
Only in the most optimistic scenario—where orbital data centers are not only feasible but also cost-competitive—could the company's valuation reach $1.97 trillion, or about $154 per share, slightly above the IPO price. Owens acknowledges that SpaceX might be the only company in the world capable of achieving this, but significant scientific uncertainties about feasibility remain.
New York University finance professor Aswath Damodaran estimates the enterprise value at $1.22 trillion. He concedes that a $1.75 trillion valuation is not entirely baseless under extremely optimistic assumptions, but this already presupposes the company securing a significant share of the enterprise AI market and the overall space launch industry expanding rapidly over the next decade.
Historical Warnings: Large IPOs Often Face a 'Pullback Fate'
Despite some institutions pointing out that SpaceX currently exhibits "double-down" signals similar to NVIDIA in its low-profile 2009 era, historical data is not kind to mega IPOs. Analysis from Truist shows that over the past 15 years, 30 large tech IPOs have experienced an average maximum drawdown of 55% in their first year of trading, with over half posting negative returns one year after their debut.
University of Florida IPO expert Professor Jay Ritter's data covers a broader scope. A study of over 9,200 IPOs from 1980 to 2024 shows that investors who bought at the first-day closing price saw an average market-adjusted return of -21% over three years. "The average first-day pop for an IPO is about 19%," Ritter noted, "so whether you buy at $135 or $165 makes a significant difference in the ultimate return."
Statistics indicate that among 1,724 stocks that went public between 2011 and 2024, the weighted average return one year after listing was -1.7%. For "mature" companies like SpaceX—larger in scale, 24 years old, with tens of billions in annual revenue—the historical record is even less favorable.
Truist's Sam Grelck also notes that short-term performance often outpaces the long term: performance tends to be relatively strong in the first week to three months post-listing, but as time extends to a year or more, pullbacks and negative returns gradually emerge. "We don't know exactly how it will go, and there are exceptions," he said. "Maybe SpaceX does well and doesn't have a big pullback."
Retail Influx and Index-Driven Passive Buying
A unique aspect of this IPO is the unusually high level of retail participation. The allocation of about 30% of shares to retail investors, far exceeding the typical 5-10%, coupled with several online brokerages significantly lowering the barriers for ordinary investors to subscribe at the offer price, marks a departure from the norm.
However, greater retail participation could also bring additional volatility risk. Grelck points out that retail investors, when company growth falls short of expectations, are often more inclined to sell outright than institutional investors, who might hold and wait.
On the other hand, index inclusion mechanisms will create a source of passive buying support. The Nasdaq 100 index recently changed its rules to allow SpaceX's inclusion as early as 15 trading days after listing, meaning holders of the popular QQQ ETF will automatically become SpaceX shareholders. The Russell index series allows for inclusion just five trading days post-listing. "There is a lot of money tracking these indices," Grelck said. "As SpaceX enters the indices, systematic buying could provide some level of support for the share price."
Lock-up Periods: A Hidden Variable for Volatility Risk
Another noteworthy detail of this IPO is SpaceX's unconventional lock-up arrangement. Unlike the typical 180-day restriction on sales for insiders and early shareholders, SpaceX allows some investors (excluding Musk himself) to sell a portion of their shares just weeks after the IPO, with additional tranches unlocking until December.
Owens believes this arrangement means the market will face potential selling pressure continuously over the next six months. Even if the actual selling pressure is not heavy, the market may price in the expectation in advance, leading to active selling before each unlock date and creating periodic pullbacks.
Furthermore, the 556 million offered shares represent only about 4% of the total shares outstanding. As early investors cash out through the staggered unlocks, the supply of sell-side shares in the market will steadily increase. Even with some offset from index-driven passive buying, the downward pressure on the share price should not be ignored. Owens concludes:
"We believe long-term investors eager to participate in SpaceX's future opportunities will have chances to buy after the initial offering at prices that offer a greater margin of safety than the current offer price provides."
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