By Brian Hamilton
About the author: Brian Hamilton is the founder of the fintech company Sageworks (now Abrigo) and chairman of LiveSwitch. He has spent decades evaluating IPOs and starred in ABC's Free Enterprise.
Otherwise smart people sometimes get sucked into the allure of following a crowd. Even they can't tell the crowd is going in the wrong direction.
This is herd mentality, a popular premise in behavioral economics that Charles Mackay famously described nearly two centuries ago in "Extraordinary Popular Delusions and the Madness of Crowds." Mackay wrote that crowd psychology is behind misguided speculations throughout history: the Salem Witchcraft trials, the Dutch tulip bubble, the British alchemy craze, to name a few.
We may be witnessing another error in the masses as SpaceX goes public this week at a stratospheric valuation of $1.75 trillion.
Recent analysis of initial public offerings by PitchBook found that venture-backed tech companies' median revenue multiple was roughly four times. In other words, the typical company in the study was valued at about $4 for every $1 of annual sales. If SpaceX IPOs on Friday at its anticipated valuation of close to $2 trillion, its valuation-to-sales multiple would be about 94 times.
This means its relative value may be more than 20 times that of the typical venture-backed tech company going public today -- a 2,000% premium for those counting. For context, Tesla publicly made its debut at 15 times sales in 2010.
When a company goes public, its offering price ideally represents what the company is worth within some realm of reasonableness. That convention protects investors, and, more importantly, it protects markets against large and sudden downswings. SpaceX is violating that convention by asking the public to pay 94 times the value of every sales dollar it produces.
The SpaceX valuation is so big that it has become too large for normal people to question. The mystery surrounding the company's huge numbers has taken on a power of its own in the public's imagination. Public investors are left to assume that the people setting the IPO number know something the rest of us aren't capable of discerning.
Maybe they do. Or maybe they are just asking people to pay 94 times sales for a company that lost almost $5 billion last year, and it's actually simple. My vote is the latter.
SpaceX has achieved impressive things. This is important to say because people confuse criticism of valuation with criticism of the company. Those aren't the same. If I say a house is nice but probably not worth $90 million, I am not anti-house. I am pro-thinking.
SpaceX's revenue grew from $10.4 billion in 2023, to $14 billion in 2024, to $18.7 billion in 2025 -- good numbers, but nothing magical. It represents an annual growth rate of about 34%, which, while impressive for, say, a lifestyle business, is less impressive for a would-be high-tech flier. They certainly aren't numbers that explain a valuation moving from roughly $180 billion in 2023, to $350 billion in 2024, to a $1.75 trillion IPO target valuation in 2026.
This is where the Elon Musk premium comes in. People aren't being asked to just buy a company. They are being asked to buy a myth. Elon will figure it out. Elon will get to Mars. Elon will dominate something else not yet invented. At some point, you are no longer analyzing a business. You are passing around a collection plate for one man's legend.
People want to get wealthy with Musk, but they are overlooking the fact that he is getting all of his money on the front-end, without bearing any risk. And there is plenty of risk.
At 94 times sales, everything has to go right. The company has to grow rapidly, turn losses into durable profits, defend its market position, avoid major operational mistakes, realize its AI ambitions, keep regulators at bay, control its capital costs, and continue to convince the public that a company with less than $20 billion in annual revenue should be worth more than many of the largest companies in the world.
SpaceX may be an extraordinary company. But that doesn't mean the investing public should pay an extraordinarily high price for it. In the end, even space companies must launch from Earth.
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(END) Dow Jones Newswires
June 08, 2026 13:46 ET (17:46 GMT)
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