SpaceX celebrates largest IPO in history – $1.77 trillion valuation at the opening

SpaceX does aim to raise the record volume of around $75 billion – but in terms of total valuation, that means less than five percent of the company is freely tradable. In the previously largest IPO, the Saudi Arabian oil company Aramco raised a good $29 billion in 2019. In the largest IPO in history, SpaceX significantly exceeds that figure. Multiplying these two figures yields the sum of $75 billion.

Record volume and valuation

The company, founded and led by tech entrepreneur Elon Musk, is thus currently in fact valued at around $1.8 trillion, catapulting it into the list of the ten most valuable companies in the world. At its stock market debut, the company would thus also be worth more than the Facebook group Meta. Following the IPO, SpaceX has a total of a good 13 billion shares outstanding. At a share price of $135, this results in a total value of $1.77 trillion.

Elon Musk himself owns more than 40 percent of SpaceX. Following the IPO, he controls 85 percent of the voting rights. The remaining 96 percent remain in the possession of the previous owners, namely Elon Musk. Musk has even promised not to sell any shares in the first year after the IPO. In the IPO, the voting rights distribution is designed in such a way that Musk retains his influence.

In fact, the company has grown by more than 2,000 percent over the past years. The group consists of three business divisions with very different profiles: spaceflight, satellite internet, and AI. The bulk of the proceeds – around eleven billion dollars – was generated last year by the Starlink satellite internet service. Starlink is SpaceX's central cash cow and generated $3.26 billion in revenue in the first quarter.

Business model: Rockets, satellites, and artificial intelligence

According to the prospectus, SpaceX generated $18.7 billion (approximately €16.1 billion) in revenue last year. At the same time, however, the company posted deep red figures: last year, losses amounted to around $4.94 billion on revenue of $18.67 billion. In the first quarter of this year, SpaceX recorded a loss of $4.28 billion on revenue of around $4.7 billion. The new AI division centered around xAI, the chatbot Grok, the social media platform X, and data center infrastructure ripped the biggest hole in the balance sheet, with an operating loss of around $6.4 billion.

Elon Musk's space company SpaceX generated less than $19 billion in revenue last year and is deep in the red. Revenue is therefore lower than that of German DAX companies Heidelberg Materials or Adidas. The valuation at the stock market debut is more than 90 times higher than last year's revenue. The market would value SpaceX at more than 94 times annual revenue – an extraordinarily high figure. For comparison: on the tech-heavy Nasdaq 100, the average price-to-sales ratio is just under seven.

Starlink is the fastest-growing telecommunications company in the world. As of the end of March, Starlink had a good ten million customers, with already more than ten million customers, including organizations, countries, and companies. SpaceX has launched around 9,600 satellites into orbit for this purpose. Particularly since the end of the Space Shuttle program, SpaceX is currently practically indispensable for US spaceflight and the military.

Starship and Starlink as growth drivers

Over the past years, SpaceX has invested more than $15 billion in the development of the Starship rocket. Starship is also intended to launch Starlink satellites into orbit that will make internet from space directly usable on smartphones. SpaceX's management expects the Starship rocket to begin commercial flights in the second half of the year, once all tests are complete. In the future, artificial intelligence is to be the largest business, also through data centers in space. The idea behind it is that the sun can supply a great deal of energy up there.

The proceeds flow in their entirety into the company's coffers. SpaceX can invest the proceeds, for example in the development of new rockets or in artificial intelligence. The shares issued represent just under 5 percent of the stakes in SpaceX. This so-called free float – the proportion of the company's shares that is traded – is unusually small.

Investor demand exceeds supply many times over

Worldwide, investors are currently positioning themselves, with demand reportedly at more than $250 billion. Today's SpaceX IPO is oversubscribed multiple times. They are said to have submitted buy orders for more than $100 billion through a handful of selected brokers. But they were allocated only a good 20 percent of the shares issued – the majority were left empty-handed. The remainder of the shares went to institutional investors. These include asset managers such as BlackRock, banks, hedge funds, and passive index funds.

In the SpaceX IPO, they were apparently reserved a good fifth of the nearly 555.6 million shares, as the "Wall Street Journal" reported. Typically, the share is five to seven percent. The latter must buy SpaceX shares because the company will shortly be admitted to important indices such as the Nasdaq 100. The index providers Nasdaq and FTSE Russell changed their requirements at short notice for this purpose. S&P Dow Jones, on the other hand, is holding firm and sticking to the rule that the stock can only enter the S&P 500 select index after twelve months on the market.

Musk expects the IPO to propel him to trillionaire status. He will become the first person with a fortune of more than one trillion dollars through the IPO. Musk will become the first person with a fortune of more than one trillion US dollars through the IPO. Billions in losses in SpaceX's books This is at least on paper, measured by the value of his SpaceX shares and his stake in the electric car maker Tesla, which he also runs. Bloomberg currently estimates his fortune at around $700 billion.

Early investors cash in billions

The venture capital firm Sequoia Capital is said to have invested around $2 billion and now holds a large stake worth more than $20 billion. According to Bloomberg, the investment firm Founders Fund, founded by Musk's long-time associate Peter Thiel, holds a stake of about three percent, which was acquired for around $600 million. At the issue price, the stake is worth more than $50 billion.

But the excitement is accompanied by warnings. Investors would be investing not only in a space company, but partly also in its public image. This is precisely what investor advocates see as a risk, especially since the euphoria in the markets fuels behavioral patterns such as "social media-driven buying waves" or speculative purchases. "Inexperienced investors in particular run the risk here of entering near a market peak and subsequently suffering significant losses." For all the excitement, the "economic gravity" still has an effect, Beckermann cautions.

Warnings of overvaluation and risks

Florian Beckermann of the Austrian Interessenverband für Anleger (IVA) warns: "Media hype, celebrity status, and the fascination with spaceflight" could lead to an overvaluation of the stock and subsequently to a "crash landing" in the portfolio. The association also points to "Musk" as a "risk factor": "His statements, political controversies, legal disputes, or strategic decisions can have a significant impact on market sentiment and thus on the share price." In addition, spaceflight remains a "high-risk business" that depends on technology, regulation, accidents, geopolitics, or fewer government contracts.

Investors fear missing out on the next big thing on the stock market. An unprofitable company with the hope of sharply rising profits in the future is pulling off a record IPO – that naturally evokes memories of the tech bubble of the late 1990s. You can probably make a quick buck on the IPO; the hype is already big. But in the long term, returns are likely to remain modest. A great company does not necessarily mean a great investment. This gold-rush mood, this euphoria – it is very similar, and gives experienced investors reason to be a bit more cautious.