May the Schwartz Be With Us. What You Should Know About the SpaceX IPO.

May the Schwartz be with us.

SpaceX (SPCX) is expected to price on Thursday night and begin trading on the Nasdaq Friday. Our team has discussed SpaceX over the last few weeks, and I thought it would be helpful to put many of our thoughts, including some links, in one place.

In general, the sentiment is that this is one IPO to avoid. Doug Kass has said specifically that he will be looking to short the IPO. Brad Ginesin told us that, historically, IPOs like this one underperform after they go public.

To continue with the Spaceballs reference, Dark Helmet, when fighting against hero Lone Starr says, “Evil will always triumph because good is dumb.” His timing is terrible, however, and he accidentally defeats himself by hitting a self-destruct button. Evil doesn’t even know it’s dumb.

Our contributors might say that the SpaceX IPO could have a similar outcome. SpaceX investors are seemingly saying, “Hype will always triumph because valuation is dumb.” And there’s a lot of hype in the SpaceX IPO.

Let’s get into it. Here’s some basics about the SpaceX IPO:

• SpaceX is expected to raise around $75 billion
• The offer closes on Thursday and shares will trade on the Nasdaq under the symbol SPCX
• Assuming the deal closes as founder Elon Musk hopes, SPCX will be worth around $1.75 trillion, one of the largest companies in the world.
• Retail investors will be offered a larger share of the IPO than is normal

SpaceX Valuation Is All Hype

Is valuation dumb? Sorry SpaceX investors, when you buy shares of a stock, you’re not voting on how cool the company is, you’re buying an asset that is expected to pay a stream of future cash flows based on earnings. In the short run, sure, your sentiment may move the stock, but in the long run, it doesn’t.

Take Tesla (TSLA). Shares are trading around $390 on Thursday. And they’re up around four-times since 2022. But if you’d been a buyer in the last quarter of 2021, you’re underwater. Tesla shares are volatile and have underperformed the market since the end of 2021.

What is the SpaceX valuation based on? A total addressable market (TAM) of $28.5 trillion! That’s like saying every dollar spent in the U.S. will be spent on SpaceX products. Kass encouraged us to read the prospectus and see for ourselves.  

Kass also shared a

from Vlad Bastion saying that SpaceX expects to IPO with a price that is 94 times revenues. Bastion tells us that IPOs that are so richly valued tend to dramatically underperform the market over the next three years. That doesn’t mean the company is bad, only that the IPO price matters.

That’s exactly Ginesin’s point in “SpaceX IPO Hype is Building but Facebook’s ‘Epic Bust’ Offers Warning.” Brad reminds us of the frenzy for Facebook (now Meta) shares (META), especially among retail traders when it went public. The company had a PE of 80, which means it was profitable! Yet, still, many institutions backed away from the IPO and watched the stock drop by 50% over the next few months. Yes, the stock has been a success, but the IPO showed that valuation mattered more than hype.

Valuation is not dumb.

Ginesin and I dug into this further in “Stocks & Markets Podcast: Is the SpaceX IPO a Search for More Money?”

You can watch it on our YouTube channel here, in addition to the link above.

How’s Business?

To analyze any company, you need to understand what it does. Musk says that Tesla is a robotics company. And maybe it will be. For now, the majority of its revenues come from car sales. Energy storage is gaining, however.

Similarly, SpaceX is in a few businesses and the one that’s the most hyped isn’t the one that brings in the money.

Listen to Chris Versace’s video breakdown of the company in “What We Learned From the SpaceX IPO Filing.”

In 2025, Starlink earned $4.4 billion of EBIT from the 10,000 satellites it had put in orbit. Meanwhile, the AI business lost $6.4 billion. The rocket business is also losing money. These are capital-intensive businesses that require huge amounts of research and development. Some of Musk’s hopes are based on putting data centers in space. That may be a great idea, but Jeff Bezos, the other billionaire who is trying to leave Earth, thinks space-bound data centers are a long way off. So, for now, what business is SpaceX in? Satellites. And losing money on other things.

From a corporate governance perspective, SpaceX is a bet on Musk. He’ll retain majority control of the company through a voting rights structure that gives retail investors little say in the company’s future. In fact, he’ll control so much of the company that people have said there doesn’t even need to be a board of directors. That’s silly. That opens the company up to an enormous amount of key man risk. What if Musk gets hit by a Cybertruck? Or his alleged drug use spirals out of control. Or he simply gets bored, as he did with Tesla before requesting a huge pay package.

It’s a risky company.

That said, our own Ed Ponsi is a believer. While we only touched on SpaceX in this video interview, Ponsi believes that Musk’s vision will come to fruition. I asked him, “Is Tesla’s Valuation Ludicrous? Or Is the Company About to Go Plaid.” Non-subscribers can watch it on our YouTube channel, right here.

Should You Buy the IPO?

That’s a decision only you can make. Our team leans toward avoiding it. At least initially.

Kass has specifically said that “I will not be buying the SpaceX IPO” and “at some point I will be shorting it.” Why? Valuation. He cited a

tweet saying that the company needs to grow by 600 times in a decade to justify the valuation.

And, while Musk says that the company will be worth $10 trillion to $30 trillion in a decade, Kass called B.S. After all, that would be up to 50% of the entire value of the stock market today.

Even Morningstar has weighed in. Kass shared its tweet and a link to its article that puts a more reasonable valuation at around half of what Musk is shooting for in the IPO. And at 50% of the target valuation, Morningstar says they’re still giving the benefit of the doubt to SpaceX. They don’t think it’s even worth the number they published! Read it here.

Here’s the thing: you may already own SpaceX. Alphabet (GOOGL) was an early investor. Fidelity owns some, too. As does Tesla! So, if you own an S&P 500 index fund, you’ve already got exposure to this risky company.

Final Thoughts

Look, this is a bet on Musk. There’s no doubt that the man is a visionary. But, SpaceX is a risky bet. The parts of the business that are currently profitable are not the ones that buyers think will be worth trillions of dollars. And that’s fine.

There’s a price at which SpaceX would make for a great investment. Given the level of risk and uncertainty inherent in the business, the suggested IPO price is at least 50% high.

The question is: Will hype triumph over valuation because investors think valuation is dumb? Time will tell.