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SpaceX is planning to go public in June, and its initial public offering (IPO) is generating a lot of buzz among investors and analysts. The company recently merged with Elon Musk’s artificial intelligence (AI) company, XAI, which itself owned the Grok chatbot and social platform X.
The combined entity is reportedly looking to raise up to $75 billion, which would break the record set by Saudi Aramco’s $29 billion IPO in 2019. This would value the company at approximately $1.75 trillion, making it the sixth most valuable company in the US. Baron’s. But what does the IPO actually mean for investors, and what could be Musk’s real endgame?
How is this IPO special for investors?
according to reutersMusk is setting aside 30% of SpaceX stock for individual investors, which is about three times the amount normally available during an IPO. This could be a smart strategy, as retail demand is expected to be exceptionally high.
As Rowan Taylor, managing partner of Liberty Hall Capital Partners, described it, “This is one of those once-in-a-lifetime moments in which people can say they just have to get involved.” Between the attention Musk has attracted and the excitement around space exploration and AI, investors should expect the SpaceX IPO to be a significant event.
Is SpaceX Really Worth $2 Trillion?
The estimated valuation of nearly $2 trillion for SpaceX would put the company ahead of giant, well-known companies like Meta Platform and Berkshire Hathaway. Barron’s notes that such a high valuation for SpaceX would be equivalent to 75 times estimated 2026 sales and 160 times estimated earnings before interest, taxes, depreciation and amortization (EBITDA).
Barron’s analysis said SpaceX needs to execute on several fronts, including making it cheaper to go to space. However, according to forbesAlmost all of the company’s revenue comes from Starlink.
This can either be a hindrance or a boon, depending on how different elements of the company work.
Could Tesla play a role?
The long game when it comes to SpaceX could be a integration with Musk’s other controversial company, Tesla. Barron’s reported that Musk has talked about “convergence” of all his companies and that Baird analyst Ben Cullow said, “I think it’s probable. It seems like it’s going to happen.”
Such a company would be a set of future technologies combining AI and space travel and would undoubtedly generate further excitement among investors. However, such a tie-up is still speculative at this stage, and it could raise additional concerns regarding valuation.
The main question regarding SpaceX is whether the company can grow earnings fast enough to support its extraordinary valuation. Although its futuristic technologies are exciting, the hype alone is not enough to sustain long-term valuations. Only time will tell if SpaceX can execute to the extent that it can support its high share price.
Editor’s Note: This article is for informational purposes only and does not constitute financial advice. Investing involves risk, including possible loss of principal. Always consider your individual circumstances and consult a qualified financial advisor before making investment decisions.