SpaceX IPO Set for June 12 with $135 Share Price as Valuation Debate Intensifies
The aerospace giant aims to raise a record $75 billion, establishing a $1.77 trillion market capitalisation, though historical data and fundamental metrics suggest significant risks for investors.
SpaceX is scheduled to list on the Nasdaq on Friday, June 12, under the ticker symbol SPCX at an initial price of $135 per share. The offering aims to raise $75 billion, establishing an initial market capitalisation of $1.77 trillion and surpassing the previous record set by Saudi Aramco in 2019. While CNBC’s Jim Cramer predicts the valuation could reach $5 trillion on the first day of trading due to high demand and a limited initial float, analysts highlight significant risks. The stock carries a price-to-sales ratio of approximately 92, compared to Morningstar’s intrinsic valuation of $780 billion. Historical data suggests large IPOs often underperform the S&P 500, and the capital raise may compel institutional investors to sell major holdings in companies such as Amazon, Microsoft, and Nvidia to meet funding requirements.
The initial public offering will see SpaceX sell 555,555,555 shares, with the company reporting $19.3 billion in revenue over the last 12 months. This financial performance results in an initial price-to-sales ratio of approximately 92, which is notably higher than Palantir, currently the most highly valued stock in the S&P 500 at 65 times sales. The limited initial float, accounting for just 4.2% of total shares outstanding, has driven expectations of a sharp initial price increase. Cramer, a former hedge fund manager with a track record of 24% annual returns over 14 years, suggests the stock could see an approximate 180% upside from its IPO price on the day it comes public.
However, the mechanics of the listing present long-term challenges. As restricted stock gradually becomes available after the lock-up period ends over the first 180 days, selling pressure is likely to increase. This influx of shares could cause the stock to sink, particularly given the company’s high valuation relative to its reported sales growth of 15% in the first quarter. Morningstar analysts have valued SpaceX at $780 billion based on discounted cash flow analysis, suggesting a potential 56% decline from the IPO valuation.
Market participants are also concerned about the broader impact of the capital raise. Institutional investors held just 3.9% of their portfolios in cash in May, according to a Bank of America survey, which is near historic lows. High-net-worth individuals with at least $3 million in assets held less than 10% of their portfolios in cash, the lowest level since surveys began in 1999. To raise the necessary capital for SpaceX exposure, fund managers and wealthy investors may need to sell other stocks, with Amazon, Microsoft, and Nvidia identified as prime targets due to their significant weight in the S&P 500.
Historical precedents further caution against optimistic long-term projections. According to Barron’s, the top 10 US IPO stocks by initial market value have underperformed the S&P 500 by more than 120 percentage points since their listing. While the combination of immense demand and a small float may drive the stock higher initially, the data indicates that SpaceX will likely underperform the broader market over the long term. Investors must weigh the immediate speculative upside against the structural risks associated with such a highly valued debut.
