Huge IPO Is Just Around The Corner
Initial Public Offerings (IPOs) are an exciting time for investors.
A new company is going public and will start trading on the stock market.
IPOs create a lot of buzz.
And a huge one is coming up.
Space Exploration Technologies Corp (ticker: SPCX), Elon Musk’s rocket and space exploration company better known as SpaceX, is going public in a few days.
If you try to buy the stock right now, it isn’t going to work.
You need to wait until June 12 (Friday) before the shares are trading on the NASDAQ.
SpaceX will be worth around $1.75 trillion once it starts trading, making it one of the 10 largest publicly traded companies in the world.
I’m seeing a lot of articles talking about the upcoming IPO.
But I’m not seeing a lot of analysis on the company and whether you should buy it.
SpaceX is best known for its rockets and space exploration, but there’s more to it than just space.
xAI, the artificial intelligence company founded by Musk, was acquired by SpaceX in 2026.
X, formerly known as twitter, is also a part of SpaceX.
And most importantly, Starlink, a satellite internet provider, is a subsidiary of SpaceX.
There are several types of businesses operating under SpaceX, which is what makes it so valuable.
Here’s SpaceX’s revenue, broken down by segment.
Over half of SpaceX’s revenue comes from its “Connectivity” segment, which is primarily from Starlink.
And despite Space being a prominent part of SpaceX’s name, it accounts for only 22% of the company’s revenue.
I want to focus on Starlink for a minute, because it’s an important segment for SpaceX.
Starlink has been driving SpaceX’s growth over the past few years.
The Connectivity segment’s revenue has almost tripled in just two years, making it the fastest growing for SpaceX.
When your business’s largest segment is also its fastest growing, it’s a great sign.
But we can’t ignore SpaceX’s other operations, especially AI.
SpaceX estimates its total addressable market (TAM) is just under $30 trillion.
The biggest slice is in AI, which accounts for just over $25 trillion of potential market.
SpaceX sounds like a slam dunk… until you look at the price tag.
Early estimates put SpaceX’s worth around $1.75 trillion.
Last year’s revenue of around $18 billion gives SpaceX a price-to-sales ratio of around 100x.
The average for the S&P 500 is around 3.5x, so SpaceX looks really overpriced.
Fast-growing tech companies like Tesla (ticker: TSLA) and Nvidia (ticker: NVDA) also have high price-to-sales ratios, but they’re only 16x and 20x, respectively.
And we need to use price-to-sales since SpaceX’s income is negative.
Last quarter, SpaceX lost almost $5 billion, which is almost as much money Tesla made in the same period.
Granted, SpaceX spent almost $9 billion just in research & development.
But it’s still losing a lot of money.
Plus, history isn’t on SpaceX’s side.
Some of the largest IPOs have had success… but it can take a while.
Alibaba (ticker: BABA), a Chinese e-commerce company, had a record-breaking IPO back in 2014.
But a year later, Alibaba’s stock price was below its IPO price.
Visa (ticker: V) had the largest IPO to date back in 2008.
And similar to Alibaba, its stock price was lower a year later.
Finally, Meta (ticker: META) went public as Facebook back in 2012.
Unfortunately, its stock price dropped more than 50% over the next 5 months.
Why bring up these other IPOs?
Alibaba, Visa, and Meta were big IPOs and made investors a lot of money.
But following their IPOs, investors lost a ton, and the same thing is going to happen to SpaceX.
Its price-to-sales is way too high.
And Morningstar, a top stock market researcher, thinks SpaceX is worth less than half its IPO price.
IPOs are exciting and nobody wants to miss out.
But sit out SpaceX and let someone else take the risk.
Have you ever bought an IPO before?
Coach Parker
Category: Stocks
