Key Points
- SpaceX is the most anticipated IPO of 2026, but several aspects of the offering resemble Meta Platforms’ troubled 2012 IPO when the company was still known as Facebook.
- Its lofty valuation, governance concerns, Elon Musk’s ambitious business plans, and the influence of short-term traders could create significant volatility in the stock’s early days.
- Like Facebook, however, SpaceX could eventually become an attractive investment if its valuation aligns more closely with the company’s underlying fundamentals.
SpaceX (SPCX) is the most highly anticipated initial public offering (“IPO”) of 2026, but that doesn’t mean its success on the stock market is a given. In fact, the SpaceX IPO has several features that make it look like the busted IPO of Meta Platforms (META), then called Facebook.
Facebook’s 2012 stock market debut was hot, hot, hot. It was the big name in social media, another burgeoning sector poised to rock the world, much like artificial intelligence (“AI”) today. While the stock was priced at the high end of its IPO price range and soared 18% that day, it sank lower and didn’t surpass that level until 16 months later. The hottest name in social media became a broken IPO.
While it’s too early to know if SpaceX will follow that same route, it does have some worrisome traits. Many analysts have called out the IPO as way overvalued, and one institutional investor has even blacklisted SpaceX for its “catastrophic governance structure.”
Beyond those concerns, however, CEO Elon Musk has made some outrageous promises that have a limited chance of ever being achieved and may not be commercially viable. Add in the fact that IPOs attract short-term traders, and you have the potential for a busted SpaceX IPO.
It may not all be bad news for long-term investors, though. If the dust settles from a poorly received IPO, value hunters can look at how the business has performed and decide if the new lower price – assuming that’s what happens – is worth it. That’s what Facebook’s investors did all those years ago and rode that company to riches. Maybe the same will happen for SpaceX.
1. Musk Pushed the IPO Price as High as It Would Go
Both Facebook and SpaceX have tried to maximize their proceeds from their IPOs. In one sense, that’s exactly what they should do. An IPO is a time to raise capital, and a first-day pop indicates that the company left money on the table. So, selling at a high price maximizes the proceeds per share sold – and it’s what should characterize a successful IPO.
Instead, what the media and many investors call a successful IPO is one that does have a strong first-day pop. In a sense, it is successful – for short-term traders who bought the IPO.
So, a successful IPO for the company is about wringing as much as possible out of investors, then letting the stock fall where it may. That’s what Facebook and SpaceX did.
As Facebook was pricing its IPO, it began with a rather wide range of $28 to $35 per share. That may seem small, but it’s a 25% increase from top to bottom, when a stock typically has an initial range of around $2. Then, it bumped that range to between $34 and $38 in response to demand. Ultimately, the IPO priced at $38, a 36% premium to the low end of the initial range.
This IPO price boosted the value of the company to $100 billion, about 100 times its 2011 earnings.
A Reuters report on the day of the IPO quoted one expert…
“The underwriters got greedy on behalf of selling shareholders and bumped the price high enough that they didn’t get much of a bump on the first day,” said Bill Smead, chief investment officer at Smead Capital Management… “They increased the size of the deal and that really did a number on it.”
It’s a similar situation with SpaceX but worse, as Musk has deftly raised the price of SpaceX stock for months before the IPO. He’s used a combination of stock repurchases from employees at ever-higher valuations to goose the stock and tried-and-true hucksterism.
The result: SpaceX’s $210 billion valuation in July 2024 soared to $1.25 trillion in early 2026 after the company bought Musk’s own cash-burning startup xAI, as he promised a $1.5 trillion IPO. Finally, Musk had to settle for a $1.75 trillion IPO, but not before testing the waters for a $2 trillion offering.
Unlike a traditional IPO, SpaceX set its own (exorbitant) IPO price without gauging investor demand. Instead, SpaceX set a take-it-or-leave-it price of $135 per share, though it did throw open the IPO gates to retail investors – many of whom are Musk fans and price-agnostic – to ensure the deal got over the finish line. SpaceX is offering a tiny portion of its total shares, around 5%, a move that’s likely to create volatility in the initial days as investors scramble to buy.
But when you try to squeeze every nickel out of investors, you may not leave upside for them.
2. Monetization Was Not Fully Clear
When paying a high valuation for an IPO, investors want a clear investment narrative, a solid business model, and a path to profitability. But even the most hyped IPOs often fail to deliver.
While Facebook’s dominance in social media today may seem predestined, around the time of its IPO, investors questioned how the company would monetize mobile users. Mobile use was exploding, but these users didn’t generate the same level of revenue as desktop users.
As the stock fell in the wake of the IPO, reflexivity kicked in. Selling led to more selling as traders figured that the falling stock price meant that Facebook was not succeeding. Would Facebook ever effectively monetize mobile, or would profitability dwindle?
Today, SpaceX may be in a similar situation, with the highly uncertain economics of AI and a pair of other pie-in-the-sky promises. SpaceX has pivoted to providing computing resources to big players, such as Anthropic and Alphabet (GOOGL), instead of directing them to its own Grok AI. While SpaceX’s deals are bringing in significant revenue now, they ultimately hinge on AI’s economics.
But it’s not just AI here. Musk has made some outlandish claims about “orbital AI” – putting AI data centers in orbit around the Earth – and creating a permanent settlement on Mars.
SpaceX’s prospectus is much more realistic on the possibilities:
[M]any of our initiatives described… under “Our Growth Strategies,” including those to develop orbital AI compute at scale, manufacture AI chips at scale, establish a lunar economy, transport humans and cargo to the Moon and Mars, and develop human augmentation systems, involve significant technical complexity, unproven technologies or technologies that do not exist, and such initiatives may not achieve commercial viability.
Will any of these businesses achieve commercial viability? Will SpaceX sink huge resources into them trying to prove them out? Does Musk believe his own hype about a Mars colony?
We simply don’t know, though Musk promises to “extend the light of consciousness to the stars.” Investors would settle for a clear business plan that has some chance of actually happening.
3. IPOs Attract Short-Term Investors
What highly hyped IPOs do well is attract short-term traders looking to make a quick buck. These traders have no interest in the business as a business. Instead, it’s all about flipping the stock to the next trader for a gain in what pundits call the “greater fool theory of investing.”
When the steam runs out of the trade, the stock deflates and all the fast money abandons ship – but fast. That was exactly the situation at Facebook during its May 2012 IPO.
The stock peaked on the first day at $45 per share, and it didn’t rise above that level again until September 2013, a full 16 months later. It took the stock nearly four months after its IPO to bottom out at $17.55.
True long-term investors had months to buy the stock at nearly half off its official $38 IPO price and an even greater discount to its first-day high. When the fast-money traders cleared out and the stock was abandoned, the long-term investors came out to scoop up a huge bargain.
Then, Facebook went on an absolutely massive bull run for years and years, delivering enormous returns to long-term investors who looked at the business and stayed away from fast money.
That’s the real takeaway for those investing in the largest IPO of all time now priced for perfection. The fast money moves on from the “hot new thing” to another “hot new thing.” It has played out in another of this year’s hottest IPOs – Cerebras Systems (CBRS), down more than 40% from its first-day high in May.
So, if you like SpaceX as a business but don’t want to buy it at today’s price, then stick around for a while. Mr. Market has a habit of putting even great businesses on sale from time to time. For now, you can stay on the sidelines to better see if SpaceX’s exponential growth is for real and what a fair value for the stock might look like.
Regards,
James Royal, PhD
Editor’s Note: Elon Musk has spent 27 years waiting for this moment. Now, it’s rolling out across America… and has the potential to be 15X-bigget than Space X. Luke Lango, who called Palantir, AMD, and Nvidia before they soared, says Musk’s latest rollout is the biggest wealth-building opportunity of his career. He’s giving away one free stock pick in this presentation.
