SpaceX is preparing to make history later this month as the largest initial public offering by market value ever recorded in the United States.
The company reportedly plans to target a $2 trillion valuation when it lists shares on the Nasdaq Exchange under the ticker SPCX.
According to Reuters, SpaceX may begin trading as early as June 12, with the IPO expected to draw particularly strong demand from retail investors.
Previously, Meta Platforms (META) held the record as the largest U.S.-based IPO, with an initial market value of $81 billion at the time of its listing.
SpaceX reported $19.3 billion in sales over the past four quarters, which places its price-to-sales ratio at approximately 103 times sales going into the offering.
For comparison, Palantir Technologies (PLTR) currently holds the highest price-to-sales ratio in the S&P 500 at 73, meaning SpaceX would immediately be about 40% more expensive than the index’s priciest stock.
A review of more than 100 popular technology stocks found only eight that ever traded above 100 times sales, and all of those stocks dropped sharply afterward, with an average peak-to-trough decline of 75%.
Beyond the valuation concern, historical data from FactSet Research (FDS) shows that the 10 largest U.S. IPO stocks on record have underperformed the S&P 500 by an average of 127 percentage points since their respective listings.
Uber Technologies (UBER), the second-largest U.S. IPO behind Meta Platforms, underperformed the S&P 500 by 116 percentage points following its May 2019 debut, yet has outperformed by 118 percentage points since May 2023.
Equity analyst Nicolas Owens at Morningstar wrote, “We think the company has been significantly overvalued and investors will have opportunities to buy the stock at more attractive levels after the IPO.”
SpaceX has fundamentally changed the economics of space travel by developing reusable rockets, including the Falcon 9, whose booster successfully returned to Earth after launch back in 2018.
The company’s next-generation Starship spacecraft is designed to be fully and rapidly reusable, with both its booster and spacecraft stages returning directly to the launch tower for rapid turnaround.
According to SpaceX’s S-1 registration statement filed with the SEC, “Space flight that historically cost billions per launch now costs of tens of millions, fundamentally reducing the cost of space access.”
The company values its total addressable market at $28.5 trillion, spanning launch services, Starlink broadband, and artificial intelligence infrastructure services and enterprise applications.
Despite the extraordinary growth opportunity ahead, the combination of an extreme valuation and the historical underperformance of mega-cap IPOs suggests investors may be better served by waiting for a more attractive entry point.
