Elon Musk set to mog every billionaire for eternity with SpaceX IPO

What's going on here?

SpaceX went public today in the biggest IPO in history.

For context, the record was Saudi Aramco's $29 billion IPO in 2019.

But SpaceX absolutely steamrolled it:

• 555,555,555 shares sold at $135 each
• $75 billion raised at a $1.77 trillion valuation
• SPCX opened at $150, closed at $160.95, up 19% on the day
• Musk became world's first trillionaire with an estimated net worth of $1.1 trillion

Pretty based.

Unfortunately, the S-1 (a document SpaceX had to file to IPO) sh*ts all over the party.

Important note: SpaceX is no longer just a rocket company. In February, SpaceX merged with xAI (Musk's AI company that builds Grok and owns X/Twitter). One share of SPCX = rockets + Starlink + Grok + X.

Here's what the S-1 says all those companies together earn:

• Revenue: $18.7 billion
• Costs: about $23.6 billion
• Total: a $4.9 billion loss last year

For comparison, SpaceX's revenue puts it in the same ballpark as Carnival Cruise Line (no, I'd never heard of them either), which does about $25 billion a year. This unc cruise liner actually turns a profit though, and the market values it at $40 billion.

SpaceX, with slightly less revenue, is worth $1.73 trillion more…

What does this mean?

SpaceX's IPO valuation is built purely on vibes.

Elon set the mood: a $28.5 trillion total addressable market spanning space, connectivity, and AI (essentially the GDP of the universe). In his words, it's the “largest actionable TAM in human history.”

Then Wall Street absolutely glazed him: Morgan Stanley predicted SpaceX's revenue would hit $330 billion by 2030 and $3.4 trillion by 2040 (that's almost 5x Amazon: the world's biggest company by revenue).

But Morgan Stanley retained about as much neutrality as Theranos peer-reviewing its own blood tests. Same with all of the other 19 banks underwriting the IPO. As underwriters, they together worked for a 0.7 percent cut of whatever the IPO raised. The higher the price, the bigger the payday. And on a $75 billion raise, that cut came out to roughly $500 million (the biggest IPO fee pool ever). So it's fair to say everyone at the table had an incentive to push the most astronomical valuation possible.

Now if Starship (SpaceX's giant Mars rocket), Starlink, and xAI all deliver on their promises, the math works.

But that still only justifies the IPO price. Not any price growth afterwards.

Why should I care?

1) An IPO is someone's exit liquidity.

Warren Buffett has avoided IPOs his whole life for one reason: the seller picks the moment of the sale, not you. Here, the sellers were Elon and 20 big Wall Street banks, all incentivised to get the highest sale price possible. And all while knowing that retail investors were coming in after them.

2) The hopium is already priced in.

To justify the $1.77 trillion valuation, SpaceX would need roughly $70 billion a year in profit. Even if it hits that number, the stock goes... nowhere, because it's already baked into the IPO price. Today's buyers need SpaceX to beat even the most optimistic predictions. Is that possible? Sure. If that $28.5 trillion market is indeed real, then SpaceX only needs a slice. And most things Elon does sound ridiculous… until he does them.

3) You probably own SPCX whether you want to or not.

As SPCX joins the big stock indexes, index funds and retirement accounts buy it automatically. If your 401(k) holds a total-market fund, part of your retirement is now tied to the most expensive IPO ever.