Should I buy SpaceX IPO?

Henry Cobbe CFA, Head of Research at Elston Consulting discusses why and how retail investors are being attracted to the SpaceX IPO and what the key considerations are

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Should I Buy SpaceX IPO?

What is an IPO

An Initial Public Offering is when a company first lists its shares on a stock market, based on a Prospectus outlining the company’s financial performance, business model and future plans.

Why are some retail investors attracted to SpaceX

As with Tesla, some retail investors are looking to invest in Space X to back founder Elon Musk’s ambitious vision.

Why are some investors concerned about SpaceX

The main concerns are:

1. Valuation: based on traditional metrics such as Price to Sales ration, the company would be trading on 95x sales which is an incredibly high valuation.  The S&P 500 trades at approximately 3.6x Price/Sales with long-term average of approximately 1.8x.
2. Governance: the voting and share class structure means that Elon Musk controls 85% of the votes with 40% of the shares.  He is simultaneously Chair, CEO, CTO.  The concentration of power in the founder is a positive or a negative depending on your perspective.
3. Fewer lock-ups and further dilution: there are fewer restrictions than usual on existing investors selling shares.  Follow on rounds could also leave participating investors in this round diluted as regards their ownership stake.

How do share prices at IPO perform?

Depending on institutional and retail investor appetite and follow on “secondary market” demand for shares thereafter, share price action at IPO can follow a wide broad range of outcomes.

Examples of successful IPOs

Some successful IPOs have seen share prices increase rapidly including:

• Alibaba Group (2014): shares were priced and offered at USD68, shares opened up at USD92.7 and closed their first day of trading at USD93.89 – a gain of more than 38% in one day.
• Royal Mail (2013): shares were priced and offered at 330p, and delivered a +78% return over the following 90 days.

This means that the market placed higher value on the shares than was initially assessed by the business and its investment advisers.

Examples of unsuccessful IPOs

Some unsuccessful IPOs have seen shares prices decrease rapidly:

• Aston Martin (2018): shares in the iconic luxury sportscar maker were offered at £19 per share, and closed down -4.7% to £18.10 on its first day and by 2019 shares were trading 75% below its IPO listing price.
• Deliveroo (2021): shares in the food delivery platform were priced at 390p and crashed immediately on opening, declining 30% within the first few minutes and closing the day 26% down at 287p.  This was seen as one of the worst ever London IPOs.

This means that the market placed lower value on the shares than was initially assessed by the business and its investment advisers.  These IPOs are said to have “flopped.”

Summary

If you are a confident seasoned direct investor, decide on whether and to what extent you wish to participate in the IPO or in the secondary market, and size your position according to your capacity for loss.

We explore this further in a separate article: What does Space X IPO mean for fund and MPS providers?
 
Sources:
https://www.bloomberg.com/news/articles/2026-06-04/s-p-dow-jones-keeps-megacap-ipo-rules-as-is-after-consultation
https://www.investorschronicle.co.uk/content/109a8673-a86c-428e-b260-9b4f996b6983