SpaceX Is Engineering History. Its IPO Is Another Story.

People often ask me about the SpaceX IPO a lot, and if the stock is actually worth it. But I typically steer clear of giving specific investment advice on individual stocks. The way I see it, there are only two outcomes: you are either right or you are wrong. Those are 50/50 odds, and that’s simply how I approach investing.

I like to think things through and make an educated decision with all the available information. At the same time, I tend to trust my gut, perhaps more than I should, but a decade of success has proven that my intuition is worth trusting. When it comes to a potential SpaceX IPO, I believe a healthy dose of skepticism is warranted. This is a moment for investors to take a step back, do their due diligence, and make a calculated choice instead of an emotional one.

My initial reservation lies in the pricing model. I understand the rationale behind anchoring the initial offering at $135 a share, but convenience shouldn’t be confused with value. Under scrutiny, the math fails to hold up.

There is no denying SpaceX’s technological dominance; the company has repeatedly achieved the seemingly impossible. With its reliable cadence of NASA contracts, it has firmly proven the commercial viability of rocket launches, while Starlink continues to dominate global satellite internet. Yet, engineering triumphs cannot rewrite the laws of economics: SpaceX remains unprofitable. Starlink has been an exceptional growth engine, but it raises a critical question: Is one profitable segment enough to bankroll an empire?

The multiples here are deeply concerning. Buying into a company valued at 93 times revenue with absolutely no profitability is a tough pill to swallow. Up to this point, successive private funding rounds have merely served as a mechanism to kick the can down the road to an IPO. It is a familiar playbook, but a dicey one. When you look back at past mega-IPOs, they debuted with much lower valuation multiples, and many had already demonstrated proven, sustainable earnings.

I recognize that with a pioneering giant like SpaceX, conventional market metrics are often thrown out the window. Investment bankers may dismiss that reality as a minor detail in pursuit of a massive deal, but I refuse to overlook it.

Moving forward, the insider lockup period presents another notable red flag. Typically, a newly public company imposes a 90-day or 180-day restriction during which insiders are prohibited from selling their shares. When this window closes, the market often bracingly anticipates massive selling pressure. Will the stock face a sudden wave of supply? Most likely. But if market history serves as a guide, lockup expirations generally exert only a short-term impact.

Provided the underlying company executes on its guidance, eager institutional and retail buyers tend to absorb that excess volume. Despite the catastrophic ‘slaughter’ predicted by some apocalyptic analysts, a measured look at the past market cycles can assure you that such fears are overblown.

Perhaps the most unusual feature of this deal is Nasdaq's decision to modify its entry rules. In removing those traditional hurdles, they have cleared a fast track for SpaceX to automatically enter the Nasdaq 100. This guarantees an immediate floor of support, as every passive index fund tied to the benchmark will be legally forced to buy the stock. In my view, this unique regulatory tailwind is the primary reason SpaceX chose Nasdaq over the New York Stock Exchange

Thankfully, the S&P 500 Index refuses to play the same accommodating game. With its mandatory one-year trading rule intact, the index rightfully forces SpaceX to prove its public market stability before letting it anywhere near the benchmark.

Then there is the ultimate, glaring red flag: institutional buyers are pushing back. Quite a few major funds are refusing to take the allocations the bankers are trying to hand them. This tells us everything we need to know about SpaceX’s pricing model, how it is detached from institutional reality. Had the company run a traditional roadshow process, market forces likely would have driven this valuation down to a much more realistic level.

Underwriters may not be in full panic, but they are clearly struggling to convince their ultra-high-net-worth clients. If your primary capital base shrinks early in the game, you are forced to look elsewhere, and that can become a structural problem for a deal of this scale. Retail investors simply do not have the collective balance sheet to cleanly absorb hundreds of millions of shares without triggering a post-IPO collapse.

You can price an IPO wherever you want, but doing so arbitrarily creates a dangerous scenario of an undersubscribed deal. In the old days of Wall Street, bankers would step up, buy the difference, and sit on the losing positions until the market stabilized. In today’s world, that old-school accountability is gone.

All of this might play out in the next couple of weeks, and my gut tells me that this may not work out as Elon Musk has anticipated. Still, what’s a few hundred billion anyway?

About the Author:

Peter Costa is a seasoned financial executive with over 30 years of industry experience, moving from his initial role as an NYSE clerk to senior trading positions at major firms like Lehman Brothers and Bear Stearns. The former New York Stock Exchange governor and retired president of Empire Executions currently leads the Costa Family Office. Additionally, he leverages his extensive background as a media market analyst, regularly delivering volatility commentary for CNBC, CNN, and BNN, while also dedicating time to philanthropy, industry speaking engagements, and sharing insights on his Substack platform.