The SpaceX IPO is so close that the excitement is almost palpable. Where some Elon Musk fanatics have been telling themselves they’re getting in on the first day at any cost, others see the potential for pain, not just with the buyers at the wrong price at the wrong time, but perhaps for the rest of the market, as capital really starts to get flowing.
Just how much of the flows have come out of other parts of tech remains the big question. After a tough session for tech and an absolute bloodbath for semiconductors on Friday, perhaps the profit-takers have already shored up enough extra cash to participate in an iconic IPO that’s literally shooting for the stars.
The $1.75 trillion IPO is coming in for a landing
The $1.75 trillion valuation for SpaceX might sound like too high a price of admission. But, in my humble opinion, I wouldn’t count on the market cap anywhere close to that level after the first week of trade on the public market.
Could $2 trillion wind up being the ceiling? How about $3 trillion? Or maybe $780 billion on the low end?
We’ll have to wait and see. But, either way, the SpaceX prospectus is here, and I’m sure plenty of analysts are busy dissecting the figures to determine whether or not the name is going to be worth a valuation in the ballpark of its target of $1.75-1.80 trillion, and what the share price will be at the end of that first day.
Of course, how does one justify a company that could command a price-to-sales (P/S) multiple that’s out of this world, well north of 67 times?
Depending on where you look, the fair value for the stock entails a market value that’s considerably lower than $1.75 trillion. For instance, Morningstar boasts a $780 billion fair value for the firm. That’s less than half of the IPO price.
Could it be that Morningstar and other analysts are overly conservative? And could the bulls see something in the future that skeptics might be at risk of missing?
Can the growth justify the premium price tag?
It’s hard to justify paying a $1.75 trillion valuation for SpaceX, in my humble opinion, unless, of course, the company really starts flooring it across all its growth businesses while successfully shifting towards a profit. After all, there’s no shortage of ambitious, high-TAM growth drivers for SpaceX.
We seem to be learning about new ones on the regular, with the idea of orbital data centers going from a peculiar idea to a brilliant idea for a serious (and perhaps seriously profitable) business. And, after last week, we learned that the Starfall capsule won FAA approval.
Of course, there’s also xAI’s Grok, which introduces further complexity as well as capital drag when you consider how much it takes in CapEx just to stay in the game at the frontier.
Some explosive growth on the horizon for the AI division
Grok has some catching up to do, and it’s probably not going to be cheap to close the gap with other models. Personally, I wasn’t a fan of bringing xAI into SpaceX. But, either way, I also wouldn’t doubt its longer-term potential, especially if AGI and a monetization boom aren’t too far behind the latest CapEx surge.
With Goldman Sachs looking for the AI division revenues to go from $3.2 billion to $322 billion in 2030 (that’s a 100x pop), the bar is set high from the get-go.
Is it too high? Time will tell. But I think a $1.75 trillion valuation is only justifiable if you think SpaceX is going to be a monopolist in space. If it does remain the king of the space economy, while Grok makes major strides, maybe there is room to pass the high bar set ahead of the firm in five years.
What’s most exciting, in my view, is Starlink, SpaceX’s golden goose that’s bound to keep laying golden eggs for the firm, especially as the latest and greatest heavy-payload rockets gear up to start really sending satellites into orbit in bulk. SpaceX is moving fast, and it’s moving heavy, with bigger and bolder satellites to be launched while the rest of the industry tries to catch up.
The bottom line
So, no shortage of hyper-growth projects. But, as always, there’s execution risk to consider.
When it comes to execution, though, the company is in good hands with Elon Musk at the helm. But, of course, his visionary leadership, as well as the scarcity premium tied to the space-and-AI titan, are probably already well-baked into a $1.75 trillion valuation.
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