SpaceX is reportedly preparing for a listing via an IPO. The listing is expected around June.
OpenAI and Anthropic are also heading for IPOs, so it is worth understanding the process and what companies aim to achieve with an IPO.
The first point is that an IPO is an exit for a certain category of shareholders. Those who funded the company during its early years can now cash out, though there may well be lock-ins so they can’t sell for the first six to 12 months. But always remember: for some shareholders, the IPO is an exit.
This matters because companies are listing much later than they used to. The reason for this is that access to funding in private capital markets is easier now. So the companies list at much larger valuations and the upside potential is less exciting.
SpaceX is expected to list with a valuation of around $1.5-trillion. It has great potential, so of course it can go up 10 times from there, or even more, but in all honesty, the real money was made in an earlier funding round. In 2020 SpaceX raised money at a $46bn valuation, and those investors have made 30 times their money in six years.
A company only ever lists once, and it wants that listing to be a huge story
Still, that doesn’t mean we can’t make money here. We just need to box clever.
A company only ever lists once, and it wants that listing to be a huge story. The $1.5-trillion valuation will definitely be a story. Saudi Aramco listed in 2019 with a closing valuation of $1.88-trillion and remains the world’s largest listing. But a big day one pop from SpaceX could exceed that.
The question will be how high it flies on listing day. If it goes well past the initial amount, it will be the talk of investors for ages.
So the company will try to find a price that offers the best chance for a pop of 50% or even 100% on the first day. Now, many will say that they will then be leaving money on the table. But maybe not. It depends on how much of the company they sell in the listing. If it’s a modest 5%, then very little money is left on the table.
The next question is whether the valuation will last once the listing hype has faded. The evidence here suggests that that is not always the case.
There are two ways to play this. The first is to get in at the IPO price (not easy with the limited shares available) and sell into the pop. The second is to wait for the pop to deflate — a few months or a year later — and then get the shares at below the IPO price.
I will try the first method. I love space as an investment theme. But SpaceX also has xAI (which includes X), neither of which is attractive to me. Nor is the CEO.
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