In the seven and a half years since Apple Inc’s market capitalization broke through the $1tn mark, investors have become accustomed to seeing big tech companies command 13-digit valuations in public markets.
There are more on the way.
SpaceX, the space exploration company controlled by Tesla Inc founder and world’s richest man Elon Musk, has signaled it is planning a mega-initial public offering in the coming months. Artificial intelligence rivals OpenAI and Anthropic also might go public this year, and their private valuations already have soared into the hundreds of billions of dollars.
The SpaceX IPO is expected to raise as much as $50bn, which would shatter the previous record set by Saudi Aramco’s $29.4bn listing in 2019. SpaceX could seek a valuation of more than $1.75tn, Bloomberg has reported, though whether public-market investors will be prepared to buy shares supporting that valuation remains to be seen.
SpaceX has morphed from a relative underdog in the space industry to an aerospace behemoth that receives billions of dollars in government contracts and serves as a backbone for the US space program. In addition to its rocket launch business, SpaceX owns a satellite-based internet broadband service, Starlink, that has become the company’s main cash flow generator. Following an all-stock acquisition in February of xAI, SpaceX also owns Grok, a money-burning AI operation whose flagship product is the Grok AI assistant. X, the microblogging site previously known as Twitter, rounds out its portfolio of businesses.
A SpaceX IPO would be a huge market spectacle as investors large and small get a chance to buy into Musk’s fast-evolving vision to create a combined space and AI powerhouse. Yet skeptics say investors might worry that Musk will deplete SpaceX, a company that is the clear leader in its industry, to fund xAI, one of many players in a crowded field.
Why is SpaceX planning an IPO?
Even though SpaceX is believed to have significant cash flow, largely from Starlink, the company would require a lot more money to fund its biggest ambitions. In an employee memo in December reported by Bloomberg, SpaceX said IPO proceeds would fund the ongoing development of the Starship rocket, AI data centers in space and a base on the Moon.
SpaceX could opt to continue raising capital in private markets rather than going public. But SpaceX’s funding needs appear to have risen substantially with the acquisition of xAI, which is burning through around $1bn of cash per month to cover the cost of computing infrastructure including training its AI models, according to people briefed on the company’s financials.
In addition, being a public company with the ability to tap the broader market for funds could help SpaceX’s AI business to raise money faster than rivals OpenAI and Anthropic PBC before they go public themselves, as they all spend hundreds of billions of dollars on their AI dreams.
What valuation and deal size is SpaceX targeting?
All signs point to SpaceX raising as much as $50bn and seeking a valuation of more than $1.75tn in the IPO.
The big question is whether that valuation can really be sustained in public markets.
Analysts value companies based on their future earnings and growth, as well as industry competition and profit margins. Yet valuation isn’t a science. Especially in bullish market conditions, investors are sometimes prepared to pay up for a company’s shares based on something other than financial fundamentals.
Some might see the seemingly vast potential of SpaceX’s space businesses as justifying a higher price than the company’s current financials would ordinarily support. But the challenges surrounding the xAI business could dampen the appeal.
Are there pitfalls to going public?
For SpaceX, the downside of having an IPO is that the company will have to publicly report its financials every quarter and answer to Wall Street analysts and public investors. Its plans also could be disrupted if its stock price is volatile or falls sharply in reaction to bad news.
What’s the IPO timeline?
If there are no hiccups, Musk could take SpaceX public as early as June 2026.
Bloomberg reported that SpaceX has picked Wall Street’s biggest banks to work on the IPO filing, which includes financial disclosures required by the US Securities and Exchange Commission and which investors will want to see before deciding whether to invest.
Typically, the process begins with a non-public filing. Even so, SpaceX might tell the world it has taken that step. Bloomberg has reported this could happen in March.
A confidential filing starts a process at the SEC that typically takes two to three months, assuming there are no major holdups. Following this review, the company normally will file the document publicly.
The public filing, which would lay out all of SpaceX’s financials in public for the first time, starts a 15-day public viewing period. After that concludes, the company will undertake a formal marketing exercise to sell shares, usually within a set price range but before the final price is set.
Who gets in?
Once the price range is set, banks will take orders for shares from institutional investors. At the same time, ordinary investors will be able to put in orders via brokers affiliated with the banks. Some of the millions of so-called retail investors who are users of popular trading platforms like Robinhood Markets Inc and SoFi Technologies Inc will likely be able to put orders in directly through their platforms, though for hot IPOs, allocations for such investors can be scant.
The day before the shares begin to trade, SpaceX and the banks will agree on a final share price that initial investors will pay and on how many shares will be sold. In deciding that price, SpaceX and the banks will have to balance what’s best for existing shareholders, who want to limit seeing their stakes shrink from the issuance of too many shares, and new investors who want access to shares.
Once pricing is decided, the shares will begin trading the next day.
How is Wall Street preparing?
The sheer size of the offering, unprecedented for Wall Street, has bankers lining up to help SpaceX go public, and most of the big Wall Street banks will be involved in some way.
The real prestige for financial institutions, though, comes from leading the offering and being involved in key decisions such as marketing, pricing and allocations. At this stage, five of the big banks — Bank of America Corp, Citigroup Inc, Goldman Sachs Group Inc, JPMorgan Chase & Co and Morgan Stanley — are confirmed to be the primary banks involved in the offering, but their exact roles aren’t clear.
How does the xAI acquisition affect a potential SpaceX IPO?
Not everyone is pleased that SpaceX has opted to buy xAI ahead of the IPO. That’s because xAI is burning a lot of cash, potentially diluting the appeal of SpaceX’s core businesses, especially Starlink.
Investors who thought they owned a space company now have a big exposure to AI, and for those with a bearish take on the sector, they suddenly would be shouldering another potential loser from the high-stakes race to dominate that business. If SpaceX is viewed as an unwieldy conglomerate, it might translate into a lower valuation than the company is hoping for.
For his part, Musk believes having a business that now spans rockets, space-based internet, AI and social media constitutes a “vertically integrated innovation engine,” specifically helping it pursue the business opportunity of building data centers in space.
Putting all the businesses under one roof would constitute a unique proposition, according to one Pitchbook analyst: “The combination of Starlink’s subscriber growth, launch dominance, and the direct-to-cell buildout is a profile that doesn’t exist anywhere else in public markets.”
How would a SpaceX IPO affect Musk’s control of the company?
Prior to the xAI acquisition, Musk owned less than half of the shares in SpaceX after countless private funding rounds that have brought in outside investors, including Peter Thiel’s Founders Fund, Fidelity Investments Inc and Alphabet Inc. It isn’t clear how much of SpaceX Musk owns after the xAI deal. SpaceX is weighing a post-IPO ownership structure that would allow insiders, potentially including Musk, to have near-total control of key strategic and corporate decisions. Investors enthralled by SpaceX’s potential and Musk’s track record likely aren’t bothered by this, but it could present problems if something went wrong and investors were ever bold enough to want change at the helm.
How will Musk pitch SpaceX to IPO investors?
Central to the pitch is that SpaceX dominates the commercial space industry and has seemingly vast growth potential and links to industries such as defense and telecommunications. SpaceX also has a cash cow in Starlink, with its global high-speed internet service, and a massive competitive advantage in the rocket launch business.
Tougher will be convincing investors that these businesses will also help SpaceX be a dominant player in AI. To get investors to buy into SpaceX’s massive valuation, Musk will also look to tap into his cult status and track record with the many investors who profited from owning Tesla shares, which have surged around 3,000% in the past decade. For some potential IPO investors, that might be the best advertisement of all.
