SpaceX's IPO prospectus -- also known as an S-1 form -- is supposed to clear things up for potential investors. After all, an S-1 form is the first place a company provides us with hard numbers, and numbers famously don't lie.
But although the numbers in the financial tables of SpaceX's recently updated prospectus aren't lying, they're also not showing the whole picture.
Now, it's not like SpaceX is concealing anything: the prospectus clearly states that some numbers aren't being included. But to get the full picture of the ticking time bomb that's awaiting IPO investors, I had to piece together data from at least half a dozen different sections of the document. Here's the unpleasant surprise I found.
Dilution is guaranteed
SpaceX's prospectus doesn't mince words regarding shareholder dilution: "Purchasers of the Class A common stock in this offering will experience immediate and substantial dilution in the net tangible book value per share of the Class A common stock for accounting purposes." (emphasis mine)
That's not hyperbole: The company's current pro forma book value per share is $2.25/share, which is expected to increase to $7.85/share once the IPO is complete. That means that $127.15 of the $135 share price (94.2%) won't be backed up by any tangible assets.
Image source: Getty Images.
It's not unusual for an company to have a book value well below its IPO offer price, but the degree of dilution here is startling. Even fellow space exploration company Firefly Aerospace (FLY -0.05%), for example, had its IPO in August with "just" 87% share dilution.
But there's another kind of dilution, too: the dilution that comes from issuing additional stock shares. Every time a company issues new shares of stock, the value of existing shares goes down. And SpaceX looks set to go on a share-issuing frenzy within the first 18 months of its existence.
More dilution is imminent
In 2025, SpaceX agreed to acquire a portion of communications company EchoStar's (SATS +3.58%) wireless spectrum in a $19.8 billion deal set to close in November 2027. The deal requires SpaceX to issue $11.1 billion in additional Class A shares and make an additional payment of up to $8.5 billion in cash. The Class A shares in the agreement have a fixed valuation of $42.40/share, meaning the company will need to issue an additional 261.8 million shares of Class A stock by next November to finalize the deal.
NASDAQ: SATS
Key Data Points
SpaceX also has an outstanding option to acquire AI developer Cursor, which expires Sept. 30, 2026. If it exercises that option, it would need to issue an additional $60 billion in Class A stock, which at $135/share would amount to 444.4 million new shares (or more if the price drops). If SpaceX decides not to exercise the option, it still has to pay Cursor $10 billion in fees, payable in cash or (you guessed it!) Class A stock.
Assuming the Cursor acquisition occurs, and SpaceX's stock price holds steady, those two obligations alone would increase the Class A share count by 706.2 million shares. That's more shares than SpaceX is offering in its IPO. It would almost certainly result in a roughly-5% additional dilution of the company's shares within the first 18 months of trading.
Even more dilution is likely
But wait, there's more!
That calculation doesn't include the roughly 1 billion additional shares that could be issued at various times through the exercising of various stock options, settlements, and other awards, for an additional 7.6% dilution of SpaceX's stock. Or, for that matter, the other roughly 31 billion Class A shares that the company has authorized itself to issue in the future for other considerations. While most companies give themselves leeway to issue additional shares in the future, the amount of shares here -- more than double the entire current outstanding share count -- is jaw-dropping. None of these are reflected in the company's actual share calculations for the IPO.
Image source: Getty Images.
SpaceX is primarily basing its $1.75 trillion valuation on the expected growth of its AI business, so it will almost certainly incur a lot of near-term capital expenses like AI hyperscalers Alphabet (GOOGL +1.59%) and Microsoft (MSFT +2.68%) have recently seen. SpaceX could cover these by spending its cash or taking on debt -- which would reduce the company's book value even further -- or by issuing more shares of stock, which would dilute existing shareholders' positions even further. Either way, the stock loses value.
Even by the numbers in SpaceX's financial tables, its shares are clearly priced at a nosebleed valuation. But potential Day One investors should also be aware of the ticking dilution time bomb that's set to devalue their shares even further within mere months of the IPO, and may want to steer clear for now.
