The big day has arrived! In a matter of hours, Elon Musk's artificial intelligence (AI) and space economy conglomerate, SpaceX (SPCX +0.89%), will make its debut and cement itself as the largest initial public offering (IPO) in Wall Street's storied history.

SpaceX's debut also starts the clock on its entrance into the technology-driven Nasdaq-100, and the Russell 1000 and Russell 3000 indexes. Although the committee overseeing additions to the benchmark S&P 500 (^GSPC +0.72%) chose not to amend the rules governing index inclusion, changes to the Nasdaq-100 and Russell Equity Index Series inclusion methodology can fast-track SpaceX's entrance into these indexes after 15 (Nasdaq-100) and five (Russell Equity Index Series) trading sessions.

Image source: Getty Images.

But while retail investor enthusiasm surrounding this IPO is thick enough to cut with a knife, there's an equally long list of justifications why SpaceX stock should be avoided like the plague. There are seven reasons, comprising structural, operational, valuation, and historical components, why SpaceX has no business in my (or your) investment portfolio.

1. Structural protections were removed, paving the way for insiders to cash out

Arguably, the most glaring warning with the SpaceX IPO is the aforementioned structural changes to index inclusion, coupled with the company's unorthodox lockup period.

Fast entry into the Nasdaq-100, Russell 1000, and Russell 3000 will force index funds to spend tens of billions of dollars purchasing SpaceX shares shortly after its debut. Given that SpaceX is selling only a little over 4% of its outstanding shares (notably lower than the 10% to 20% observed with most IPOs), this forced purchasing by index funds will gobble up a substantial portion of the initial float and could artificially boost its share price.

Wow, the S&P Dow Jones Indices has just officially announced that they will NOT be changing their inclusion rules to make it easier for "MegaCap" companies (such as @SpaceX) to be fast-tracked into the S&P 500.

Their reasoning:
"S&P DJI determined that exceptions to the... pic.twitter.com/iK3evLC56q

-- Sawyer Merritt (@SawyerMerritt) June 4, 2026

This artificial share price boost coincides with an accelerated lockup period for most insiders. Excluding Elon Musk, insiders can begin selling a portion of their shares as soon as the second trading day after SpaceX's first quarterly report in August. This unique lockup period, the company's low float, and the removal of investor protections to fast-track SpaceX into several major indexes should facilitate a wealth transfer from retail investors to insiders as they cash out.

2. It's a capital-intensive business with little margin for error

Although SpaceX is the sum of several parts -- reusable rockets, satellite-based broadband services (Starlink), AI start-up xAI, and social media platform X -- many of its operating segments are highly capital-intensive and have virtually no margin for error.

For instance, building rockets and satellites is costly and time-consuming. The inflationary effects of higher production costs, launch delays, and rapid unscheduled disassembly (the fancy phrase for when a rocket or satellite crashes or explodes) can pummel a capital-intensive business like SpaceX.

Additionally, SpaceX is spending a small fortune to expand its AI data center compute. Though it's announced two notable compute contracts in recent weeks from Anthropic and Alphabet, SpaceX's xAI division has been spending far more than it's generating in sales.

3. SpaceX is losing money hand over fist

This brings me to the next logical reason to avoid the SpaceX IPO like the plague: the company is losing a lot of money!

While its mile-long prospectus highlighted several consecutive years of positive adjusted EBITDA, this represents nothing more than a smoke-and-mirrors attempt to mask steep operating losses. Last year, Musk's company lost nearly $2.6 billion from operations and spent close to $1.95 billion on interest expenses. All told, its net loss surpassed $4.9 billion.

🚨YOU ARE THE EXIT LIQUIDITY

You are about to be offered the most expensive IPO in modern history.

SpaceX's S-1 just dropped. The headline numbers:

- 2025 revenue: $18.7 billion
- 2025 net loss: $4.9 billion
- Q1 2026: still losing money
- Reported IPO valuation target:... pic.twitter.com/vaPLoKjsGN

-- Thierry from arvy 🇨🇭 (@ThierryBorgeat) May 21, 2026

SpaceX is unlikely to be profitable anytime soon, which is an absurd statement for a company expected to slide in ahead of Tesla (TSLA +2.60%) as the eighth-most-valuable publicly traded business on U.S. exchanges.

4. The valuation can't be justified

While the aforementioned structural changes will force index funds to purchase SpaceX stock over the next few weeks, there's zero fundamental justification for the company's IPO valuation of $1.77 trillion.

History tells us that no company at the forefront of a game-changing trend over the last three decades has been able to maintain a price-to-sales (P/S) ratio above 30. SpaceX is going public at 95 times its reported sales of $18.67 billion last year. Even with sizable monthly compute deals from Anthropic and Alphabet now in place, SpaceX's P/S ratio is firmly in bubble territory.

We've also never witnessed a public company reach trillion-dollar status without recurring profitability. Musk's other trillion-dollar company, Tesla, is arguably the least consistent of all trillion-dollar companies. Nevertheless, it's been persistently profitable on a full-year basis for more than half a decade.

Image source: Getty Images.

5. Elon Musk has a terrible habit of overpromising and underdelivering

Another reason investors can confidently avoid the SpaceX IPO is its CEO, Elon Musk. While Musk successfully turned Tesla into a trillion-dollar company, his track record shows a lengthy history of overpromising and underdelivering.

For example, Musk has been opining for more than a decade that Tesla's AI-powered full self-driving (FSD) software is "one year away" from Level 5 autonomy. Despite this ongoing claim, Tesla's FSD hasn't moved beyond Level 2. Musk also promised 1 million robotaxis on public roads by the end of 2020 (which never materialized) and has touted his company's line of Optimus humanoid robots, which aren't generating direct sales for Tesla.

If investors take the time to separate Musk's facts from his as-of-now fictional claims, they'll discover that most of his promises and forecasts have gone unfulfilled. If these unfulfilled promises are backed out of his company's valuations, SpaceX and Tesla could tumble.

6. Mega tech IPOs have mostly flopped since the early 2010s

Historical precedent suggests that retail investors steer clear of the SpaceX IPO, as well. According to research by Truist Financial analysts, an overwhelming majority of big tech IPOs since 2012 have fallen flat in their first year as public companies.

Moral of the story-do NOT chase hot IPOs

Year-1 average drawdown = 55%
Year-1 median drawdown = 54%

Table: Truist pic.twitter.com/xt864JD4Xh

-- Puru Saxena (@saxena_puru) June 3, 2026

Recently, Truist analyzed the performance of 30 large-scale tech-driven IPOs since Facebook (now Meta Platforms) went public in May 2012. Truist uncovered an average year-one drawdown of 55% among these high-profile IPOs. Furthermore, just 43% were positive six months after their respective debuts.

Saudi Aramco, which held the title of largest global IPO until SpaceX went public, declined by 15% six months after its debut. Once investor euphoria fades after a couple of weeks, most brand-name IPOs struggle.

7. Investors persistently overestimate next-big-thing technologies

Lastly, but perhaps most importantly, professional and everyday investors have persistently overestimated the adoption and/or optimization rate of next-big-thing technologies for more than three decades.

AI and the space economy are two of the hottest trends on Wall Street. PwC analysts foresee AI creating $15.7 trillion in global economic value by 2030, while the analysts at McKinsey & Company predict the space economy can create $1.8 trillion in economic value by 2035. While the adoption of AI and space infrastructure hasn't been an issue, optimization certainly appears to be one.

We're likely several years away from AI solutions and the space economy optimizing sales and profits for corporate America. In other words, investors are repeating the same mistakes they made with the internet, nanotechnology, 3D printing, blockchain technology, the metaverse, and so on.

SpaceX is the poster child for a next-big-thing bubble-bursting event, making it a stock that should be avoided like the plague.