Space Exploration Technologies' (SPCX +2.04%) initial public offering (IPO) last week didn't just break records; it blew them out of the water. SpaceX's $75 billion raise was almost triple that of Saudi Aramco's previous IPO record. SpaceX soared almost 20% on its first day of trading from the pre-IPO price, taking the company's market cap past $2 trillion and making it one of the 10 largest publicly traded U.S. companies.
That's all exciting, but neither the hype nor the size of its IPO is a good reason on its own to buy SpaceX. You might buy shares if you think founder and CEO Elon Musk can deliver an interplanetary reality. Or you might think SpaceX is overvalued and decide to pass or wait for the company to deliver more concrete results.
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What might make SpaceX a buy
SpaceX is a three-in-one company with a big vision, combining space, artificial intelligence (AI), and satellite communications. It estimates a $28.5 trillion total addressable market for its space-enabled solutions, and some growth investors want a piece of a future where people can live on the moon.
NASDAQ: SPCX
Key Data Points
Not only does SpaceX offer a bite of the space economy, but the company could also disrupt the booming AI infrastructure market by building solar-powered data centers in space. Then there's the so-called "Musk effect," whereby swathes of loyal fans believe in his ability to deliver against all odds.
Others point to SpaceX's achievements and innovations, such as revolutionizing rocket launches, creating a 9,000-strong Starlink satellite network that provides broadband internet worldwide, and developing Starship, an enormous reusable rocket that will be able to carry people, equipment, and satellites into space.
Why you might pass on SpaceX
Risk is the biggest reason for passing on SpaceX. The company plans to spend huge sums on untested projects that may not even be possible. On top of which, a valuation of over $2 trillion for a company that didn't turn a profit last year seems extreme, even when you consider the untapped potential of space exploration.
In addition to technological risks, SpaceX's reliance on U.S. government contracts, which accounted for around 20% of its 2025 revenue, also makes it vulnerable to changes in policy or administrations. Then there's Musk himself: Not only is he a controversial figure, but the company's structure also gives him control of over 80% of votes, meaning shareholders will have little say in how the company is run.
Finally, many traditional valuation methods are difficult to apply to SpaceX because of its out-of-this-world proposals and lack of profits. However, its price-to-sales ratio is a whopping 117 as I write this, meaning that investors are paying over $117 for each $1 of revenue. For context, SpaceX competitors also have high P/S ratios; Rocket Lab's is 84, reflecting the high-risk, cash-intensive nature of the sector.
Treat SpaceX like any other investment
Ignore the size of SpaceX's IPO and instead think about how it might fit in your portfolio. If you are a growth investor willing to hold a risky stock for 20 years or more, there could be logic to allocating a small percentage of your portfolio to SpaceX. It will likely be a volatile ride, but it could eventually pay off.
However, SpaceX will have limited appeal to value investors. The hype, governance issues, and high level of risk certainly make me uneasy. Ultimately, its IPO prospectus reads more like Captain Jean-Luc Picard's Star Trek opening, and I'm not convinced that it can deliver the "next paradigm shift for humanity."
