SpaceX is reportedly planning the largest IPO in history, raising $75B with a target market cap of $1.75T. According to The Financial Times, Elon Musk is personally driving the terms of the IPO.[1]
In a typical IPO, the underwriters choose the offering terms after discussions with potential buyers, a process known as “bookbuilding.” In contrast, The Financial Times reports:
Musk’s influence over the size and timing of the listing has been highly unusual, said one investor close to a banker on the deal. “It’s kind of scary how Elon is setting the price, it’s not being done formally,” they said.
In a typical IPO, the existing shareholders are not allowed to sell their shares until 180 days have passed. In contrast, The Financial Times reports:
Bankers involved are toying with the idea of allowing existing shareholders to sell out of their positions on day one, two of the people said … SpaceX is considering a so-called staggered lock-up that would allow initial investors to slowly sell down their stakes over the course of several months.
Last, as I’ve previously discussed, many index providers are reportedly considering changing their rules to allow SpaceX to be swiftly added to the indices (Nasdaq has already changed its rules for the Nasdaq-100).
In this piece, I sketch out four possible scenarios for the SpaceX IPO. What follows is merely a thought experiment and is neither a prediction nor investment advice.
Scenario 1: Complete Triumph
As the IPO date approaches, SpaceX fever grips the world. Prices of related securities rise in anticipation, including Tesla, EchoStar (which owns shares in SpaceX), and various funds claiming to own shares in SpaceX.[2]
Elon’s epic showmanship creates enormous demand for SpaceX shares. Instead of the traditional IPO roadshow, Elon dazzles potential investors by bringing them to the launch site in Florida to witness the launch of a Falcon 9.
The day before the IPO, the underwriters revise the offer price upward from $30 to $50 due to high demand. It turns out Elon’s initial valuation was too conservative, and the IPO is massively oversubscribed.
When trading opens, the market price swiftly rises to $110, more than double the offer price of $50, thanks to a tsunami of retail buying. This “first day pop” in price rise instantly creates dozens of new SpaceX billionaires.
Fifteen trading days later, there’s a wave of buying by index funds thanks to the new index inclusion rules. The process goes smoothly, and there’s minimal price volatility as insiders sell and index funds buy. In the months that follow, share prices climb ever higher as SpaceX generates astronomical profits from its operations.
Scenario 2: Mixed Success
Due to Elon’s aggressive valuation, demand for the IPO is tepid. The underwriters heroically manage to drum up enough buy orders at the offer price of $30, but just barely. When trading starts, the price is only prevented from falling by extensive “price stabilization” by the underwriters.
In the days that follow, the price drifts downward and the offering is seen as a disappointment similar to the 2012 Facebook IPO. As SpaceX insiders sell in the initial weeks, they’re widely condemned for driving the price downward. On day 15, the index funds buy in a chaotic process that generates substantial price volatility and further criticism.
Scenario 3: Train Wreck
As the IPO date approaches, there are growing questions about the optimistic projections in SpaceX’s S-1 filing. In a stroke of bad luck, a Falcon 9 rocket explodes on the launch pad at an investor event, showering debris on the assembled institutional investors. After a large European sovereign wealth fund declines to participate in the IPO, Elon briefly suspends Starlink service in northern Europe.
As the world falls into recession amid continuing Mideast conflict, global stock markets fall. Elon insists that the IPO go forward as planned despite unfavorable market conditions. The IPO day is a disaster, with the market price falling to $19, far below the offer price of $30 despite frantic efforts by the underwriters. Elon rages against short-sellers in a profanity-laced series of tweets, seemingly unaware that short selling is virtually impossible immediately after the IPO.
Prices continue to fall in the ensuing three weeks to around $10. On trading day 15, the day that SpaceX is added to major indices at the close, prices rise to $15 by 3pm in chaotic trading. At the closing auction, when the index funds must buy, the print comes in at $20. But the next day, price falls right back down to $10, delivering instant losses to the hapless index investors. In the subsequent months, SpaceX’s price continues to fall amid disappointing operational results, along with a wave of lawsuits.
Scenario 4: IPO Withdrawn
Revelations in the SpaceX S-1 filing unleash a chorus of condemnation, similar to the reaction to WeWork’s S-1 in August 2019. At the same time, global stock markets collapse after oil prices soar to $300 per barrel.
Elon insists that the IPO go forward as planned. After a public feud with his investment bankers, however, he reluctantly cancels the IPO only 24 hours before trading was scheduled to commence. This decision is even more last-minute than the stunning withdrawal of the Ant Financial IPO in November 2020 (also touted as history’s largest IPO), 36 hours before scheduled trading.
Elon tweets that he is delighted that SpaceX can continue as a private company and he never really wanted to go public anyway. He declares that he has “funding secured” from unspecified sources to continue SpaceX’s mission to “expand consciousness to the stars.”
The Aftermath
I have no idea which scenario might occur; perhaps something else entirely will take place. Whatever happens, it will undoubtedly impact the ability of other firms to go public later in 2026. A successful SpaceX offering might pave the way for OpenAI and Anthropic to go public. A disastrous one might close the door, at least for a while.
As I’ve previously discussed, the U.S. is currently enduring an epic IPO drought. The SpaceX IPO might be like a torrential rainstorm in this parched landscape. The downpour could bring forth a flowering of life and greenery, or it could bring destructive flash floods. Be ready for anything.
[2] References to this and other companies should not be interpreted as recommendations to buy or sell specific securities. Acadian and/or the author of this post may hold positions in one or more securities associated with these companies.
