SpaceX's $1.8 Trillion IPO Raises Concerns Over Overvaluation and Forced Investments

SpaceX IPO Approaches – Massive Scale and Controversial Terms

Elon Musk’s space company SpaceX is set to debut on US public markets on Friday in what is expected to be the largest initial public offering (IPO) in history. The company is valued at nearly $1.8 trillion, or $135 per share, surpassing Saudi Aramco’s $1.7 trillion IPO in 2019.

According to Reuters, SpaceX plans to allocate 20% of shares to retail investors and has drawn around $70 billion in orders. However, concerns about overvaluation persist. MorningStar analysts have valued SpaceX at just $63 per share, a 53% discount to the IPO price.

Nasdaq Rule Changes and Forced Investments

In early May, Nasdaq implemented a rule change that allows SpaceX to enter the Nasdaq-100 index after just 15 trading days, bypassing the traditional three-month “seasoning” period. S&P Dow Jones Indices, however, has not changed its rules, so S&P 500 inclusion still requires four profitable quarters.

These changes raise concerns that pension funds and index fund managers will be forced to buy SpaceX shares. The treasurer of North Carolina state said the state will not buy a direct stake for its pension fund for teachers, firefighters, and police officers because it is too expensive, but will invest through broader index funds.

Aleksander Tomic, associate dean at Boston College, warned that fund managers are contractually obligated to follow the index and cannot simply avoid SpaceX. “That could be highly undesirable,” he said.

Governance Structure and Musk’s Influence

SpaceX’s governance plan gives Musk control of up to 85% of voting power despite owning only 42% of equity. A letter from several state officials described this level of accountability insulation as “virtually unheard of” among large US issuers. This means the board would find it extremely difficult to remove Musk if necessary.

AI Bubble and Broader Impact

SpaceX’s IPO comes as OpenAI and Anthropic also plan public listings. Tomic noted these companies may be significantly overvalued, and Nasdaq’s 15-day rule does not allow enough time to assess IPO performance. If the AI bubble bursts, it could affect multiple stock market participants, including pension funds and university endowment portfolios.

SpaceX shares are already directly held by university endowments; for example, the University of North Carolina system has 10% of its endowment tied to SpaceX. The company reported a $4.9 billion loss last year, but revenue grew to $18 billion, driven mainly by the Starlink network.