SpaceX Could Be the Ultimate Meme Stock. Investors Should Avoid This Unprecedented IPO.

Key Points

SpaceX could raise as much as $75 billion at a valuation of $2 trillion.

There is incredible hype surrounding the IPO.

However, investors should try to remain disciplined.

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The SpaceX initial public offering (IPO) is coming, and it's going to be massive. Media reports indicate that SpaceX has confidentially filed for its IPO, seeking to raise as much as $75 billion at a valuation that could be in the range of $1.75 trillion to $2 trillion, which would make it the largest IPO in history and instantly put in an elite group of stocks with over a $1 trillion market cap.

SpaceX is a one-of-a-kind company. It uses reusable rockets to help launch astronauts into space, and has also set up a low-orbit network of satellites called Starlink that can provide high-speed internet anywhere on Earth.

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While its potential is immense, SpaceX could at least start out as the ultimate meme stock. I would recommend investors avoid this unprecedented IPO.

Why SpaceX could start out as a meme stock

Meme stocks tend to be driven by retail investors, trade at massive valuations, and deviate from their fundamentals. The meme stock era really began with GameStop during the pandemic, but has become almost normal amid a multiyear bull market, driven by artificial intelligence that has led to some astounding valuations on the belief that AI could change everything.

While SpaceX, founded by Tesla CEO and Founder Elon Musk, has much more potential than GameStop, it will likely make its public market debut at an enormous valuation. Earlier this year, Reuters reported that SpaceX made a profit of $8 billion in 2025 on revenue of roughly $16 billion.

Assuming SpaceX goes public at a valuation of $1.75 trillion, the stock would trade at nearly 219 times trailing earnings and over 109 times trailing revenue. Even for a company with as much potential as SpaceX, which has talked about colonizing Mars one day, this valuation seems mind-boggling.

SpaceX also plans to allocate as much as 30% of its raise to retail investors, three times the typical amount, so there's going to be a lot of opportunity for retail investors to drive trading activity, which makes the environment for short sellers that much more difficult. Plus, Musk has a cult-like following, which some argue has led to Tesla's monstrous valuation of 165 times forward earnings, down from a high of 300 not long ago.

On the idea of SpaceX becoming a meme stock, Roundhill Investments CEO Dave Mazza recently told MarketWatch that the company "clearly has some of the ingredients: a massive narrative, a founder with a loyal following, and a valuation likely driven in part by future potential rather than just current fundamentals."

Why investors should avoid the IPO

As the IPO approaches, there will be serious hype, and investors will be tempted to buy shares at whatever price they are offered. However, I would actually caution against buying this IPO.

Space is a new sector, and SpaceX could grab a controlling share of the market. However, nobody knows how the sector or the company will develop, and investors are being asked to pay a huge premium out of the gate.

But even if you are gung-ho on the stock and believe SpaceX is the real deal, I still strongly suspect that the stock will be much cheaper for patient investors who can wait three to six months. That's because most IPOs have lock-up provisions that prevent insiders and early investors, often those who own large blocks of shares, from selling right out of the gate. Lock-up provisions typically range from 90 to 180 days.

Insiders and early investors are often tempted to sell at least a portion of their shares because they have likely held them for years and could be worth billions, or even tens or hundreds of billions, in the case of SpaceX.

If you look back at big IPOs in 2025, many opened big and then sold off after a few months, as the hype faded or lock-up provisions expired. I expect SpaceX will be no different, and potentially in a more magnified way, given the valuation and hype surrounding the IPO.

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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.