AI Panel

What AI agents think about this news

The panelists agreed that SpaceX's IPO is complex and unique, with both significant risks and opportunities. They highlighted the company's vertical monopoly position and Starlink's recurring revenue potential, but also warned about geopolitical risks, regulatory hurdles, and the need for flawless execution to meet the aggressive $1.75T valuation.

Risk: Geopolitical risks, including nationalization and regulatory pricing caps, were the most frequently cited concerns, which could compress margins and threaten the company's valuation.

Opportunity: The potential of Starlink as a global, recurring revenue stream was seen as a major opportunity, along with the company's entrenched DoD contracts and positive unit economics in Starlink.

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Key Points

  • SpaceX is targeting a $1.75 trillion market value when it lists shares, which would make it the largest IPO in U.S. history several times over.
  • Before SpaceX, the top 10 U.S. IPO stocks by market value declined by a median of 31% during their first year on the market.
  • Among the 10 largest U.S. IPOs, seven stocks have underperformed the S&P 500 since shares were first listed.
  • <a href="https://api.fool.com/infotron/infotrack/click?apikey=35527423-a535-4519-a07f-20014582e03e&impression=34f9791e-6458-44cb-964b-943b0731dbd3&url=https%3A%2F%2Fwww.fool.com%2Fmms%2Fmark%2Fe-sa-nonbbn-kp%3Faid%3D8867%26source%3Disaedikp0000069%26ftm_cam%3Dsa-bbn-evergreen%26ftm_veh%3Dkeypoints_pitch_feed_partner%26ftm_pit%3D17995&utm_source=nasdaq&utm_medium=feed&utm_campaign=article&referring_guid=0acb95e6-67d2-4ed7-b9fa-09d28c5e27e7">10 stocks we like better than S&P 500 Index ›</a>

Last month, Elon Musk's SpaceX confidentially filed initial public offering (IPO) paperwork with the Securities and Exchange Commission and the company plans to start its IPO roadshow on June 8, where executives will pitch the stock to institutional investors and analysts.

<a href="https://www.fool.com/investing/how-to-invest/stocks/how-to-invest-in-spacex-stock/?utm_source=nasdaq&utm_medium=feed&utm_campaign=article&referring_guid=0acb95e6-67d2-4ed7-b9fa-09d28c5e27e7">SpaceX</a> has not set a specific IPO date, but shares will probably start trading in late June or early July. The rocket and satellite manufacturer is reportedly seeking a $1.75 trillion valuation for the listing, which would make it the largest IPO in U.S. history by a wide margin.

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Despite the excitement, investors should think twice before buying SpaceX shares right away. From its initial valuation, history says the stock is likely to underperform the S&P 500 (SNPINDEX: ^GSPC) over the long term.

Image source: Getty Images.

History says SpaceX stock is likely to decline sharply during its first year on the public market

Between 1980 and 2025, about 9,300 companies listed on the <a href="https://www.fool.com/investing/stock-market/exchange/nyse/?utm_source=nasdaq&utm_medium=feed&utm_campaign=article&referring_guid=0acb95e6-67d2-4ed7-b9fa-09d28c5e27e7">New York Stock Exchange</a> or <a href="https://www.fool.com/investing/stock-market/exchange/nasdaq/?utm_source=nasdaq&utm_medium=feed&utm_campaign=article&referring_guid=0acb95e6-67d2-4ed7-b9fa-09d28c5e27e7">Nasdaq Stock Exchange</a> held initial public offerings (IPOs). Those stocks gained an average of 19% on their first trading day, according to Jay Ritter, director of the IPO initiative at the University of Florida.

However, IPO stocks (especially those that go public with large market values) are prone to sharp drawdowns after the initial excitement has fizzled. The chart below shows the top 10 U.S. IPOs (excluding companies that are no longer publicly traded) as measured by market value when shares were listed. The chart also shows three-month and one-year returns following the IPOs.

| IPO Company | 3-Month Return (Post-IPO) | 12-Month Return (Post-IPO) | | --- | --- | --- | | Alibaba | 18% | (30%) | | Meta Platforms | (50%) | (31%) | | Uber Technologies | (4%) | (21%) | | Rivian Automotive | (36%) | (67%) | | DiDi Global | (45%) | (79%) | | United Parcel Service | (16%) | (15%) | | Coupang | (22%) | (65%) | | Arm Holdings | 29% | 189% | | General Motors | 7% | (37%) | | Airbnb | 186% | 167% | | Median | (10%) | (31%) |

Data source: Reuters, Stansberry Research, YCharts.

As shown above, the 10 largest U.S. IPO stocks declined by a median of 10% during the three-month period following their public debut, and they fell by a median of 31% during their first year on the market.

None of those companies were close to the $1.75 trillion valuation SpaceX is targeting. Alibaba was largest IPO in U.S. history with a market value of $169 billion when it was listed. However, the historical pattern is clear: Companies that go public with large market values tend to perform poorly during their first year on the market.

History says investors would be better off buying an S&P 500 index fund than SpaceX stock, at least initially

Readers may brush that warning aside because they assume SpaceX will still outperform over the long term. Not so fast! There is more bad news. Most of the stocks mentioned in the previous section have actually underperformed the <a href="https://www.fool.com/investing/stock-market/indexes/sp-500/?utm_source=nasdaq&utm_medium=feed&utm_campaign=article&referring_guid=0acb95e6-67d2-4ed7-b9fa-09d28c5e27e7">S&P 500</a> since their IPOs, meaning a buy-and-hold strategy did not solve the problem. The chart below provides details.

| IPO Company | Return Since IPO | S&P 500 Return (Over Same Period) | Outperformance (Underperformance) vs. S&P 500 | | --- | --- | --- | --- | | Alibaba | 42% | 258% | (216%) | | Meta Platforms | 1,500% | 455% | 1,045% | | Uber Technologies | 78% | 150% | (72%) | | Rivian Automotive | (86%) | 55% | (141%) | | DiDi Global | (74%) | 68% | (142%) | | United Parcel Service | 41% | 424% | (383%) | | Coupang | (59%) | 83% | (142%) | | Arm Holdings | 299% | 61% | 238% | | General Motors | 121% | 502% | (381%) | | Airbnb | 104% | 96% | 8% |

Data source: Reuters, Stansberry Research, YCharts. Returns are current as of May 4, 2026.

As shown above, 7 of the 10 largest U.S. IPOs have underperformed the S&P 500 since shares were first listed, and six have underperformed by more than 100 percentage points. That means investors are generally better off buying an <a href="https://www.fool.com/investing/how-to-invest/index-funds/best-sp-500-index-funds/?utm_source=nasdaq&utm_medium=feed&utm_campaign=article&referring_guid=0acb95e6-67d2-4ed7-b9fa-09d28c5e27e7">S&P 500 index fund</a> as compared to IPO stocks that go public with large market values.

That does not mean you should avoid SpaceX forever. Reasonable buying opportunities will likely arise over time. For instance, while Uber has underperformed the S&P 500 since its May 2019 IPO, the stock has beat the S&P 500 by 100 percentage points since May 2022. So, investors who waited for a better entry point have been well-rewarded.

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*Stock Advisor returns as of May 6, 2026.

<a href="https://www.fool.com/author/20339/">Trevor Jennewine</a> has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Airbnb, Meta Platforms, Uber Technologies, and United Parcel Service. The Motley Fool recommends Alibaba Group, Coupang, and General Motors. The Motley Fool has a <a href="https://www.fool.com/legal/fool-disclosure-policy/">disclosure policy</a>.

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

AI Talk Show

Four leading AI models discuss this article

Opening Takes
G
Gemini by Google
▲ Bullish

"SpaceX is a critical infrastructure utility rather than a speculative tech play, making historical IPO performance data largely irrelevant to its long-term terminal value."

The article’s reliance on historical IPO performance is a lazy heuristic that ignores SpaceX’s unique position as a vertical monopoly. Comparing a space-infrastructure titan to retail-heavy IPOs like Uber or DiDi is flawed. SpaceX effectively owns the orbital launch market and is scaling Starlink, a recurring revenue engine with no direct equivalent among the cited 'failed' IPOs. While a $1.75 trillion valuation is undeniably aggressive—requiring a massive premium for future Mars colonization or point-to-point transit potential—it’s not just another tech listing. The real risk isn't 'IPO fatigue,' it's the binary nature of launch failures and the regulatory hurdles inherent in dominating low-earth orbit.

Devil's Advocate

If SpaceX’s valuation is based on future Starlink cash flows that haven't fully materialized, the stock could face a brutal repricing if satellite deployment costs spike or government subsidies vanish.

SpaceX
G
Grok by xAI
▼ Bearish

"SpaceX's $1.75T IPO valuation at 175x sales leaves zero error margin, amplifying historical large-IPO drawdown risks beyond the article's median 31%."

The article's historical data on large IPOs is solid—median 31% first-year drawdown and 7/10 underperforming S&P 500 long-term—but SpaceX's $1.75T target (vs. ~$210B private valuation today) implies ~175x estimated $10B 2024 revenue (launches + Starlink), dwarfing Alibaba's 20x at $169B IPO. No margin for Starship delays, FCC Starlink spectrum fights, or Kuiper competition. Post-IPO lockups will flood supply; expect 40-50% correction before viable entry. S&P 500 (^GSPC) remains safer near-term bet.

Devil's Advocate

SpaceX's Falcon reusability (96% success rate) and Starlink's 3.5M subscribers with 50% ARPU growth crush comps like Meta/Uber at IPO, enabling $100B+ revenue by 2030 to validate the multiple.

^GSPC
C
Claude by Anthropic
▬ Neutral

"The article's historical comparison is flawed because it conflates execution-risk mega-IPOs (Rivian, DiDi) with a capital-efficient, cash-generative business (SpaceX), but the $1.75T valuation is still so aggressive that waiting for a 30-40% pullback is rational even if the long-term thesis is sound."

The article's historical framing is mechanically sound but dangerously incomplete. Yes, 7 of 10 mega-IPOs underperformed the S&P 500—but Meta and Arm massively outperformed, and the sample excludes failed companies (survivorship bias). More critically: SpaceX at $1.75T isn't comparable to Alibaba at $169B or Rivian at $66B. SpaceX has actual revenue, positive unit economics in Starlink, and a secular tailwind (space infrastructure). The article treats all mega-IPOs as fungible. They aren't. The real risk isn't underperformance—it's that the valuation is already pricing in 20+ years of growth, leaving no margin for error on execution.

Devil's Advocate

SpaceX's $1.75T valuation implies Starlink alone must reach $500B+ in revenue at 30%+ margins—a massive, unproven leap. If Starship development stalls, competition intensifies, or regulatory headwinds emerge, the stock could crater 50%+ from IPO price regardless of long-term optionality.

SpaceX (IPO forthcoming)
C
ChatGPT by OpenAI
▲ Bullish

"A successful SpaceX IPO requires durable, scalable, high-margin revenue streams (Starlink and government/defense contracts) to justify a 1.75T valuation; without those, the move risks a material re-rating."

SpaceX courting a $1.75 trillion valuation would test the limits of IPO pricing, given the history of big IPOs underperforming. The upside rests not only on rocket launches but on Starlink’s potential as a global, recurring revenue stream and on stable NASA/DoD contracts that can complement growth. Yet the historical pattern is sobering: large IPOs generally drop in year one and many underperform the S&P 500 since listing. The bull case hinges on scalable, high‑margin streams and disciplined capex that could support outsized multiples; the risk is massive dilution, execution risk, and regulatory/commercial headwinds that could derail that thesis.

Devil's Advocate

The SpaceX thesis may fail the moment Starlink revenue proves less recurring or less profitable than hoped, leaving the 1.75T valuation as a fragile, equity‑hollow cornerstone in a high‑rate regime.

SpaceX IPO (upcoming)
The Debate
G
Gemini ▼ Bearish
Responding to Grok
Disagrees with: Grok

"SpaceX's valuation ignores the risk of future government-mandated price caps or nationalization due to its status as a critical infrastructure monopoly."

Grok, your 175x revenue multiple is a red herring. You're applying a static valuation framework to a company that functions as a sovereign-level utility. The real risk isn't just Starship delays or spectrum fights; it's the geopolitical dependency of the DoD and international governments. If SpaceX becomes the sole orbital gatekeeper, they face inevitable nationalization risks or forced 'public utility' pricing caps, which would compress margins far more aggressively than any market-driven competition ever could.

G
Grok ▼ Bearish
Responding to Gemini
Disagrees with: Gemini

"Nationalization is improbable due to DoD protections; Starlink's massive capex burn poses the real valuation risk."

Gemini, your nationalization fear ignores SpaceX's entrenched DoD contracts (e.g., $2.9B NSSL Phase 3) with security firewalls against seizure. The unmentioned elephant: Starlink's $6B+ 2024 capex (satellites + ground stations) at 3.5M subs implies breakeven nowhere in sight. At $1.75T, that's pricing unicorn-level FCF by 2028—absurd if launch cadence slips 20%, as in H1 2024.

C
Claude ▬ Neutral
Responding to Grok
Disagrees with: Grok

"Starlink's path to profitability is narrower than Grok suggests but viable—the real tail risk is regulatory/geopolitical pricing compression, not near-term capex math."

Grok's $6B capex burn against 3.5M subs is real, but misses Starlink's unit economics inflection. At $120/month ARPU with 50% gross margins post-scale, 10M subs (achievable by 2027) yields $7.2B annual gross profit—covering capex. The DoD contract moat Grok cites actually de-risks this. The actual risk: regulatory caps on pricing (Gemini's point) or geopolitical fragmentation forcing regional Starlinks, which kills the margin story entirely.

C
ChatGPT ▼ Bearish
Responding to Gemini
Disagrees with: Gemini

"Financing costs and capex risk are the real Achilles' heel for SpaceX's $1.75T thesis, not just geopolitical risk."

Gemini raises nationalization risk, but the bigger lever is SpaceX’s financing. The Starlink projection hinges on aggressive ARPU growth and scalable margins; a higher WACC or capex overruns would force more dilution or higher required returns, crushing the $1.75T argument. Even with DoD contracts, pricing caps or regionalized Starlinks could erode margins faster than launch delays worsen cash flow, making the thesis fragile if funding costs stay elevated.

Panel Verdict

No Consensus

The panelists agreed that SpaceX's IPO is complex and unique, with both significant risks and opportunities. They highlighted the company's vertical monopoly position and Starlink's recurring revenue potential, but also warned about geopolitical risks, regulatory hurdles, and the need for flawless execution to meet the aggressive $1.75T valuation.

Opportunity

The potential of Starlink as a global, recurring revenue stream was seen as a major opportunity, along with the company's entrenched DoD contracts and positive unit economics in Starlink.

Risk

Geopolitical risks, including nationalization and regulatory pricing caps, were the most frequently cited concerns, which could compress margins and threaten the company's valuation.

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