SpaceX, the rocket and AI company led by Elon Musk, presents investment opportunities. However, its futuristic and unproven initiatives also involve considerable financial hazards.
SpaceX takes center stage in financial markets on Friday as the company makes its debut on the stock exchange.
The Elon Musk-led enterprise, focused on rockets, satellites, and artificial intelligence, secured as much as $75 billion (€65 billion) by offering nearly 555.6 million shares at $135 each, according to a statement released by the firm on Thursday.
This marks the largest initial public offering (IPO) in history, surpassing the previous milestone set by Saudi Aramco in 2019, when the oil giant went public and raised $26 billion.
The listing instantly elevates SpaceX to the seventh-largest publicly traded US company, placing its valuation at an impressive $1.8 trillion.
SpaceX intends to use the proceeds from the IPO to finance its ambitious initiatives, such as deploying AI data centers in orbit and missions to Mars.
Data centers in space: Solution or disaster?
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SpaceX has lofty aspirations
Founded in 2002, SpaceX has achieved notable progress in space technologies over the years, including reusable rockets, establishing itself as the world's leading launch services provider.
The company's primary objective is to colonize Mars and build a civilization there.
Closer to Earth, SpaceX runs Starlink, an extensive network of roughly 8,000 satellites, which provides broadband internet services to consumers, governments, and corporate clients. Starlink is currently the company's sole profitable operation.
Earlier this year, SpaceX expanded into artificial intelligence by merging with xAI, which Musk founded in 2023 to compete with firms like ChatGPT-maker OpenAI and Anthropic.
Musk aims to install massive AI data centers in space to harness solar energy and utilize the cold vacuum of space for free cooling, enabling these facilities to bypass the energy and cooling limitations they encounter on Earth.
SpaceX: Still operating at a loss
In its IPO prospectus, SpaceX highlighted a potential $28.5 trillion market for its services, asserting that it is uniquely positioned to deliver integrated, space-based AI and internet offerings.
Nevertheless, concerns persist regarding the steep valuation, particularly for a company that is still unprofitable.
Last year, SpaceX generated $18.7 billion in revenue but recorded a $4.9 billion net loss. The company has indicated that it does not anticipate turning a profit in the near future. It also carries substantial debt—approximately $29 billion as of the end of March.
Given its financial situation, SpaceX would be valued at roughly 94 times its annual revenue, a significant premium over the stocks of highly profitable Big Tech firms like Apple, Alphabet, or Nvidia.
After reviewing SpaceX's finances, Morningstar, a US-based financial services firm, has appraised the company at $780 billion—a sharp reduction from the IPO's $1.8 trillion valuation.
It noted that the outlook for SpaceX is "very uncertain," and success hinges on whether the company's orbital AI platform functions and offers meaningful cost advantages over terrestrial computing.
What drives the enthusiasm for SpaceX stock?
Investor interest—both retail and institutional—appears immense, with recent reports indicating that the IPO is already oversubscribed.
Many Musk supporters cite his vision for SpaceX and his track record of building Tesla into a global automotive and tech giant as reasons to invest.
Most IPOs allocate only about 5% to 10% of the total offering to retail investors, according to Fidelity, a financial services company. However, SpaceX has reserved a much larger share—up to 30%, or $22.5 billion—for retail investors.
"Many retail investors are unaware that about 25% of IPOs drop on the first day of trading, and an even larger percentage fall over longer horizons," Jay Ritter, an IPO expert and finance professor at the University of Florida, told DW.
"But institutions are willing to give SpaceX and the big AI companies high valuations because other tech companies have demonstrated the ability to grow and become enormously profitable," he added, pointing to firms like Alphabet, Nvidia, and a few others with annual after-tax profits exceeding $100 billion per year.
"If they hadn't done it, there would be a lot more concern about the valuations," Ritter emphasized. "But these other companies, including Microsoft and Broadcom, went public at much lower valuations, and thus had more upside potential for public market investors."
The Nasdaq stock exchange also revised its rules in May to allow large newcomers like SpaceX to join its index within 15 trading days, down from the previous three months. This change means passive investment funds tracking the Nasdaq 100 index will need to purchase SpaceX shares sooner.
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Musk retains strong control over SpaceX
Experts caution that SpaceX stock could be more volatile once trading begins, as the company is only offering about 4% of its equity in the IPO.
A large number of institutional and retail investors pursuing a limited supply of stock could result in sharp price fluctuations.
Even after the IPO, Musk will maintain a firm grip on the company.
The billionaire currently owns an estimated 42% of SpaceX, but following the listing, a special dual-class share structure ensures he retains about 82% of the total voting power on the board, meaning no one can remove him.
The company also restricts shareholders' ability to file class action lawsuits, requiring them to bring cases in a specialized Texas business court. If a judge declines, disputes go to private arbitration, a provision seen as severely limiting investor rights.
Morningstar warned that Musk's dominance of SpaceX also poses a "key-person risk," and that minority shareholders will have limited ability to influence the company's decisions.
"This concentration of decision-making authority in a single individual creates governance risks that warrant careful consideration," said Morningstar.
Edited by: Andreas Becker
The article was updated after SpaceX released a statement on June 11 announcing the pricing of its IPO.