① Analysts point out that SpaceX not only has publicity gimmicks such as sending humans to Mars, but its existing business is also very solid; ② However, looking back at the large IPOs of the past 40 years, those highly valued new stocks have often failed to bring lasting returns.
Investors are eagerly anticipating the launch of SpaceX's initial public offering (IPO), with many having waited for years to buy shares in the company.
Earlier media reports indicated that SpaceX planned to go public in 2026, targeting a valuation of $1.5 trillion. Elon Musk confirmed on Wednesday on the social media platform SpaceX that SpaceX is moving forward with its IPO.
Shay Boloor, chief market strategist at Futurum Equities Research, said that despite it being a high-risk, capital-intensive business, demand for stocks from retail investors will be “very substantial.”
“This will be the craziest IPO in stock market history. If the target valuation is $1.5 trillion, I wouldn’t be surprised at all if it goes up to over $2 trillion after listing,” Bolor said.
Elon Musk is currently the world's richest person, with a net worth exceeding $460 billion. He owns several prominent companies, including SpaceX and the electric vehicle company Tesla. , AI The companies include xAI, social media company X, brain-computer interface company Neuralink, and underground tunnel company The Boring Company.
Of the aforementioned companies, only Tesla is currently a publicly listed company.
"Combining substance with hype"
Analysts point out that SpaceX not only has hype such as sending humans to Mars, but its existing business is also very solid.
Dan Hanson, senior portfolio manager at Neuberger Berman's Quality Equity Fund, said that SpaceX's current solid business performance combined with its huge future potential will attract a lot of investor interest in the IPO.
“This is a rare case; it has both genuine substance and eye-catching gimmicks,” he said.
The Quality Equity Fund manages $2.1 billion in assets, and as of the end of November, approximately 5% of its assets were invested in unlisted shares of SpaceX.
Hanson stated that SpaceX's launch business and Starlink communication products are already quite mature, which will help the company obtain a strong valuation and qualify it for an IPO.
Hanson also said that the funds raised in the IPO could help SpaceX develop new technologies, such as space data centers that do not require the high-energy-consuming cooling systems found on Earth. .
“It possesses all the characteristics of a ‘market darling’ in the current technological revolution,” said James St Aubin, chief investment officer at Ocean Park Asset Management. “Its service prospects are so bright that investors can temporarily ignore valuation issues and let growth expectations rise as they please.”
St Aubin even predicts that by 2026, SpaceX will join the ranks of the seven largest U.S. stocks, making it the "Great Eight".
Large IPOs often have poor follow-up performance.
However, looking back at large IPOs over the past 40 years, those highly valued new stocks have often failed to deliver lasting returns.
According to data compiled by University of Florida professor Jay Ritter, from 1980 to 2023, a total of 45 companies had valuations exceeding 40 times their annual revenue (at least $100 million after adjusting for inflation) on their first day of trading. However, three years later, only 7 of these companies had stock prices higher than their closing price on their first day of trading.
On average, these stocks fell by about half from their first day's closing price and lagged behind the broader market by about 63%.
Typical examples of poor performance include Beyond Meat (listed in 2019), Palm (listed in 2000), and Snowflake (listed in 2020). Datadog and Zoom, which went public in 2019, are among the few companies that have performed well.
Tesla is the biggest exception. The company went public in 2010 with a relatively conservative valuation, but its stock price skyrocketed over the next decade.
“SpaceX’s current high valuation does limit its upside potential,” Ritter said. “Even if it grows to $2 trillion, that’s only a 100%-200% return.”
(Article source: CLS)
