SpaceX IPO: Be Extremely Wary

The upcoming SpaceX IPO has a ton of red flags. I am really, really wary of this deal, and so should you.

If all goes according to plan, SpaceX (ticker: SPCX) will be the largest IPO in history. By a wide margin. The company is hoping to raise $75B, which would give the company a market cap of $2T (according to its latest filing). This would eclipse Saudi Aramco ($29B, 2019), Alibaba ($25B, 2014), Softbank ($23.5B, 2018), and all others. At $2T, this would make SpaceX the 8th largest company in the world.

Not bad for a company that only made $18B in revenue and lost -$5B in 2025.

Here’s a quick outline of the deal:

• A $1.75T target valuation, though the latest reports are pushing this number towards $2T. Let’s stick with $1.75T for now
• There are 21 underwriters, with Goldman Sachs leading the deal. The incentive for this IPO to go well is insane
  • The five lead banks (Goldman, Morgan Stanley, BofA, Citi, JPMorgan) lent SpaceX a $20 billion bridge loan to pay off $17.5 billion of old Twitter and xAI debt, and SpaceX must repay it from IPO proceeds within 6 months. These same banks that are hyping SpaceX also get paid back the moment it sells
  • At $75 billion, the underwriters will collect $875M in fees, and Morgan Stanley is the designated “stabilization agent,” meaning it can buy shares to prop up the price after launch. Also, the early investors (who are many) put in under $11 billion and are looking at a $1.75 trillion valuation
• There’s about to be a lot of rich people in Austin. After SpaceX goes public, 12 people will clear $1B and 160 people will make $100M+
• This deal is structured to give Elon Musk 42% of the total equity and 85% of the voting power (through 10-vote Class B shares)

I don’t want you to think that I am beating up SpaceX or Elon in this post. I want to be fair, as Elon has a proven track record of fundamentally disrupting the aerospace and electric car industries. But in my opinion, the SpaceX deal has many red flags that need to be addressed, regardless of who is at the helm.

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My biggest concerns:

• Maximum protection for this company.
  • Texas Incorporation: It requires a 3% stake ($52B) to file a lawsuit against SpaceX, and emails are excluded from discovery
  • Class B Shares: Super-voting shares (10x voting shares-Elon Musk owns 94% of these shares) that can be passed on to children via trusts. Class A shares get 1 vote per share.
  • Class C stock: Non-voting stock created for any future acquisitions to prevent any dilution of control
• A free float of only 3%-4%. Free float refers to the percentage of a company’s total stock that is available for trading in the open market. Microsoft has 99.97%, and Amazon has 90.5%. A tiny float of only 3%-4% means that SpaceX will be highly volatile. The limited supply of tradable shares means even a small shift in buy or sell orders can cause dramatic price swings. A low float is sort of a volatility amplifier in both directions. Because there is such a small supply of stock, big swings should be expected, even if this stock is a multi-trillion-dollar company and not a penny stock.
• Index inclusion: All of the major indices changed their rules to allow SpaceX (and upcoming Anthropic and OpenAI IPOs later this year) into their benchmarks as soon as possible
  • CRSP (VTI and VUG), which normally requires at least a 12.5% free float, introduced an alternative liquidity test on April 27th in order to include SpaceX
  • FTSE Russell (Russell 1000 index – IWB, IWF) announced a fast-entry mechanism under which IPOs exceeding the Russell Top 500 market cap are eligible for inclusion 5 trading days after listing
  • Nasdaq 100 (QQQ) adds SpaceX after 15 trading days under its Fast Entry rule, which was newly introduced a few weeks ago.
  • S&P 500 (VOO, SPY, and others) has yet to modify its rules for a fast entry. Current rules require one year of public trading and 4 straight quarters of positive GAAP earnings. The proposed changes would cut the required trading period in half and waive the requirement for four consecutive quarters of positive earnings (a major hurdle to SpaceX’s inclusion).
• This company is not profitable. In Q1 of this year, the company lost $4B (-$2B from operations, and another $2B from non-cash expenses, such as depreciation). There are three business segments within SpaceX:
  • Starlink: Q1 2026 P/L: +1.1B (dominant product)
  • Rockets: Q1 2026 P/L: -$662M
  • AI (Enterprise / Grok) Q1 2026 P/L: -$2.5B
• Even if we were to value this company based on its revenue, we are looking at a 100X revenue multiple. For context, the S&P 500 currently has a 3.7X revenue multiple (which is currently very high).

The biggest issue for this stock, in my opinion, is its small float and the fact that index providers are changing their inclusion rules. Because of the limited float, the hype around this stock, and the auto-inclusion mechanism, SpaceX has the potential to go to the moon (pun intended) at the outset. So don’t be surprised if it rips on IPO day. But the same features can also cause this stock to get absolutely crushed. Be forewarned.

Normally, when a stock has a small float, index providers would weight it based on what is actually tradeable. Nasdaq just changed this. Under the new rule, any stock with less than 20% of its shares freely trading gets its index weight multiplied by up to 5x. So SpaceX, with a 4% float, does not get counted as a 4% float. It gets counted as if roughly 20% were available.

So, with a $1.75 trillion valuation and a 4% float, $70 billion of stock actually trades. The 5x multiplier tells index funds to weight it as if it were a $350 billion company instead. They are forced to buy more than they otherwise would.

So, if you’re invested in QQQ, the fund would have to sell everything else (Apple, Microsoft, Nvidia, etc.) to make room for a company trading at 100X revenue. Because the float is so small, it cannot quickly absorb all of this demand. Dramatic price spikes should be expected.

Summary

So, in summary, we’re looking at the largest IPO in history, a company losing billions a quarter, priced at 100x revenue. You get no votes, no real way to sue, and no price the open market actually sets. The demand is manufactured by index rule changes, there is a lot of hype and volatility, and the supply that meets it later belongs to insiders and banks who got in at a tiny fraction of today’s price and need a liquid market to sell into.

Sweet.

Ryan A. Hughes

Ryan is the founder of Bull Oak, a financial advisor in San Diego. He’s been listed in InvestmentNews 40Under40 and his firm has been named one of the fastest-growing by Wealth Management Magazine.