Key Points
SpaceX, a pioneer in the space economy, could be the largest IPO ever.
While the hype is real, some investors may not want to invest in the company at such a high valuation.
It's likely that a big chunk of the market will end up having some exposure to the stock eventually.
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It's hard to remember an initial public offering (IPO) with more hype than SpaceX. The company already has a wide following as the pioneer of the space economy; its founder, Elon Musk, is one of the most famous CEOs in the world; and the company is planning to go public with an absolutely enormous valuation.
However, given that the company will likely trade at a massive valuation, not all investors will choose to buy it.
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But the stock may have such a large market cap that even those hoping to avoid SpaceX will have no choice but to own it. Here's why.
Why SpaceX won't be for everyone
While I understand why investors are excited about SpaceX, I can also see why other investors may want to avoid the stock, at least early in its public life.
SpaceX has leveraged reusable rockets to launch astronauts into space more quickly and affordably, and to set up its low-Earth-orbit network of satellites that provide internet service in areas without good access to traditional internet infrastructure. Starlink has been incredibly successful, garnering over 9 million users.
Image source: Getty Images.
Still, in 2025, the company reportedly posted a loss of roughly $5 billion on over $18.5 billion of revenue, according to tech news outlet The Information. Media reports suggest the company could look to raise as much as $75 billion at a $2 trillion valuation, so the stock will most likely trade at nosebleed multiples.
Furthermore, space is a relatively new frontier, at least in an economic sense, so there's going to be a lot of uncertainty, from regulatory challenges to operational challenges.
Finally, given the hype surrounding the IPO, the fact that Musk is reportedly allocating 30% to retail investors, and the usual lock-up provisions that come with most IPOs, I suspect this stock will be extremely volatile in the beginning.
Long-term investors may look past near-term events like this, but much of Wall Street trades on a shorter-term basis, and some investors simply won't have the stomach for the volatility.
Why investors may end up owning SpaceX even if they hope to avoid the stock
Everyone seems to want a piece of SpaceX. Musk and the company have reportedly hired over 20 investment banks to handle the massive IPO.
Because the company is so big, it will have an influential role in financial markets, so most major indexes will want to include SpaceX as soon as possible. In fact, some indexes have already begun changing their governance rules to fast-track SpaceX's inclusion.
The Nasdaq Composite (NASDAQINDEX: ^IXIC) recently introduced a new "fast entry" rule, under which the Nasdaq can evaluate new publicly traded companies by comparing their market cap to the rest of the index on a company's seventh trading day.
If the company were to rank in the top 40 of the Nasdaq-100 on its seventh day of trading, and meets the rest of the index's eligibility criteria, it could be admitted into the index on its 15th day of trading. Previously, the Nasdaq-100 required newly listed companies to wait at least three months before joining.
This isn't just about SpaceX, but other future megacap IPOs down the line, like Anthropic and OpenAI, which could IPO later this year or next, with valuations exceeding $1 trillion.
The broader S&P 500 Index is also considering rule changes that would enable SpaceX and other megacap IPOs to enter the index sooner than expected. Currently, new publicly listed companies have to wait at least one year to join the S&P 500. Under the new proposed rules, they could potentially enter the index as soon as six months after an IPO.
The S&P would define a megacap company as having a market cap equal to or exceeding that of the 100th-largest company in the S&P Total Market Index.
Once a company joins an index, any other funds tracking that index have to buy the stock. At a $1 trillion to $2 trillion market cap, SpaceX would immediately catapult to one of the largest companies in the stock market, giving it a larger weighting in the S&P 500 and Nasdaq-100 and, therefore, greater influence on these indexes.
That's why investors should understand that even if they don't buy SpaceX directly, they may end up owning it eventually if they own a fund tracking the S&P 500 or Nasdaq-100.
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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.
