Key Points
SpaceX is targeting a $2 trillion valuation and a June IPO, with Elon Musk allocating up to 30% of shares to retail investors -- triple the typical amount.
The IPO bundles SpaceX with Elon Musk's businesses outside of Tesla: xAI, X (formerly Twitter), Neuralink, and the Boring Company.
xAI is reportedly spending $1 billion a month playing catch-up as OpenAI, Anthropic, and Google continue to dominate.
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SpaceX recently filed for what could be the largest initial public offering (IPO) in history, targeting a massive valuation (rumored to potentially exceed $2 trillion) and a June listing. SpaceX CEO Elon Musk is reportedly structuring the offering to allocate up to 30% of the available shares for sale directly to retail investors -- three times the norm.
The details behind this IPO have generated a whole lot of excitement. I get it, but I'm still going to pass on it when it finally occurs.
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Why SpaceX's IPO is generating so much excitement
To be sure, I think SpaceX has built something extraordinary -- perfecting reusable launch systems is truly incredible. And Starlink alone generated over $10 billion in revenue last year, helping bring the internet to underserved populations all over the globe.
Image source: Getty Images.
The company's $8 billion in EBITDA last year is certainly impressive. So is the $24 billion in revenue it's expected to earn in 2026. And the list of backers is a who's who of Silicon Valley: Alphabet, Sequoia Capital, and Andreessen Horowitz.
The valuation problem
Now, the obvious issue is valuation. A $2 trillion market capitalization means you would be paying more than 80 times forward revenue. That is a hefty premium, to put it lightly.
But what really concerns me is the company's recent acquisition of xAI, and with it, X, the social media platform formerly known as Twitter. Neuralink and the Boring Company have been absorbed as well.
The IPO bundles all of these businesses into one stock, and in my opinion, they're dead weight.
xAI and X are dragging down the investment case
X's revenue has fallen from $4.4 billion in 2022 to roughly $2.9 billion in 2025, though the steady bleed has reversed recently. The platform carries an enormous amount of debt from Musk's original $44 billion acquisition of Twitter. With $1.2 billion in annual interest payments, X is struggling to break even.
Meanwhile, the latest numbers put xAI's annualized revenue at $500 million. That sounds impressive until you realize it's spending $1 billion a quarter to make that. Grok, the company's chatbot, seriously lags the offerings from OpenAI and Anthropic. All 11 of its co-founders have departed, and Musk himself said that it was "not built right."
$1 billion in cash moving out the door every month is a big deal for SpaceX. Building rockets and launching satellites is an expensive business and requires a steady flow of capital. xAI will siphon off a huge portion of available funds for a return I'm not convinced will materialize.
Why I'm passing on the SpaceX IPO
SpaceX is certainly an impressive business. But at this valuation, with xAI gobbling up cash for years to come, I'm going to pass. For me to consider jumping in, the stock would need to fall significantly.
And it just might -- mega-IPOs have a history of underperforming initially.
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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Tesla. 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.
