Key insights
- SpaceX's highly anticipated IPO saw its stock close up 19.2% at $160.95, valuing the company at $2.1 trillion. This significant debut, with a substantial portion of shares offered to retail investors, highlights strong market appetite for innovative technology companies, particularly in space exploration, satellite internet (Starlink), and AI. The company's ambitious market projections and integration of AI across its ventures suggest potential for continued investor interest and influence on technology sector valuations.
The biggest initial public offering in history lived up to the hype. SpaceX (SPCX +19.22%) went public today, with shares selling at $135 each. With shares in high demand, the stock opened at $150 and continued climbing throughout the day, closing at $160.95.
That’s a gain of 19.2% from the IPO price set by Elon Musk’s company and gives it a market cap of $2.1 trillion, making it the seventh-biggest publicly traded company in the world on Day One.
It’s been a dizzying day for investors who lined up for a chance to take part in the IPO. Retail investors typically have access to between 5% and 10% of IPO shares, with institutional investors taking the lion’s share. But SpaceX planned to make more than 20% of its shares immediately available to retail investors.
When the market opens again on Monday, SpaceX stock will be closely watched once more. Here’s what you should know.
SpaceX is getting a lot of attention for the types of businesses it operates. Its rocket business is the most dominant in the world, having carried out more than 660 missions to date. And because it uses reusable rockets, SpaceX can achieve faster turnaround times and lower costs. The most profitable division is Starlink, which provides internet and mobile connectivity worldwide through its satellite network. And the xAI division, which was a stand-alone company valued at $250 billion before it was absorbed by xAI, is building AI infrastructure, operating its Grok chatbot, and integrating AI across Musk’s companies, including Tesla.
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In its prospectus, management projects that SpaceX has a total addressable market (TAM) of $28.5 trillion, calling it “the largest actionable total addressable market in human history.” And it projects $26.5 trillion of that will come from AI, including $2.4 trillion for AI infrastructure and $22.7 trillion for enterprise applications.
SpaceX sought a valuation of $1.77 trillion while raising an incredible $75 billion in its IPO. But even those numbers were low, as the IPO was estimated to be 4 times oversubscribed, with demand for shares reaching $250 billion.
There are other key factors. Nasdaq and Russell, which operate two of the largest stock exchanges in the U.S., agreed to cut the waiting period from months to days before SpaceX can be listed on their exchanges – and shares instantly gobbled up by exchange-traded funds that track those indexes. Even though the managers of the benchmark S&P 500 chose not to follow suit, SpaceX stock will be a part of many 401(k) retirement accounts, even if account holders take no action.
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And SpaceX also has a unique lockup period. Typically set at 180 days, the lockup period is designed to prevent insiders from artificially crashing the stock price, particularly if the stock price jumps higher in the first few days after going public. SpaceX, however, will allow investors to sell 20% of their stock on the second day of trading after the company’s first earnings report as a publicly traded firm -- in this case, its Q2 earnings report. Additional shares can be sold 70, 90, 105, 120, and 135 days after the IPO.
All these factors help drive interest in SpaceX’s historic IPO.
IPOs often have great first days because of investor interest and enthusiasm – and both of those are off the charts for SpaceX. IPOs from 2012 to 2021 averaged a 23.6% return on their first day, according to a study by Jay Ritter, a professor at the University of Florida.y
But that enthusiasm doesn’t last. In Ritter’s study, those IPOs had average three-year returns of 10.6%, indicating they struggled to maintain their opening-day gains.
Consider the recent example of Meta Platforms, which went public as Facebook in May 2012. The IPO price was $38, but by September 2013, shares were trading below $18 each, and it took a full year to return to the IPO price.
Today, of course, Meta is one of the most successful stocks, and a mere $1,000 investment in the company at its IPO would be worth $14,700 today. But it takes time, and IPO investors had to weather some down years in the beginning.
And SpaceX will incur significant capex in the coming years as it builds out its AI ambitions. Goldman Sachs projects that SpaceX will have a negative free cash flow of $105 billion in 2029.
Whether you are a bull or a bear, SpaceX is going to be a fascinating stock to watch. SpaceX had a great first day, but that doesn’t mean the stock will keep soaring.