SpaceX IPO Valuation Faces Scrutiny Amid Profitability Concerns

Key Insights

• Some analysts argue the expected SpaceX valuation exceeds fundamental estimates.
• Historical IPO performance shows many high-profile listings struggle after initial enthusiasm fades.
• Investors continue assessing profitability, spending requirements, and broader market conditions.

SpaceX is expected to become one of the largest public offerings in market history, placing investor attention on both its growth prospects and valuation.

While enthusiasm around the company’s position in the space and satellite industries remains strong, several analysts have raised questions about whether the expected valuation can be justified by current financial performance.

Two media reports this week are sending a warning about the SpaceX IPO. First, a report by Morningstar noted that the company is worth about 50% lower than the expected valuation. It believes that the intrinsic value of the company is about $780 billion.

Morningstar argues that, while SpaceX is a sound business, its goals are ambitious. It also notes that the company has become highly overvalued, which may lead investors to scale back their optimism. Another Bloomberg report showed that investors were using Jefferies to short the stock.

A closer look at the recently released S1 document shows that the valuation concerns are genuine. The S1 showed that the company’s revenue jumped to $18 billion last year from $14 billion a year earlier. It made $10 billion in 2023.

The company also suffered a whopping $4.9 billion loss last year and $4.2 billion in the first quarter. A good way to establish whether SpaceX is really a $2 trillion company, as Polymarket traders predict, is to compare its numbers with those of Taiwan Semiconductor, which is also valued at $2.1 trillion.

TSMC made an annual revenue of $121 billion last year, up by over 40% from the previous year. It also made a net profit of over $54 billion. Its first-quarter revenue was $33 billion, almost double what SpaceX made the whole of last year.

A closer look at most IPOs shows that many of them start well amid the hype and then crash once the momentum stops.

There are many examples of this. For example, Figma, a company that Adobe wanted to buy for $25 billion a few years ago, went public last year. Its stock initially pumped to $143 after going public. Today, it trades at $22.

Similarly, Circle stock price initially surged to $300 after going public last year. Today, it has plunged to $90, erasing billions of dollars in value.

Gemini Space Station, the crypto exchange owned by the Winklevoss Twins surged to $45 and then fell to $4.5. The same is happening among other companies, including Klarna and Medline, which have all plunged after the IPO.

SpaceX’s stock may crash due to soaring costs, making profitability less certain. Most of its costs are coming from its xAI brand, which owns Twitter and Grok. Like other AI companies, its costs have surged in the past few years.

The costs are also coming from its large chip plant in Texas, which will cost about $55 billion. Tesla will also contribute to this plant and there is a risk that its total costs will be much higher. Therefore, there is a risk that the stock will drop as losses mount over time.

Another minor reason why the SPCX stock price will crash is that the ongoing Bitcoin price will hurt its balance sheet. The company owns 18,000 coins currently valued at over $1 billion.

Bitcoin price has continued falling this year and is now hovering at $61,000. It has crashed due to ongoing BTC ETF outflows as investors rotate into AI companies and ETFs.

In summary, while SpaceX is a juggernaut in its industry, the public markets will bring a different angle to its business, which may lead to further weakness.

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