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Wall Street Goes Orbital with SpaceX IPO

By Contributor
Wealth Management

Preparing for Takeoff

Brendan Roberts

SpaceX conducted its initial public offering last week at a $1.77 trillion market cap, making it the largest IPO ever; it has surged significantly since. By trading at this valuation, it became a top-10 market cap company on day one, leapfrogging Tesla itself in in the process. SpaceX is also projected to do less than two-thirds the revenue of Tesla this year, all while having negative cash flow.

To put that in perspective, when Google first became public in 2004, it was a $23 billion market cap and didn’t even place in the top 100 companies by market cap. Meta Platforms (Facebook) debuted in 2012 at a $104 billion market cap, placing it inside the top 25 most valuable companies at that time, surpassing heavyweights like Amazon, Citigroup, and McDonald’s.

Artificial intelligence continues to permeate markets the same way the internet captivated the world when it went mainstream in the late ’90s. The IPO window is open, and SpaceX is just the beginning.

Later this year, the companies behind ChatGPT (OpenAI) and Claude Code (Anthropic) are in a full sprint to list their shares publicly as well. They have seen the fastest product adoption since smartphones, the internet, and social media. If you thought launching rockets into space was ambitious, these companies double their revenue every few months. Despite the macro headwinds from multiple global conflicts, persistent inflation, and lower-income consumers under pressure, the markets continue to creep higher. 

Although there are many different polarizing conversations to have about AI and IPOs, we now must consider how these firms fit into our world of investing. Are owning these companies considered high-risk? Is it appropriate for people entering retirement to hold a position like SpaceX, Anthropic, or OpenAI? Are passive indices such as the S&P 500 eventually going to have exposure to these companies? What about my retirement funds? These are the type of client questions we’ve received — and they are timely conversations to have with your financial advisor.

Is Passive Index Investing at Risk?

Passive indexing, the S&P 500 as one example, gives you broad exposure to the U.S. economy by proportionally allocating capital to the largest public companies by market cap weighting. New risks may arise, however, if companies like SpaceX, Anthropic, OpenAI, and others are included in the index well before they generate positive cash flow. If a company cannot generate positive cash flow, it makes it more difficult to support paying a dividend or buying back company stock. Therefore, it’s very unlikely a company can return capital to shareholders until they do generate positive cash flow.

This means, as an investor, most (if not all) of your investment returns must come from price appreciation through the stock price heading higher, which is driven by investor sentiment. 

“Artificial intelligence continues to permeate markets the same way the internet captivated the world when it went mainstream in the late ’90s. The IPO window is open, and SpaceX is just the beginning.”

Although this is certainly a possibility, as it is with any stock, an investor must consider the risks of the stock itself, in addition to the market dynamics at play, to potentially make a positive return on their investment. Many of the early insiders who owned these companies prior to the IPO have already made a ton of money and will advantageously use the IPO as an exit strategy — i.e., sell their shares to capture some, if not all, of their profits.

However, there are lockups involved for insiders and employees, meaning they cannot divest their shares immediately when the stock first begins trading. This could result in many months (if not years) of selling pressure as investors look to ring the register on a company they’ve already made a lot of money from. One may question, what about the passive indices? Won’t they be forced to buy the IPO since it’s projected to be a top 10 market cap company? Not necessarily.

Bending Rules Based Investing

The Nasdaq Composite is an index comprised of the 100 largest non-financial companies listed on the exchange. This index is already dominated primarily by tech, software, and telecommunications sectors. Previously, a stock would have to be a public company for at least three full calendar months before being considered for inclusion in the index.

Surprisingly, Nasdaq implemented a new ‘fast entry’ rule effective May 1 of this year, by which the top 40 non-financial companies can be fast-tracked into the index in as little as 15 days. This is a rule change that occurred just months before the SpaceX IPO, which raised concerns for many investors. 

The S&P 500 index has a rule where a company would have to demonstrate cumulative GAAP profitability over the most recent four consecutive earnings reports to qualify for inclusion in the index. Previously, S&P Global considered making an exclusion for ‘megacap’ companies like the three IPOs discussed today, but they recently changed their tone and said they will not make any exceptions. This means it will likely be some time before SpaceX is included in the S&P 500, as it is not likely to meet the profitability metrics in the near term required for inclusion.

S&P Global is in a difficult position because, if they do not include SpaceX, it could result in a tracking error and possibly worse performance than funds that do choose to allocate capital to the company. Alternatively speaking, if they manipulate their own rules to try to include a company with no cash flow, it could compromise their rules-based investing approach, which has worked for decades.

Active Versus Passive Investing

Actively managed investing involves someone selecting the investments rather than getting exposure to a defined basket of investments as determined by an index fund. For example, someone about to enter retirement or already in retirement may not view SpaceX as an appropriate investment for them, given it’s considered high-risk as measured by its lack of profitability, lofty valuation, and continuous share dilution, among many other risks.

Something else to consider is the tax consequences of where you choose to hold the stock. If the SpaceX IPO is not successful and the stock price falls significantly, you could benefit from realizing a loss in a taxable account as a tax write-off as opposed to a retirement account, where you could not write it off.

Conversely speaking, if SpaceX makes new highs and you have significant gains in a taxable account, you would have to factor in capital gains tax when choosing to sell the position. If it were held in a retirement account, there would be no tax consequences to selling the position at a gain. (With any financial advice, it should be tailored to the individual, family, or institution.)

Unfortunately, there is not a one-size-fits-all solution to decide if these IPOs are appropriate investments for you or not. Fortunately, there are plenty of capable investment professionals to have this conversation with you and help determine what is appropriate for your situation. 

We will be watching these IPOs intently in the coming months. Although the prospect of exposure to such a disruptive and innovative company is compelling on the surface, we remind investors to proceed with extra caution with IPOs, especially when they are widely hyped and sought after by the public.

Brendan Roberts is a portfolio manager at St. Germain Investment Management, serving in a dual role as both an advisor and a member of the firm’s investment policy committee. His responsibilities include equity research, trading, and financial advising.

St. Germain Investment Management does not intend or suggest investment advice through this information. This information is provided for educational purposes only and should not be construed as advice. This presentation has been prepared without consideration to the circumstances and objectives of a particular individual; therefore, investment vehicles mentioned may not be suitable. Investors should carefully consider risks, investment objectives, fees, and potential expenses before investing. Individual results may vary, and past performance does not guarantee future results. Market and economic conditions beyond our control, such as inflation, interest rates, and other exogenous events, may or may not have played a role during the time period, and such conditions or material data, whether in whole or part, does not suggest similar investment outcomes in the future or that such conditions would prevail in like fashion. Neither the data nor rate of return reflect the particular objectives or investment goals of any individual, group, or company at St. Germain Investment Management.

What the SpaceX IPO Means for the Market

By Contributor
Wealth Management

Exploring New Frontiers

Jeffrey Liguori

Momentum behind all things outer space is building rapidly. The aerospace field is advancing quickly toward ambitious goals beyond mere exploration, such as in-space manufacturing, lunar data centers, space-based solar power, lunar mining for rare earths and metals, and space tourism. Space is nearly a $700 billion industry today and likely to surpass $1 trillion in about five years, and $2 trillion by 2040.

For years, exploring and working outside of the Earth’s atmosphere has been almost entirely driven by the governments of sovereign nations, largely dominated by the U.S. and Russia, with China emerging as a powerful competitor in more recent years. Private contractors dabbled in space travel as early as 1982, but with intermittent success, constrained by the enormous amounts of capital required to support an ongoing effort. That all changed in 2002, the year that SpaceX was founded. 

Elon Musk tasked SpaceX with slashing the cost of reaching space to unlock bolder exploration and broaden access, with the long-term aim of making humanity multi-planetary. To bring that vision within reach, SpaceX is building fully reusable rockets and spacecraft that could one day help establish a self-sustaining city beyond Earth.

It is no surprise, given the size of the industry and the bold ideas of the company and its founder and CEO, that the SpaceX initial public stock offering was the largest ever, with a $1.77 trillion market capitalization, or total value, when shares began being sold to the public this month. Until now, the IPO for Visa in 2008 was the largest ever, valuing that company at $20 billion. 

All this makes SpaceX the eighth-largest public company by value on the planet, and one of only two in the top 10 with fewer than 20,000 employees.

Market Indexing and Institutional Buying

While the overall valuation of SpaceX is massive, the company is only selling about 5% of all shares, which means investors only have to deploy between $6 and $8 billion to support the offering, with all proceeds going directly to the company. Musk will retain approximately 42% of equity (with about 85% voting power) after the IPO. 

The pattern in many ‘hot’ IPOs is familiar: a strong opening surge followed by a cooling-off period over the next 12 months. Visa was no exception, climbing roughly 50% in its first month as a public company before briefly trading below its IPO price a year later. For patient shareholders, however, the outcome was far more compelling: the total return of Visa shares since coming public is about 2,500%, versus roughly 725% for the S&P 500 through May 31, 2026.

Visa’s macroeconomic backdrop in the throes of the Great Financial Crisis was far different from today’s market, where equities are hitting new highs almost daily. And past performance is no indication of future results. 

Given SpaceX’s expected size at listing, the company is likely to join the Nasdaq soon after its IPO, creating a potential technical tailwind for the shares. Because many ETFs and other passive funds are required to track the index, inclusion would likely trigger incremental buying demand. Analysts expect that index-related flows could begin roughly 15 days after the offering, providing an additional source of near-term support for the stock.

“This year, individual investors have shown a strong tendency to chase winning stocks, which can make market moves bigger and more volatile.”

The expected timeline is as follows: Nasdaq inclusion roughly 15 days following the IPO, following a rule change that allows SpaceX to qualify. S&P 500 inclusion is likely to be delayed by approximately 12 months because the index did not change its rules. (A company must be profitable for addition to the S&P 500, and despite lobbying efforts on behalf of SpaceX, which isn’t currently profitable, Standard & Poor’s refused to change its rules.)

The Active Retail Investor

You and I — the retail investor — may matter more to SpaceX’s IPO than index funds or other passive buyers. This year, individual investors have shown a strong tendency to chase winning stocks, which can make market moves bigger and more volatile. Much of that buying has been concentrated in semiconductor names such as Nvidia, Micron, SanDisk, and Advanced Micro Devices, as well as in leveraged ETFs tied to those trades.

Those gains are now large enough that retail investors could have an outsized influence on the IPO. If even a small share of recent profits is redirected into SpaceX, demand could be powerful relative to the limited number of shares available for trading.

That could lead to two clear outcomes. First, strong retail demand could push the stock well above expectations after the IPO. Second, investors may sell other recent winners to free up cash to buy SpaceX, which could create short-term pressure in parts of the broader market, especially in leveraged funds, where selling can have an amplified effect.

Investor enthusiasm around a SpaceX IPO may be adding fuel to an already stretched stock market. Many Wall Street strategists warn that AI-driven gains have pushed valuations toward historically elevated levels, increasing the risk of speculative excess. SpaceX could intensify those concerns: at nearly 110 times revenue and with no current profitability, its valuation would reflect exceptionally high expectations for future growth. Even at the peak of the late-1990s tech bubble, valuations generally topped out around 10 times revenue, making SpaceX’s projected multiple extraordinary by historical standards.

Still, the IPO market may suggest a different conclusion. More than 1,100 companies went public during the buildup to the tech bubble from 1998 to 2000 before the market eventually broke. By contrast, only about 235 IPOs have come to market over the past three years, including SpaceX and others expected later this year. If IPO volume offers any signal about the broader market, the current rally may still have room to run.

As always, it is difficult to predict if the SpaceX IPO moves the market to even loftier heights, or marks a turning point whereby stocks come back to earth. Either way, it will be one hell of a ride — pun intended.

Jeffrey Liguori is executive vice president of Bradley Foster & Sargent Inc.