Key Points
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SpaceX is gearing up to hold what stands to be the largest IPO ever, with plans to raise as much as $80 billion from public market investors.
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Elon Musk’s space exploration company is also targeting a larger share of the retail investor market than is typical with most IPOs, with plans to sell 30% of the offering to everyday investors.
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This could prove key in maximizing SpaceX’s post-IPO valuation, which, while it is to the benefit of insiders and other private SpaceX investors, may be a way for public investors to profit as well.
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Speculation is rising that SpaceX, Elon Musk’s space exploration company, will go public in the next few months in the biggest IPO ever. SpaceX plans to raise between $40 billion and $80 billion, far above the $25.6 billion Saudi Aramco raised in its 2019 public market debut.
Furthermore, unlike other IPOs, where retail investor presentation can be as low as 5%, Musk and SpaceX are aggressively working to ensure that as much as 30% of the offering goes to small, everyday investors. SpaceX is even working with retail-facing platforms like E*TRADE and Morgan Stanley to ensure this happens.
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There’s a very good reason Musk may want to ensure as many retail investors as possible participate in this IPO. If retail investors, especially those already holding shares in Musk’s Tesla (NASDAQ: TSLA) decide to go “long and strong” on SpaceX stock as well, this could go a long way in enabling SpaceX to sustain, and add to, a multitrillion-dollar valuation.
Image source: Getty Images.
Musk’s faithful flock provide SpaceX with a ready-made investor base
Retail investor enthusiasm for Tesla stock has entailed a devotion that goes well beyond typical stock ownership. True believers in Musk’s long-term “master plan” for the electric car company — these “fanboy” investors willing to buy the dip, not to mention cut the company much slack when it fails to live up to expectations — have been key to Tesla continuing to trade at a forward P/E ratio in the triple digits, when the average automotive stock is lucky to trade at a double-digit forward multiple.
Much suggests that this investor base will also become “true believers” in SpaceX shares. If this occurs and these investors also talk glowingly about the stock, on the same social media platforms where bullish talk about Tesla is prevalent, the impact on SpaceX’s performance right out of the IPO gate could be tremendous.
A big reason for this is how much investing has changed since Tesla first went public. In today’s market, with retail traders more active than ever, SpaceX shares could surge “to the moon” on speculative frenzy. For existing shareholders, this could prove beneficial, given how much SpaceX’s private market valuation has exploded.
The impact could prove tremendous
Estimates of SpaceX’s valuation range widely. Certain transactions, such as Musk’s merger of his xAI start-up into SpaceX, have contributed to the significant increase in this pre-IPO company’s private-market valuation. However, as seen in SpaceX’s trading price on private market platforms like Forge, the stock has also experienced significant appreciation ahead of the IPO.
A year ago, SpaceX shares were trading around $215 each. Today, per the latest private market sales, it’s trading around $612 per share, implying a valuation of nearly $1.5 trillion. Given the pent-up excitement among retail investors for a stake in SpaceX, its valuation could spike to $2 trillion, perhaps even higher near term.
While mostly beneficial to SpaceX insiders, there is a way for the public to capitalize on it. EchoStar just swapped some of its spectrum with SpaceX in exchange for $8.5 billion in cash and a 2% stake. EchoStar shares have already rallied on this “hidden asset,” but a further climb for SpaceX post-IPO could give shares in this secret space stock even more room to run.
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Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends 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.
