SpaceX has announced its IPO (Initial Public Offering), which is set to be the largest in history, aiming to raise $75 billion at a valuation of approximately $1.8 trillion. To put these figures into perspective, the amount Elon Musk is seeking to raise from investors is equivalent to the combined value of the eight largest companies in Portugal’s PSI index: EDP, Jerónimo Martins, BCP, Galp, Sonae, NOS, Navigator, and REN. By purchasing these companies, investors would be acquiring businesses that generate $100 billion in annual revenue and $5 billion in annual profits. By investing the same amount in SpaceX, they would be buying 4% of a company that generates less than $20 billion in revenue and loses $5 billion per year. Using other benchmarks, SpaceX’s proposed valuation is five times Portugal’s GDP and equal to the combined value of Europe’s five largest companies, which together generate $60 billion in annual profits. And this is for a company that not only operates at a loss, but is also burning through $9 billion per quarter and does not expect to become profitable in the coming years.
It is natural that, in the final stages of speculative cycles, with emotions running high and FOMO (Fear Of Missing Out) driving decisions, we look at these absurd numbers and say that there must be a narrative that justifies valuing SpaceX this way. And what is that narrative? Cities on Mars with one million inhabitants, space-based data centers serving the AI economy, and an estimate of market size larger than the entire U.S. economy. And all of this is being promised by a person who, in addition to already serving as CEO of several other companies, will simultaneously be Chairman, CEO, and CTO of SpaceX, while holding 10% of special shares that permanently grant him 52.5% of the voting rights. In other words, Elon Musk and the private investors and executives associated with him can sell 90% of the company to investors for $1.5 trillion, while Musk continues to control it as though it were his private property.
It is true that SpaceX is a leading company in the space sector and possesses the best technology for launching payloads into orbit, controlling more than 80% of that market. This enabled it to build Starlink, a global satellite network through which it sells internet services worldwide. That is where nearly all of its revenue and profit margin come from. However, this successful company has recently been undermined by Elon Musk’s speculative ventures. SpaceX acquired xAI, founded by Musk himself, for $250 billion in stock, despite the company losing enormous amounts of money through its Grok AI model. In turn, xAI had already acquired X (formerly Twitter) the previous year for $45 billion. That company had originally been purchased by Musk for $44 billion in cash and subsequently damaged through the dismissal of 80% of its workforce and highly divisive policies, although it did give him control of a major social media platform. In other words, Musk’s pattern has been to carry out stock-based acquisitions among loss-making companies he controls, using ever-higher paper valuations to generate accounting gains for himself and his private investors, all of whom will now finally be able to sell their shares to public investors following the IPO at a stratospheric valuation.
But you may say: only those who want to buy SpaceX shares in the IPO will do so. That is simply the market at work. Wrong. The worst part is not SpaceX’s absurd valuation, nor the fact that Musk controls the company with only 10% of the shares. The worst part is that the U.S. capital market is being manipulated to benefit Musk while leaving investors exposed. In an effort to attract the major IPOs that are on the horizon (SpaceX, OpenAI, and Anthropic), NASDAQ changed its index inclusion rules in May to ensure it would win these listings. The new rules allow companies like SpaceX to join the NASDAQ-100 after just 12 days instead of waiting a full year. Another change was the elimination of the requirement to make at least 10% of shares publicly available (free float) in order to qualify for index inclusion. This benefits SpaceX, which plans to sell only 4% of its shares. But because that small free float would normally result in a very low index weighting, since weighting is based on publicly traded shares, NASDAQ also decided that companies with low free float would receive triple weighting.
The game is now so distorted that gains during the first few days are almost guaranteed due to the mandatory buying pressure from passive funds that track the indexes. More than $1.5 trillion in passive funds track the NASDAQ-100. Under the new rules, those funds will be required to purchase SpaceX shares based on its index weighting, which is expected to exceed 0.6%. This implies immediate and compulsory demand for more than $10 billion worth of shares at any price, regardless of the company’s value or the quality of its financial results. This will cause the stock price to jump during the IPO, creating a snowball effect because a higher share price increases the company’s weight in the index, which forces funds to buy even more shares, pushing the price up again. At that point, facing growing demand, SpaceX employees and investors will be able to sell their shares into the market instead of waiting the usual six-month lockup period. Private investors and executives will thus be able to cash out and earn billions of dollars disconnected from the company’s actual value. Based on expectations of these easy gains, speculative buying of pre-IPO share blocks at prices above the IPO price has already begun.
This happens because everyone involved profits from the process. Company executives who receive shares and can sell them, private investors who backed SpaceX, lenders who provided financing at high interest rates, the banks promoting the IPO which is being led by the five largest American investment banks and even exchanges such as NASDAQ, which increase their size and revenues by attracting trillion-dollar IPOs. It is a game in which everyone profits except the retail investor, who is invited and now effectively compelled by these new rules to participate in IPOs with excessive valuations at the peak of the bubble.
In this context, I applaud the courage of the Danish pension fund AkademikerPension, which, faced with this situation, announced that it had placed SpaceX on its exclusion list due to speculative valuation concerns and catastrophic corporate governance. There is also a movement among American pension funds opposing these new NASDAQ rules, but because they operate under U.S. jurisdiction, they will still be required to replicate the index and purchase the shares.
And what will European market regulators such as the European Securities and Markets Authority (ESMA) do? Will they allow this distorted market to force Europe-based passive funds to buy SpaceX shares? When rules are changed just one month before a mega-IPO specifically to benefit that offering, it is clearly time to take a courageous stand in defense of investors—a core responsibility of ESMA.
Today, SpaceX’s IPO is being announced as the largest in history. Tomorrow, history may remember SpaceX’s IPO as the beginning of the end of the speculative bubble in the American technology market.
And, on a more optimistic note, I would like to offer my triple congratulations to the Católica-Lisbon SBE community!
- Congratulations on the extraordinary rise of 11 places in the Financial Times Executive Education ranking, reaching 26th place worldwide in Open Enrollment Programs!
- Congratulations on the launch, on June 1, of the School’s new brand identity as the next step in its “Achieve Greatness” journey.
- Congratulations to alumnus Vítor Gaspar, who will receive the Career Award at Católica-Lisbon SBE on June 2 at 6:00 PM in recognition of an outstanding career in research, public service, and international leadership.
Filipe Santos, Dean of Católica Lisbon School of Business and Economics