SpaceX IPO Buzz Grows, But History Of Big Listings Warns Investors

SpaceX is preparing for what could be the largest initial public offering (IPO) ever, targeting a $1.75 trillion valuation when it begins trading under the ticker 'SPCX' as early as June 11. The company’s prospectus was filed on Wednesday, with Elon Musk offering shares to retail investors through platforms like Robinhood and SoFi, potentially allowing broader access at a lower price. A Reuters analysis of the top 50 IPOs by valuation over the past five years reveals a stark warning for investors: most underperformed the S&P 500. Buyers of these IPOs saw an average return of 27% through May 21, compared to a 53% gain in the broader index. The data assumes purchases at IPO prices, which retail investors often cannot achieve, and returns worsen further on the first trading day. SpaceX’s valuation would give it a price-to-sales ratio of nearly 100, far exceeding even high-flying AI stocks like Nvidia, which trades at 24. University of Florida professor Jay Ritter noted that companies with extreme valuations often underperform, despite optimistic future projections. 'Stuff could go wrong,' Ritter cautioned, pointing to SpaceX’s $5 billion loss in 2023 as a red flag. Among recent IPOs, AI chip designers Astera Labs and Arm Holdings stand out as winners, with gains of over 700% and 400%, respectively. However, other high-profile debuts have faltered: Chinese ride-hailing giant Didi Global, once heavily oversubscribed, is now down 74% since its 2021 IPO and trades over-the-counter after being delisted in 2022. The SpaceX IPO follows a wave of AI-related listings, including Cerebras Systems, which surged 52% on its May 14 debut before dropping 27% from its peak. Analysts suggest that while AI-driven demand may support SpaceX’s valuation, historical trends indicate that high-priced IPOs rarely deliver long-term outperformance for average investors.