SpaceX IPO faces scrutiny as past blockbuster listings often underperform

SpaceX’s upcoming initial public offering (IPO), expected as early as June 11, is drawing attention as one of the most anticipated stock debuts in history, with a potential $1.75 trillion valuation. However, a Reuters analysis of the 50 highest-valued IPOs over the past five years shows that investors would have fared better buying an S&P 500 index fund 75% of the time. The average return for these IPOs through May 21 was 27%, compared to a 53% gain in the S&P 500, assuming investors could purchase shares at the IPO price. SpaceX’s valuation would dwarf previous listings, but its price-to-sales ratio of nearly 100—far exceeding Nvidia’s 24—raises concerns, especially as the company reported nearly $5 billion in losses last year. University of Florida professor Jay Ritter noted that high valuations often correlate with underperformance, despite optimistic future outlooks. Among recent IPOs, AI-related chip designers like Astera Labs and Arm Holdings stood out as winners, with gains of over 700% and 400%, respectively. However, other high-profile debuts faltered: Chinese ride-hailing giant Didi Global, once valued at $14 per share, is now down 74% after its delisting, while Rivian Automotive has slumped 82% since its 2021 IPO despite burning $1 billion in cash quarterly. Even Figma, whose shares nearly quadrupled on its first trading day, has fallen 35% amid investor fears that generative AI could disrupt its business model. The analysis underscores the risks of betting on high-profile IPOs, particularly those with sky-high valuations, as past performance suggests most fail to outpace broader market gains.