SpaceX and the IPO Mania

This is an exciting moment for markets. U.S. equities are sitting at all‑time highs, powered by a very real, very palpable optimism about technology and the possibilities of tomorrow. Some of the brightest minds in the world are sketching out futures that sound like science fiction: data centers orbiting the earth, human colonies on Mars, and swarms of AI agents sophisticated enough to make us question our own relevance. 

Yet this same wave of technological optimism tends to blur the line between what’s achievable and what’s fantasy. Breakthroughs inspire people to dream up scenarios that are either technically impossible or economically nonsensical. For most investors, it becomes genuinely hard to tell where the real innovation ends and the marketing begins. 

This confusion creates a goldmine for promoters who can package those dreams and sell them to the world. We often see this most clearly in the Initial Public Offering (IPO) markets. Investors, eager not to miss the ‘next big thing’ can find themselves swept into stories that are far more exciting than they are profitable. 

Take, for example, Space X, which is creating palpable excitement with an upcoming IPO. As per its filings, in 2025, SpaceX  generated $18.7 billion in revenue and $5 billion in net losses. The business has three divisions - Space, Connectivity, and Artificial Intelligence. 

The Space business builds and operates reusable rockets for both Starlink and external satellite customers, completing 165 Falcon launches in 2025. With payloads of up to 40 tons, Falcon is now a mature platform and the real upside lies in Starship, a 100 ton heavy lift vehicle developed at a cost of ~$15 billion but still pending commercial approval. To Elon’s credit, he figured out how to make reusable orbital rockets work thus opening up the modern space economy. 

Starlink provides communications services. In 2025 it generated $11.4 billion in revenue and $4.4 billion in operating income, partially helped by the fact that it doesn’t pay commercial launch rates to SpaceX. Subscriber growth has been explosive, rising from 2.3 million in early 2024 to 10.3 million by Q1 2026. It is important to note that while margins are high, this is a fairly capital intensive business (satellites only have a useful life of 5 years) and its competitors (broadband/telcos) are fierce foes due to which Starlink’s ultimate Total Addressable Market (TAM) may be limited.

Revenue for the Artificial Intelligence segment comes from three sources: advertising on X (previously known as Twitter), subscriptions to Grok (its LLM), and the sale of AI compute capacity. So far, Grok has only gained 1.9 million paid subscribers, compared with an estimated 50 million for ChatGPT. However, Space X just made a deal where Anthropic is reportedly set to pay $15 billion per year to Space X for access to its compute capacity. As we’ve seen with other hyper-scalers, building and operating data centers is a brutally capital intensive business.

At the rumored $1.8 trillion valuation, investors would be paying ~100x 2025 revenue and ~75x 2026 estimated revenue for SpaceX. As a comparison, the S&P 500 is trading at 3.8x 2026 estimated revenue. Elon Musk has proven himself to be one of the greatest stock promoters in human history. SpaceX expectations are further emboldened by Elon’s pay package where his equity vests on, “the Company’s establishment of a permanent human colony on Mars with at least one million inhabitants”. However, these multiples demand not years but decades of near‑perfect execution including massive Starlink subscriber growth, sustained launch dominance including success of Starship, and the ability to fund enormous capex cycles in AI.

In addition to fundamentals, there are a few other interesting facts about the IPO:

One, the sheer size of the raise at $75 billion will test the market. Where is the money going to come from? It helps that SpaceX has arm-twisted index providers into relaxing their rules to include it in the major indexes shortly after its debut. Second, SpaceX has taken in just $12 billion of equity capital since it was founded. If the IPO values the company at $1.8 trillion, early investors would see about a 160× return! With large amounts of wealth created, there is risk in what happens after the lockup, when those investors are finally free to sell. Third, why go public at all? The private markets are now deep enough to fund almost any scale of ambition. One plausible explanation is that a public listing could eventually make it easier to combine SpaceX and Tesla, two companies with significant intercompany transactions and shared technology. 

“An IPO is like a negotiated transaction – the seller chooses when to come public – and it’s unlikely to be a time that’s favorable to you.” 

-Warren Buffett

White Falcon will not be participating in this IPO. We think this valuation is outrageous. We prefer situations where the market has modest expectations and the odds are tilted in our favor and this is exactly the opposite. But, we are watching the situation closely and assessing its potential impact on the broader equity markets. Our interest is also being fueled by reports that Anthropic and OpenAI may be preparing their own IPOs later in the year. As we look back at history, we are reminded that these IPOs usually come at a time when it is most advantageous for the promoters. In fact, In some cases, these IPOs can mark short term market peaks.

We can also add the recent SPAC mania of 2021 to the above. By late 2022, over 90% of those SPACs traded below their $10 listing price, and many fell 60 - 80% as projections failed to materialize.

This dynamic occurs for two reasons. The first is timing: companies typically choose to go public when markets are euphoric and valuations are high and, currently, enthusiasm around space and AI is strong. The second is liquidity: in order to buy tens of billions of dollars’ worth of new stock, investors must sell something else. If and when these IPOs disappoint, sentiment can swing sharply in the other direction and investors rush to reduce risk, resulting in broad based selling across the equity market. 

To be clear, we do not see the SpaceX IPO as a definitive signal that the market has reached its peak. It is one of many signs that help us gauge where we are in the cycle. We will watch this IPO, as well as other IPOs, shifts in investor sentiment, and changes in fundamentals, to inform how we manage the portfolio. As always, our focus remains on staying disciplined and positioning ourselves thoughtfully.