Winning The SpaceX Lottery
We received more inquiries about SpaceX’s initial public offering than any other topic in some time. It is not surprising. Although Elon Musk can be quite polarizing, he is probably the Einstein of our generation.
When encountering a “can’t miss” investment opportunity we are overwhelmed with everything that is good. This blinds investors as they are determined their lottery ticket will win.
If you received a SpaceX allocation, it doesn’t alleviate your need to evaluate this as you would any on-going business.
SpaceX has a dominant 70% market share in the space lift business with the Falcon 9. Refurbishing and reusing landed rocket boosters reduces launch costs by millions of dollars per flight.
Starlink, the workhorse of SpaceX, has ten million customers paying $11.4 billion annually and growing 50% per year. Their global internet network generates steady, predictable consumer cash flows.
Additionally, SpaceX is rapidly spending money in the extremely expensive and competitive AI market challenging other major AI/LLM providers.
Regardless of how capable Musk is, SpaceX investors need to approach this investment with caution. There are rational questions to ask and limits to consider.
For most investors, once you strip away the excitement, the valuation falls apart. Much of the narrative is valued not in logic, but rather proximity to Musk.
At $1.77 trillion of total value, this is the biggest IPO ever. However, only 4% of the company is being initially being sold to the public. This can create artificial demand with limited supply, causing the price to spike temporarily.
With only three years of financials, the S-1 filing outlining the details behind the company is very opaque. Musk controls 85% of the votes. As a “controlled” company, SpaceX has $20 billion of obligations to Musk-affiliated entities.
We have seen several credible research pieces estimating SpaceX’s valuation at $750 billion to $1.3 trillion. Although those are hefty figures, they pale in comparison to the IPO valuation.
Furthermore, recognize that with $18.7 billion in revenue in 2025, SpaceX lost $4.9 billion. Cumulatively, SpaceX has posted losses of $37 billion.
For comparative purposes, that puts the IPO price at about 94 times sales. This is ten times as expensive as Alphabet, Apple and Microsoft, twelve times as expensive as Meta and 25 times as expensive as Amazon.
Given this, just because Musk says the business is worth $1.77 trillion does not make it so. As such, how do you logically value the business? There was not a formal valuation done on SpaceX. Musk simply said, “this is what it is worth,” without independent analysis.
This allowed Musk to sell a narrative as if the next ten years of high growth and profitability are guaranteed.
Aurelion Research commented, that to bridge the gap from their estimate of $700 billion to $1.75 trillion, you must assign nearly a trillion dollars to space data centers that don’t exist and to a Mars optionality that may never produce revenue.
Investment bankers are jumping over themselves to sell this. If you follow the money, you see investment bankers are not being compensated for a good valuation. They are compensated for selling shares at a high valuation.
What happens after the lock up period? Somewhere between Day 2 and Day 366 after the IPO, insiders who have owned SpaceX stock for years will have the ability to sell their shares. With limited shares available initially, and a new group of sellers, it is quite possible that insiders may drive the price down.
What does the future of Tesla or SpaceX look like without Musk at the helm? We hear no one discussing this.
What if Musk has a stroke, gets cancer or is in a car accident? All these ventures heavily rely upon Musk not only living, but being highly productive.
What if a solar flare or meteor storm destroys half of Starlink’s satellites?
What if the Falcon 9 blows up destroying the launch pad like we recently observed with Blue Origin?
Being a great investor requires discipline and the ability to identify what can go wrong. If everything goes right, markets take care of the rest. If you haven’t identified what can go wrong, you may wake up with a sizable surprise on your hands.
If you understand this and acknowledge the gamble, then size it appropriately. Obviously, you don’t want all your net worth in SpaceX.
Lastly, SpaceX can simultaneously be a great company and a terrible investment. As a great company, society will reap the benefits of Musk’s genius, but the stock will hit some turbulence.
Dave Sather is a Certified Financial Planner and the CEO of the Sather Financial Group, a “fee-only and fiduciary” strategic planning and investment management firm.
