Why Smart Investors Are Skipping the SpaceX IPO
Every time a major company goes public, retail investors face a subtle trap: they become exit liquidity for early investors who got in years or decades earlier. The SpaceX IPO, set to price at $135 per share and value the company at $1.77 trillion, is a masterclass in why long-term investors should approach hot IPOs with extreme skepticism.
SpaceX has been private for 24 years—far longer than Microsoft (11 years), Google (6 years), or Facebook (8 years) before their IPOs. That’s because private companies are staying private longer, and founder Elon Musk has been perfectly happy to raise capital from institutional and venture investors. The question for public market investors is simple: at what price should you step in? At $135, SpaceX trades at a price-to-sales ratio of over 90-to-1. This is approaching the stratospheric valuations we saw at the dot-com peak. Consider what happened to companies that traded at similarly extreme multiples: Yahoo peaked at 50x sales before declining 97%, Qualcomm at 30x sales before falling 88%, and Cisco at 25x sales before it took 26 years just to break even from its 2000 highs.
The broader problem is that SpaceX is allocating 30% of the $75 billion deal to retail investors—roughly $22.5 billion worth of shares. History shows that retail participation creates dangerous volatility. Most investors won’t get shares at the IPO price anyway; they’ll buy on the open market after the stock has already gapped up in the frenzy. This isn’t buying an IPO at a fair valuation—it’s volunteering to pay premium prices to help early investors exit their positions at maximum valuations. A better strategy is to wait 6-12 months, let the hype fade, let management report actual results, and then evaluate whether SpaceX is worth owning at a rational price. And here’s the real kicker: if you own S&P 500 or total market index funds, you’ll eventually own SpaceX anyway once it becomes large enough to be included. There’s no need to chase it at inflated IPO valuations.
So what for long-term investors? SpaceX may well become a transformational company—Starlink is already profitable, Starship could open entire new markets, and it has no real competitors. But a great company at the right price is what compounds wealth. A great company at a terrible price destroys it. The fact that SpaceX is going public at all reflects where we are in the market cycle: when mega-cap valuations reach these extremes and institutional money needs exits, it’s often a sign to be cautious, not euphoric. The patient investor who buys SpaceX at $110 in nine months, with better information and lower volatility, will likely do far better than the one chasing it at $135 today.
