Will You Own SpaceX Shares? What the Historic IPO Means for Your Portfolio
(image created by AI; article written by me)
What the SpaceX IPO Means for Markets and Your Portfolio
SpaceX is preparing to launch the largest IPO in history at a $1.78 trillion valuation, with OpenAI and Anthropic set to follow. In this week's blog, we look at how these mega-fundraisings can influence broader market performance and answer a question several clients have asked over recent weeks: will you own shares in SpaceX through your existing portfolio? (TL;DR: not immediately.)
Tomorrow, Elon Musk’s SpaceX is expected to raise around $86 billion in what will be the largest Initial Public Offering (IPO) in history.
And hot on the heels of SpaceX, OpenAI and Anthropic, the two dominant players in the artificial intelligence race, have both filed IPO prospectuses, with stock market listings expected later this year. Alphabet (owner of Google), meanwhile, is reportedly seeking to raise a further $80 billion to fund its AI infrastructure build-out.
Taken together, we're witnessing one of the largest waves of equity issuance ever seen. And this of course has an impact on the wider stock market.
As SpaceX, OpenAI, Anthropic and others prepare to issue vast quantities of new shares, investors need cash to buy them. This week, one market commentator observed that these deals are beginning to "suck the oxygen out of the room", with investors taking profits elsewhere — particularly in technology stocks — to make way for the flood of new equity paper.
There is also a sentiment element at play. Some investors see uncomfortable parallels with the late stages of the Dot-Com boom, when a succession of highly anticipated technology IPOs came to market at increasingly ambitious valuations shortly before the bubble burst in early-2000. Whether that comparison ultimately proves valid remains to be seen, but it has undoubtedly encouraged a degree of caution, with many investors adopting a "wait and see" approach until the market has had a chance to digest the new issuance.
When investing, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invested, particularly when investing for a short timeframe. Neither simulated nor actual past performance is a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
Is SpaceX a Good Investment?
I have no idea.
That might sound like a cop-out, but it's the most honest answer.
There are two reasons: firstly, our role isn't to predict which individual companies will outperform over the next few months or years. We recommend diversified portfolios designed to help clients achieve their long-term financial goals, rather than making concentrated bets on individual stocks.
Secondly, even if we were inclined to have a view, how exactly do you value a company like SpaceX?
The challenge with SpaceX is not deciding whether it’s a remarkable business - it clearly is. The challenge is deciding what it is actually worth.
At first glance, the valuation looks eye-watering. At the proposed IPO price, SpaceX would be worth around $1.78 trillion, making it the seventh largest company in the world and commanding a valuation multiple far in excess of most established technology giants. That price tag would put the company on a 90x revenue multiple. For context, Apple and Microsoft trade at around 9.5x revenues, whereas Nvidia - the largest company in the world - trades at a premium 20x.
To some investors, that's an obvious red flag. However, to others, the comparison misses the point entirely.
Traditional valuation approaches work best when a business has reasonably predictable revenues, profits and growth prospects. SpaceX has elements of all three, but it also has enormous optionality. How do you value a company that dominates commercial space launches today, could become one of the world's largest internet providers tomorrow, and may yet create entirely new markets that do not currently exist?
The answer, of course, is that nobody can do so with any great precision (though many will say they can).
This is why opinions on the stock are so polarised. Bears look at the valuation and see a company priced for perfection. Bulls look at the opportunity and argue that conventional valuation metrics fail to capture the scale of what SpaceX could become.
Both perspectives are reasonable.
What Does History Tell Us?
The history of IPOs isn’t particularly encouraging.
Academic research going back to the 1990s (notably Ritter and Loughran, widely cited in financial literature) consistently documents that IPOs tend to underperform the broader market over three to five years following listing.
The pattern is especially pronounced in hot IPO markets — periods of high investor enthusiasm, elevated valuations, and heavy issuance — which is precisely the environment we find ourselves in today.
This doesn't mean every IPO is a poor investment. Some of these companies may turn out to be exceptional businesses and exceptional long-term investments. But the best businesses don't automatically make the best investments if the starting valuation already reflects an enormous amount of future success. In this instance, you don't just need the company to succeed — you need it to succeed more than the market currently expects, at a pace faster than the current price implies.
Will You Own Shares in These Companies?
The short answer is: not immediately, and probably not for some time.
Our core investment proposition uses low-cost index funds that invest in companies once they are included in major market indices such as the S&P 500, MSCI World and FTSE All-World. We also use some more specialised indices, including those that favour smaller companies or companies with value characteristics, to tilt portfolios towards factors that have historically been associated with higher long-term returns.
When a company lists its shares, index inclusion is not automatic from day one. Each index provider has its own eligibility criteria, relating to factors such as trading history, liquidity and the proportion of shares available to public investors.
Some index providers have already begun relaxing their rules to accelerate the inclusion of SpaceX. Others, most notably S&P, have held firm. As things stand, SpaceX is unlikely to become eligible for inclusion in the S&P 500 until at least mid-2027.
That's getting into the weeds somewhat. The key point is that SpaceX — and potentially OpenAI and Anthropic in due course — will gradually find their way into the major market indices. From that point, they will naturally begin to feature in index-tracking portfolios.
In effect, this creates a built-in "wait and see" period. Rather than chasing the excitement of the IPO itself, investors allow the company to establish a public track record before it becomes part of the portfolio. It is a patient, evidence-based and rules-based approach that we continue to endorse.
How Much Would You Actually Own?
It's also worth putting the scale of these IPOs into perspective.
Whilst the headline numbers are enormous, only a small proportion of the company is actually being floated on the stock market. SpaceX may be raising approximately $86 billion, but the proposed valuation of $1.77 trillion implies that only around 5% of the company is initially available to public investors — what markets refer to as the free float.
This matters because most indices are weighted according to the shares that are actually available to buy and sell, rather than the company's full valuation.
On that basis, the initial SpaceX free float would represent only around 0.05% of the global stock market.
To put that into pounds and pence, an investor with £1 million invested in a global equity index would initially have exposure of only around £500 to SpaceX. Even if the entire company were publicly listed today, that figure would rise to only around £14,000, or 1.4% of the portfolio.
For investors holding globally diversified portfolios, the message is therefore that you will probably own some SpaceX eventually — but not today, not in any meaningful size, and not all at once. However, if SpaceX continues to grow and creates substantial shareholder value, its share of global stock market indices will rise accordingly, meaning investors will participate in that success through gradually increasing portfolio exposure.
Conclusion
The SpaceX IPO is undoubtedly a historic event. Whether it ultimately proves to be a historic investment remains to be seen.
The company sits at the intersection of some of the most exciting themes in global markets — artificial intelligence, satellite communications, and space exploration. It is therefore unsurprising that investors are captivated by the story.
Yet history teaches us that excitement and investment returns are not always the same thing.
Indeed, the greatest impact of the SpaceX IPO may not be on portfolios at all, but on market sentiment. The combination of SpaceX, OpenAI, Anthropic and the wider AI ecosystem coming to market represents a significant test of investor appetite. If demand proves strong, it could provide further fuel for the technology rally. If not, it may reinforce concerns that valuations have run too far, too fast.
Either way, our approach remains unchanged. We will continue to favour diversified portfolios, broad market exposure and rules-based investment decisions over attempts to predict which company, sector or theme will dominate the next few years. That approach may not be as exciting as trying to identify the next Nvidia, but history suggests it is a more reliable way of achieving long-term investment success.
As for whether you'll own SpaceX?
Almost certainly.
Just not tomorrow.
Happy Thursday!
Kind regards,
George
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