Wall Street is abuzz with excitement over the upcoming blockbuster listing of Elon Musk’s rocket and satellite manufacturing company, SpaceX, expected next month. The company plans to trade under the ticker symbol “SPCX” and filed its prospectus on Wednesday, with the share sale potentially taking place as early as June 11. Founder Elon Musk is offering some shares to retail investors through Robinhood, SoFi, and other trading platforms, allowing them to enter at a lower price point. Following SpaceX’s listing, OpenAI and Anthropic are also expected to go public soon after.
However, among the largest IPOs in recent years, very few have allowed investors who bought in at the time of listing to make money. An analysis of the 50 highest-valued IPOs over the past five years shows that in roughly three-quarters of the cases, investors would have been better off buying an S&P 500 index fund. This data highlights the difficulty of finding bargains among companies whose valuations often surge dramatically before their shares even begin trading.
The data shows that if an investor had bought each of these IPO stocks, the average return as of May 21 would be 27%. In comparison, over the same historical periods, the S&P 500 posted an average gain of 53%. This analysis assumes buyers were able to purchase shares at the IPO offering price (which is typically not possible for retail investors) or simply bought the broader S&P index. The analysis also shows that historically, returns have been even worse for those who bought in during the first-day frenzy of trading.
Dennis Dick, a trader at proprietary trading firm Triple D Trading, said: “Unless you get in early on these projects and buy these assets before the IPO, it’s very difficult to make money.”
SpaceX is expected to target a valuation of $1.75 trillion, which would dwarf all previous Wall Street listings. At a $1.75 trillion valuation, SpaceX’s price-to-sales ratio would be nearly 100 times, compared to 24 times for AI giant Nvidia (NVDA). SpaceX posted a loss of nearly $5 billion last year.
During the internet era of the late 1990s, many internet companies saw their share prices soar after their IPOs based on compelling stories, only to crash once reality dashed optimistic visions. Meanwhile, Cisco Systems (CSCO) made substantial profits by providing the routers and switches needed for early internet development. During the cloud computing wave of the 2010s, data center builders like Amazon (AMZN) and Microsoft (MSFT) took center stage, but it was the chipmakers supplying the underlying processing power that captured the most lasting gains.
In the case of SpaceX, the company that best fits this description is Nvidia. The funds raised through this share offering are expected to drive massive spending in advanced computing, from which Nvidia is poised to capture a disproportionate share. Nvidia’s near-monopoly in the general-purpose AI accelerator market means a significant portion of SpaceX’s newly acquired liquidity will flow into its data center chip business.
For retail investors, rather than chasing the short-term IPO frenzy, it may be wiser to focus on infrastructure suppliers that provide the foundational technology underpinning innovation. Nvidia, with its powerful moat built on its GPU architecture ecosystem and CUDA software platform, stands to benefit continuously from the wave of AI and space investment from companies like SpaceX, offering long-term compounding advantages.
