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If all goes according to plan, Elon Musk’s privately held SpaceX will officially go public on Friday, June 12. Although some retail investors may be lucky enough to buy shares at the IPO price, most will only be able to purchase the stock on the open market afterward. So, is the IPO the best time to buy? Here are three reasons to buy and two reasons for caution.
Three Reasons to Buy
SpaceX is far more than just a rocket launch company. Its business portfolio includes the social media platform X (formerly Twitter), the artificial intelligence model Grok, the Starlink satellite internet service, and even a budding microchip business. Whether it’s space transport, low-earth orbit broadband, generative AI, or social media, each business line sits squarely on the core growth trajectories of human society over the next decade.
Pre-IPO hype is nothing new, but the level of attention surrounding this particular offering is extraordinary. From institutions to retail investors, sentiment is extremely buoyant. In the short term, this enthusiasm alone could drive sharp gains on the first day of trading and for some time thereafter – though not indefinitely.
On the books, SpaceX is not yet profitable, and may not be anytime soon. However, the primary reason for its net losses is that the company continues to invest heavily in acquiring or building assets that will drive future revenue growth. On an operating basis, its business is technically generating positive cash flow. The prospectus shows that operating cash flow turned positive over the past year. While the figure still needs to widen and capital expenditures will eventually need to be curtailed, it is an encouraging sign that its core operations – even at a small scale – are not burning cash.
Two Reasons to Wait
Experienced investors know that most IPOs, after a first-day pop driven by hype, tend to decline significantly within a few weeks to a few months. Uber, Meta (then Facebook), Alibaba, and Visa are just a few big names that have delivered huge gains since their IPOs but were deep in the red shortly after going public. Exceptions exist, but by definition they are unlikely – even when the enthusiasm surrounding a stock is as robust as that surrounding SpaceX.
It is difficult enough to assess and make a judgment on a well-established, mature company. It is nearly impossible to perform a meaningful fundamental analysis on a company that is undergoing rapid change, as SpaceX still is. Even more, there is the potential for changes that have not yet begun – for example, market whispers that SpaceX could eventually merge with Tesla. The market tends to reward certainty and punish uncertainty through a stock’s price. With so many variables, the risk of share price volatility is considerable.
Conclusion
SpaceX has a compelling portfolio of businesses and positive operating cash flow, and short-term sentiment could push its stock higher. However, the historical pattern of post-IPO performance and the ongoing rapid evolution of the company itself constitute cautionary reasons that cannot be ignored. For ordinary investors, it may be wise to wait for the post-IPO “cooling-off period” to pass before assessing whether the stock is worth holding for the long term.
