SpaceX IPO outlook highlights risk of underperforming the U.S. market

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SpaceX IPO risk outlook

Highlights

Reuters analysis shows that three-quarters of the 50 highest-valued IPOs in the past five years underperformed the S&P 500, averaging 27% versus 53%.
SpaceX plans a share sale as soon as June 11, targeting a $1.75 trillion valuation and a nearly 100 price-to-sales ratio despite a nearly $5 billion loss last year.
Astera Labs surged over 700% and Arm Holdings 400% post-IPO, but other major listings like Didi Global and Rivian Automotive are down 74% and 82% from their IPO prices.

IPO valuation trends before the SpaceX debut

As reported by Reuters, an analysis of the 50 highest-valued IPOs of the past five years shows investors would have done better buying an S&P 500 index fund about three-quarters of the time. The findings point to the challenge of identifying value in companies whose valuations often climb sharply before shares begin trading.

An investor who bought each IPO in the Reuters review would be up an average of 27% through May 21, versus an average gain of 53% for the S&P 500 over the same periods. The analysis assumes investors could buy at the IPO price, which is often difficult for retail buyers, instead of purchasing the broader market.

Returns are weaker still for investors who buy during a stock's first day of trading, the analysis shows. Dennis Dick, a proprietary trader at Triple D Trading, says it is difficult to make money unless investors buy into these companies before the IPO stage.

SpaceX is expected to trade under the ticker SPCX after filing its prospectus on Wednesday, with a share sale potentially as early as June 11. Founder Elon Musk is making some shares available to retail investors through Robinhood, SoFi and other trading platforms, giving them a chance to buy at a lower entry price.

The space company is expected to target a $1.75 trillion valuation, which would exceed previous Wall Street listings. University of Florida professor Jay Ritter says IPOs with especially high price-to-sales ratios tend to perform the worst over time, and at that valuation SpaceX would carry a price-to-sales ratio of nearly 100 while losing nearly $5 billion last year.

Recent winners and laggards shape investor expectations

Some AI-linked IPOs have outperformed the market. Astera Labs has jumped more than 700% since its 2024 IPO, while Arm Holdings has climbed about 400% since its 2023 debut, both ahead of the S&P 500.

Cerebras Systems, another AI chip designer, has risen 52% from its May 14 IPO price, although it is down about 27% from its first intraday peak. SpaceX's expected debut is also likely to be followed by OpenAI and Anthropic, as investor demand for AI-related companies helps push the U.S. stock market to record highs.

Several other high-profile listings have disappointed investors. Didi Global, after a heavily oversubscribed 2021 IPO, was delisted from the New York Stock Exchange in 2022 and its over-the-counter shares are down about 74% from the $14 IPO price.

Rivian Automotive has fallen 82% since its 2021 IPO, despite briefly becoming the second-most valuable U.S. automaker, while Figma is down 35% from its $33 IPO price after concerns that generative AI could weaken its technology advantage. Even Alibaba, still the record holder for the largest U.S. IPO by valuation, has only doubled since its 2014 debut, trailing the more than 300% return of the S&P 500 over the same period.

We previously reported on how potential IPOs from SpaceX and OpenAI could become a major stress test for a U.S. market increasingly concentrated in a small group of AI-linked leaders. The piece noted that rapid index inclusion after a blockbuster listing could force passive funds to buy regardless of valuation, amplifying concentration risks—especially if higher bond yields and sticky inflation push investors to apply tougher standards to long-dated growth stories.

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