Vibes & Valuations
Great companies and great investments are not always the same thing.
It is not very often that an initial stock offering comes along that is so obvious, so exciting, and so inevitable that even people who never buy stocks start paying attention.
But that seems to be what has happened with SpaceX.
Last week, the company confidentially filed with the SEC for a U.S. Initial Public Offering (IPO), targeting a potential June 2026 debut. The company reportedly aims for a valuation of over $1.75 trillion and may raise between $50 billion and $75 billion, making it potentially the largest IPO ever.
Do the financials justify a valuation that would make the company worth roughly 300% of Exxon or nearly 175% of Walmart?
I haven’t seen the numbers, but probably not.
SpaceX may be a great company, with great growth potential, but as I mentioned in my note two weeks ago (The Price is the Risk), great companies can be terrible investments if you pay too much for them. And when a company is at the peak of its popularity, as SpaceX seems to be right now, that popularity makes it one of the most dangerous things to buy.
In many ways, it reminds me of Facebook.
Back in 2012, I remember one of the bond traders I worked with excitedly buying shares of Facebook on the first day of its IPO. It was the only stock trade I ever saw her make. The shares started at $38, fell 33% in 11 days, and eventually fell more than 50% over the next few months.
Somewhere around the lows, she sold her shares and declared Facebook a scam.
SpaceX may trade very differently from Facebook, and it may very well end up being the greatest company ever created. But when an IPO is all anyone can talk about, and investors seem more concerned with vibes than valuation, it is generally best for retail investors to stay away.
Interesting sidenote:
The Fundrise Growth Tech Fund is a closed-end fund that began trading a few weeks ago with very thin liquidity. Most investors who held shares when the fund was private are currently locked in and unable to sell. But the fund owns SpaceX along with other private AI names like Anthropic, Databricks, and OpenAI, and retail investors want to get in before the underlying holdings become public.
So, despite the fund valuing its holdings at around $19/share, the fund started trading at around $31, peaked at $575, and currently trades at around $122.
When the hype dies down and the lockup period for existing shareholders ends, it should eventually trade closer to $19 (or whatever the net asset value ends up being), and whoever is left holding the bag will probably wonder how they lost nearly everything being an early investor in a portfolio of great companies.
Personal note:
My wife has spent the last few months helping to organize a fundraiser for Jenni’s Rescue Ranch. If you are in the Sugar Land area and looking for something to do on April 18th, I highly recommend it.
