Trillion dollar rocket man: Why Elon Musk’s SpaceX could come crashing back down to earth after its record-setting IPO

Elon Musk has managed to outpace his main artificial intelligence rivals, Anthropic and OpenAI, by becoming the first to complete preparations for an initial public offering (IPO). In effect, Musk has seized from them the opportunity to attract large-scale and scarce investment capital.

The primary purpose of a traditional IPO is to raise public equity capital to scale production, modernize technology, or expand into new markets. Investors, in turn, gain the opportunity to acquire a stake in an operating business in anticipation of future returns, relying on established stock market regulations. However, the listing of Elon Musk’s aerospace corporation SpaceX on the Nasdaq does not conform to these fundamental principles.

SpaceX is the technological leader in its industry, having effectively monopolized the market for commercial orbital launches. Its subsidiary Starlink, which provides Ukraine with communications terminals during the war, has ensured critically important, reliable connectivity and the uninterrupted operation of the country’s government and civilian infrastructure. In 2025, Starlink generated about 60% of the parent company’s $18.7 billion in revenue. Nevertheless, the valuation at which the offering was conducted has raised concerns among independent financial analysts.

Rather than reflecting a reasonable valuation supported by current cash flows, the market is confronting what experts describe as long-term speculative valuation strategy. The SpaceX IPO risks becoming a large-scale mechanism for transferring risk, in which the ultimate buyers of overpriced shares will not be sophisticated venture investors but ordinary citizens, since the structure of the offering in many ways resembles crypto schemes built around AI hype.

The economics of “selling a dream”: a history of unfulfilled promises

According to the company’s own assessment, SpaceX is expected to achieve an astronomical market capitalization of between $1.75 trillion and $1.77 trillion. That would place it among the ten most valuable publicly traded corporations on the planet. To understand how far removed this figure is from economic reality, it is necessary to examine the company’s financial performance during the most recent reporting period.

In 2025, SpaceX generated total revenue of $18.7 billion. At the same time, the corporation recorded a net loss of $4.9 billion. By contrast, all of the world’s five most valuable companies were profitable in 2025. For example, Microsoft ended the year with $128 billion in profit, an increase of 17% compared with 2024. Other technology giants also posted strong results: NVIDIA reported enormous earnings, Apple revamped its strategy, while Alphabet (Google) and Amazon likewise demonstrated high profitability. As a result, a deeply loss-making business valued at nearly one hundred times its annual revenue is arriving on the Nasdaq stock exchange.

Starlink’s satellite business did indeed generate an operating profit of $4.4 billion. However, this only means that Musk’s other experimental and research programs consumed and burned through more than $9 billion in a single year. Independent research firm Morningstar estimates SpaceX’s fair value at closer to $780 billion, concluding that the company’s valuation is inflated by more than a factor of two.

To justify such an enormous gap, SpaceX relies on the mechanism of forward-looking statements. The scope of this mechanism was significantly expanded by the U.S. Private Securities Litigation Reform Act of 1995. The corporation officially claims that it intends to capture a share of the emerging artificial intelligence market worth more than $28 trillion – a figure comparable to the entire annual GDP of the United States.

These projections include plans to deploy 100 gigawatts of computing data centers in Earth orbit, launch one million satellites, colonize Mars, and build a self-sustaining city there with a population of one million people. At the same time, SpaceX’s management acknowledges in its own filings that it is currently impossible to determine either the timeline or the feasibility of these initiatives because the necessary technologies do not yet exist, as detailed by analysts at The New York Times.

In recent years, Elon Musk has repeatedly been criticized for failing to deliver on public promises. Advertising revenue at the social media platform Twitter (now X), which he owns, fell by roughly one-third instead of achieving the promised threefold increase. The Boring Company’s Hyperloop project of high-speed underground transportation has not progressed beyond receiving verbal approvals. Tesla’s Cybertruck, marketed as being capable of amphibious operation, has not demonstrated the advertised capabilities in practice. Finally, SpaceX itself failed to fulfill a five-year, $2.9 billion contract with NASA to develop a lunar landing vehicle.

Nevertheless, the rules of the modern stock market have changed. Thanks to the businessman's large social media following, investors are increasingly buying into personal faith in a corporate leader rather than financial performance, turning shares into something resembling viral “meme assets.”

One of the main reasons for rushing the IPO in mid-June 2026 was the urgent need to refinance internal debt across Musk’s business empire, as well as competition for liquidity in the artificial intelligence market, where startups such as OpenAI and Anthropic are also preparing public offerings. To position SpaceX not merely as a space transportation operator but as a leader in the high-tech sector, a large-scale internal corporate restructuring was carried out earlier this year.

Investors had previously provided Musk with roughly $7 billion to finance the acquisition of Twitter. The structure of these transactions and the capital raising involved were covered in detail by major business media outlets, including The Wall Street Journal, Reuters, and CNBC. After a radical shift in the platform’s policies led to an exodus of major advertisers and a decline in the asset’s valuation, these same holdings were converted into equity in a new artificial intelligence startup, xAI.

In February of this year, xAI, together with all of its liabilities and the social media platform X under its control, was absorbed by SpaceX. For accounting purposes, xAI was assigned a valuation of $250 billion in the transaction, which was paid for with newly issued SpaceX shares. Shareholders of xAI, which includes X (formerly Twitter), were likely pleased with the merger, as the social media platform under Musk’s leadership never generated the profits that had been promised. By converting these holdings into SpaceX shares, investors gained an opportunity to recoup their losses.

Some SpaceX investors, by contrast, believe that the merger granted xAI investors a larger stake in the combined company than they deserved. As a result of the transaction, xAI investors received roughly 20% of the merged entity’s shares, sparking intense debate in the market. Details of the deal can be found in reporting by The Guardian and investigations by The Wall Street Journal (a copy of the article is available in the web archive).

According to analysts, the transaction resembles an exercise in artificial valuation inflation. xAI’s flagship product, the Grok chatbot, lacks an substantial standalone user base, while the IPO prospectus effectively counts users of the X platform as customers of the AI service. Moreover, after the deal was completed, Musk himself acknowledged that xAI’s software required a complete overhaul.

At present, the financial performance of this structure appears viable only because of a computing-capacity leasing agreement with rival firm Anthropic, which pays $1.25 billion per month. Incorporating these debt-laden and financially unstable divisions into SpaceX enabled the holding company’s overall valuation to be inflated, while the $80 billion raised through the IPO will be used not for space exploration but to cover existing obligations, including a recent $20 billion bridge loan.

The most critical aspect of the upcoming IPO, affecting millions of ordinary investors, is the unprecedented change in regulatory rules implemented by Nasdaq itself. In an effort to beat the New York Stock Exchange (NYSE) in the competition to host the largest listing in history, Nasdaq’s management made sweeping concessions to the issuer.

A special “fast track” was introduced for ultra-large companies – so-called megacaps with valuations of around $1 trillion or more. Under the new rules, SpaceX will be added to the Nasdaq 100 index just 15 trading days after its market debut. Previously, the rules required a lengthy “seasoning” period and liquidity assessment for newly listed shares, which could last up to a year. In addition, the standard requirement that at least 10% of a company’s total equity be floated on the public market was waived for SpaceX; the company will offer only 5% of its shares. These actions by Nasdaq have already drawn sharp criticism from prominent market participants, including Michael Burry.

The risk inherent in this arrangement lies in the mechanics of modern passive investing. Roughly half of the U.S. stock market is now controlled by index mutual funds and exchange-traded funds (ETFs), which are managed by automated algorithms. The sole purpose of these funds is to mirror the composition and weighting of companies within an index, completely disregarding their actual valuation or profitability.

The inclusion of SpaceX in the index requires these funds to purchase SpaceX shares automatically and on a large-scale at what may be their peak valuation, using money entrusted by investors. Following Nasdaq’s lead, similar rule changes are now being considered by index providers FTSE Russell and S&P. As a result, even citizens who never intended to buy Musk’s stock directly may find their retirement savings automatically used to provide liquidity for the offering.

The current developments surrounding SpaceX reflect a deeper distortion within Silicon Valley’s venture capital ecosystem, where an insulated system of mutual financing and loss socialization has emerged. The largest players – investment banks, venture capital funds, and technology entrepreneurs – have created a model in which the failure of one project is offset through the aggressive marketing of the next.

A vivid example of this system is the story of the coworking startup WeWork. The company, whose manifesto grandly promised to “elevate the world’s consciousness,” inflated its valuation to $47 billion before collapsing into bankruptcy, leaving outside investors with enormous losses. Meanwhile, its founder departed with a personal fortune of $1.7 billion and soon succeeded in raising another $350 million from leading venture capital firm Andreessen Horowitz for a new venture. A similar example of this cycle of impunity can be found in fintech company Bolt. In 2025, its board of directors reinstated Ryan Breslow as chief executive officer, despite the fact that he had previously stepped down amid allegations that corporate metrics had been falsified.

In the case of SpaceX, the key American financial conglomerates – Goldman Sachs, Morgan Stanley, JPMorgan, and Citigroup – are serving as underwriters and lead managers of the offering. They have a direct interest in maintaining the company’s elevated valuation, as their underwriting fees are tied directly to the amount of capital raised. The same financial institutions that previously provided financing for the acquisition of Twitter are now being paid to manage the SpaceX IPO, completing a cycle in which capital circulates within the same network of participants.

An additional source of risk is the large and opaque secondary market that developed around SpaceX shares during the years the company remained private. Because direct purchases of equity stakes were restricted by the issuer’s stringent internal rules, outside investors relied on special-purpose vehicles (SPVs) to gain exposure to the company.

Demand for SpaceX shares led to the creation of multilayered ownership structures involving as many as five intermediaries, each collecting its own fees. As a result, many pre-IPO investors are far from certain about the exact nature of the assets they legally own.

The U.S. Department of Justice’s experience investigating financial crimes shows that enthusiasm surrounding Musk’s companies has repeatedly attracted fraudsters. In late 2023, a financier was sentenced to a lengthy prison term after defrauding investors of approximately $6 million by selling nonexistent stakes in SpaceX. In December of last year, authorities arrested investor Giovanni Pennetta, who had established a fraudulent structure to trade shares in defense contractor Anduril. When SpaceX begins trading publicly, many retail holders of such proxy investment vehicles may encounter legal complications or discover that they have no claim to actual underlying assets at all.

The U.S. Department of Justice’s experience investigating financial crimes shows that enthusiasm surrounding Musk’s companies has repeatedly attracted fraudsters.

The primary risk to the broader market may emerge 180 days after the IPO, when the statutory lock-up period for early insiders and senior executives expires. Once they are legally able to cash out, major private funds may begin selling shares on a large scale, locking in multibillion-dollar profits. Passive index funds, however, constrained by Nasdaq’s rules, will be required to continue holding these potentially declining securities on their books, with losses ultimately borne by ordinary participants in pension programs.

The only effective legal means of protecting capital in such a situation, according to proponents of this view, is through case law and active oversight by institutional investors. For example, Danish pension fund AkademikerPension officially announced a complete boycott of the SpaceX IPO, citing unacceptable regulatory and financial risks.

Financial experts recommend that private investors promptly contact their pension providers and asset managers to request limits on investments in high-risk, unaudited mega-cap issuers until their valuations undergo a full market correction. In an environment where traditional market oversight mechanisms have been weakened, safeguarding savings increasingly becomes the direct responsibility of investors themselves.