Why We Are Recommending NOT to Buy the SpaceX IPO

The upcoming SpaceX initial public offering (IPO) is being framed by Wall Street and mainstream media as a "once-in-a-generation" opportunity. For years, retail investors have watched from the sidelines as the company dominated commercial space flight and built out its Starlink satellite network. Now that the doors are finally opening to the public, the temptation to buy in is immense.

However, at Aartha, our core philosophy is built on separating a great company from a great investment.

While we deeply admire SpaceX’s engineering achievements, an objective look at the underlying financial data, structural governance, and valuation metrics reveals a highly unfavorable risk-reward profile for incoming shareholders.

Here are the primary reasons we are advising our clients to sit this one out.

1. A Multitillion-Dollar Valuation Paid for Perfection

Historically, IPOs offer investors "ground-floor" access to a young business with immense room to scale. SpaceX is reversing this trend. Rocketing toward a public debut with an expected market cap of $1.5 trillion to $2 trillion, it will be the largest IPO in financial history.

At this scale, the upside is already heavily priced in. To put this into perspective:

• Decelerating Growth: SpaceX's revenue grew by roughly 18% to $15.5 billion in 2025. While respectable, this is a sharp deceleration from the 51% and 89% growth rates posted in 2024 and 2023 respectively.

• The P/S Disconnect: A $2 trillion market cap places its price-to-sales (P/S) ratio north of 120x. Compare that to the S&P 500 average of ~3.5x. For a relatively mature company with plateauing growth, this multiple leaves almost zero margin for execution error.

2. The Unrelated, High-Risk Pivot into Generative AI

Investors expecting a pure-play aerospace and telecommunications company are in for a surprise. In early 2026, SpaceX absorbed Elon Musk’s artificial intelligence startup, xAI, in an all-stock transaction valued at $250 billion.

This completely changes the risk profile of the business:

• No Proven Synergies: It remains highly unclear how developing the Grok large language model (LLM) fundamentally aids a rocket propulsion or satellite internet business.

• Capital Destruction: Generative AI infrastructure requires immense, ongoing capital expenditure. Driven by massive AI data center spending, SpaceX posted a $5 billion net loss in 2025.

• IPO Proceeds Redirection: A significant portion of the capital raised in this IPO will likely be funneled directly into speculative AI chips and data centers, rather than core aerospace innovation.

3. Highly Unfavorable Structural "Red Flags"

The underwriting dynamics of this specific IPO suggest that insiders are optimizing for their own liquidity rather than long-term shareholder health.

The Rule Changes: Wall Street bankers are actively toying with bypassing the traditional 180-day lock-up period. If enacted, early venture capitalists and corporate insiders could begin dumping their shares into the market on Day One.

Furthermore, reports indicate that retail investors are being allocated up to 30% of the entire IPO float. Historically, when institutional banks drastically increase retail allocations for a highly anticipated debut, it isn't out of generosity—it is because institutional "smart money" is hesitant to absorb the massive supply at these extreme valuations. Retail demand is essentially being leveraged to act as exit liquidity for early insiders.

Exit Liquidity: This is an unofficial, but widely understood industry slang term. It describes a situation where retail investors (the general public) buy into a hyped asset, allowing the early, big institutional investors to sell their shares and pocket the cash.

4. Technical Bottlenecks: The Starship Execution Risk

SpaceX’s current financial engine relies heavily on its workhorse, the Falcon 9. However, the company’s future growth—and the justification for its multi-trillion-dollar valuation—rests entirely on Starship, its massive, fully reusable next-generation rocket.

From an investment standpoint, Starship represents a critical operational bottleneck:

• The Starlink V3 Dependency: To make the Starlink satellite internet business highly profitable, SpaceX needs to launch its massive, next-generation Starlink V3 satellites. These satellites are too large and heavy for the Falcon 9; they require Starship.

• The Reusability Hurdle: While Starship has made incredible progress in test flights, achieving rapid, reliable, and commercially viable reusability at scale is still years away.

• The Valuation Mismatch: If Starship faces extended engineering delays, regulatory hurdles, or deployment friction, the Starlink network cannot scale at the pace Wall Street expects. Buying the IPO today means betting a staggering amount of capital on unproven operational timelines.

The Bottom Line for Aartha Clients

When you look across the table and cannot tell who the sucker in the deal is, it is usually wise to step away from the table.

SpaceX is an incredible feat of human ingenuity. But as a public stock launching at a $2 trillion valuation, burdened by a speculative $250 billion AI cash-burn engine, and structured to allow rapid insider exits, it behaves more like a retail-driven speculative vehicle than a sound, fundamentals-based investment.

We recommend maintaining a disciplined asset allocation. Let the initial volatility settle, let the insiders sell, and wait to see how the company navigates the strict reporting standards of public markets before risking your hard-earned capital.

The Aartha Investment Committee