History Says SpaceX Stock Will Do This in Its First Year of Trading
Written by Ryan Vanzo for The Motley Fool -> SpaceX's upcoming IPO could break records. Historical data from other IPO stocks gives some clue to what may happen next. We're just days away from the SpaceX IPO . The company is reportedly targeting a $1.77 trillion valuation, whi
Historical data from other IPO stocks gives some clue to what may happen next.
We're just days away from the SpaceX IPO . The company is reportedly targeting a $1.77 trillion valuation, which would make it one of the largest public debuts in history. If its valuation target is reached, the company aims to raise as much as $75 billion in capital. That's enough to fund truly groundbreaking growth initiatives, everything from orbital data centers to a human base on the moon.
There are plenty of reasons to believe SpaceX will reach its intended valuation. "We believe we have identified the largest actionable total addressable market in human history," SpaceX claims in a recent regulatory filing . "We estimate that our quantifiable TAM is $28.5 trillion."
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There are also reasons to believe shares could struggle out of the gate. "We think the company has been significantly overvalued and investors will have opportunities to buy the stock at more attractive levels after the IPO," an analyst from Morningstar recently warned. "[L]ong-term investors eager to participate in SpaceX's future endeavors and potential success will have opportunities to do so with a greater margin of safety than the initial offering is likely to provide."
No one knows the future. But analyzing historical data from previous IPO stocks can give us some idea of where SpaceX's stock price might head over the next 12 months.
Jay Ritter is the director of the IPO Initiative and an emeritus professor at the University of Florida. He has been tracking the short- and long-term performance of IPO stocks for decades. The compiled data from decades of IPOs paints a clear picture of what to expect for SpaceX.
The first important statistic to understand is that, by and large, IPO stocks tend to perform very well on their first day of trading. This positive first-day performance is often attributed to the chronic underpricing of IPOs. Investment banks and underwriters have an incentive to ensure an IPO performs well. An inability to fully sell out at an intended price can result in bad press for both the IPO company and the underwriters, whose job it was to successfully sell the stock to investors.
