The SpaceX IPO Is the Biggest in History. That Doesn't Automatically Make It a Good Investment.
Written by Todd Shriber for The Motley Fool -> The SpaceX IPO will be history’s largest, as Elon Musk’s company is looking to raise $75 billion at a valuation of $1.8 trillion. Retail investors are enthusiastic about the offering. History suggests they should exercise patience
The SpaceX IPO will be history’s largest, as Elon Musk’s company is looking to raise $75 billion at a valuation of $1.8 trillion.
On the Mount Rushmore of highly anticipated initial public offerings (IPOs), SpaceX stock must be one of the four "presidents." Elon Musk's rockets, satellites, and social media conglomerate will finally sell 555.5 million shares to the public on June 12 at an IPO price of $135, listing on the Nasdaq Exchange under the ticker SPCX.
The company is reportedly looking to raise $75 billion at an implied market capitalization of $1.77 trillion, making this the largest IPO in history. Combine that size with rising enthusiasm for space equities and some investors' reverence for Musk by way of Tesla , and it's understandable that, forgive the space pun, enthusiasm for the SpaceX share sale is out of this world.
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The SpaceX IPO is generating buzz, but patience may be a virtue. Image source: Getty Images.
With select IPOs, anticipation and enthusiasm can be helpful, but the blush wears off quickly. Think of it in terms of kids anticipating opening their holiday gifts. They're excited in early December, but by the end of the month, their holiday zest wanes. Likewise, size attracts market participants, but none of these factors guarantees IPO success.
History shows that many IPOs, including many in recent years, deliver impressive first-day performances . That's great for some market participants, but not necessarily for long-term investors. In fact, market participants who believe in SpaceX's five-year potential should consider not buying the stock on its first trading day.
There's precedent for approaching the SpaceX IPO with some restraint. Keith Lerner of Truist Securities recently examined post-IPO trends for 30 well-known stocks, and the case for not rushing into SpaceX grows stronger in light of those findings. Just 43% of the stocks were higher six and 12 months after their IPOs, with median losses of 9% over those periods.
