Warren Buffett Would Never Buy the SpaceX IPO. Here's What He'd Do Instead.

The countdown commences. SpaceX is going public as soon as tomorrow, and it's likely to be the most hyped initial public offering (IPO) of all time. The rocket company has captured the imaginations and enthusiasm of investors worldwide. One investor that won't likely be boarding the rocket ship anytime soon is the famed Oracle of Omaha, Warren Buffett.

Buffett not boarding

SpaceX plans to offer its stock at $135 per share, valuing it at $1.77 trillion. That stratospheric price likely sent shivers down the 95-year-old's spine. Let's talk about how the world's greatest investor might view this unique public offering.

The famed investor and former chief executive officer of Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB) is equally known for his ability to pick winning companies as for knowing when to stay away. While SpaceX has captured the imagination of investors globally, the company's financials are what truly matter. They are the core reason Buffett almost certainly will sit this one out.

Not your typical prospectus

Buffett's first rule of investing is to only buy companies that you understand. With SpaceX, we are dealing with literal rocket science, but with an interesting Elon Musk-esque twist. First, SpaceX comes with many subsidiaries, ranging from internet satellite constellations to electric vehicles, artificial intelligence, and a social media platform. The true mission of SpaceX is becoming cloudier and more convoluted, and that's a warning flag for investors.

For example, in the S-1 filed with the Securities and Exchange Commission, several strange statements suggest SpaceX may be trying to be something well beyond a rocket company. The S-1 mentions the "light of consciousness" and multiplanetary living. The prospectus includes several images as well. It's eerily reminiscent of the infamous WeWork prospectus.

It's also worth noting that Elon Musk has made himself essentially irreplaceable in this IPO. He will remain the company's CEO, chief technology officer, and chairman. If the company struggles or Musk becomes distracted by other projects, the risk for investors is heightened.

Image source: The Motley Fool.

Finally, Warren Buffett won't invest in the IPO because of the financials. SpaceX is an extremely expensive science experiment. The company says it may never become profitable. Although this is a risk for any start-up, it's concerning for a company that's aiming for a $1.77 trillion valuation.

SpaceX generated $18.7 billion in revenue in 2025, up from $14 billion in 2024. The losses have accelerated much more quickly, though. According to the S-1 filing, SpaceX had net income of $791 million in 2024, but last year it plummeted to a $4.9 billion net loss.

The $1.77 trillion valuation didn't make much sense to Morningstar either. Its analysts value SpaceX at $780 billion, less than half of the valuation Musk and SpaceX are pushing for.

Buffett tries to pay fair prices for good companies. At $135 per share at the IPO, there is no planet in the galaxy where this fits that bill. In addition to being a capital-intensive business, SpaceX has stiff competition and a limited competitive moat. Yes, it leads in the launch category now, but competitors are on its heels. Rocket Lab (NASDAQ: RKLB) and Jeff Bezos's Blue Origin are formidable opponents.

Here's what Buffett would do instead

If you are bullish on the space industry as a whole, there is some justification for participating in the IPO. However, the inflated price and valuation will require a very long holding period for it to make sense. Far too much of the future revenue and growth is already baked into the IPO price. For everyday investors, it's easy to get caught up in the hype and excitement of an enormous IPO from one of the most charismatic business leaders in the world.

Elon Musk does know how to execute and bring a vision to life, but I'd rather wait for the price per share to come back down to Earth. There are other ways to gain exposure to SpaceX without taking on extreme volatility and risk. By purchasing shares in highly profitable companies such as Alphabet, which invested nearly $1 billion in SpaceX, you can share in the upside while remaining more protected. Financial institutions such as Bank of America also invested in SpaceX early on.

This is an approach Buffett might prefer to participating in the IPO directly. Buffett sees companies for what they are and never let short-term noise cloud his decisions. Until SpaceX's financials make sense, you probably won't see Buffett touching the shares.

Bank of America is an advertising partner of Motley Fool Money. Catie Hogan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Berkshire Hathaway, and Rocket Lab. The Motley Fool has a disclosure policy.