3 Reasons to Avoid SpaceX Stock When It IPOs

According to a report from Reuters, Elon Musk's space exploration company, SpaceX, has filed for an initial public offering (IPO) slated to go live in June. With an expected valuation of more than $2 trillion, this is likely to be the largest IPO in history. And it will give retail investors access to an established industry leader in the rapidly expanding space opportunity.

But all that glitters isn't gold. IPO investing comes with a unique set of risks compared to other stocks. And it is very easy to get burned. Let's discuss three reasons why investors may want to think twice before betting on SpaceX as soon as it becomes publicly available.

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1. The underlying reason why the stock is going public

As a retail investor, it helps to look at an IPO as a sales pitch. Essentially, someone is trying to sell you something (shares in their company) that they previously had all to themselves. And it makes sense to dig deeper into the reasons why they are suddenly willing to give up partial ownership of their company's future earnings in return for cash today.

For small, unprofitable companies, it's easy to answer this question: they simply don't have the money they need to expand operations, or the ability to raise funds internally or access debt financing at an acceptable interest rate. An established company like SpaceX wouldn't normally have such problems. However, an aggressive pivot to generative artificial intelligence (AI) has exposed the business to new expenses that it needs help paying.

Financial news service The Information reports that SpaceX lost just under $5 billion in 2025. And this was largely because of the $250 billion acquisition of Elon Musk's AI company, xAI. Generative AI development requires immense capital spending for hardware and data centers. And investors who bet on the SpaceX IPO should expect this to put a significant drag on earnings and cash flow, with long-term success far from guaranteed.

2. SpaceX is already massive

SpaceX's AI-driven losses aren't the only cause for concern. With an expected valuation of $2 trillion, the company will be one of the largest public stocks in the world -- up there with giants like Apple, Nvidia, and Meta Platforms. By default, new investors will be somewhat late to the party, missing out on the years of triple-digit equity value growth that led the company to its current position.

To make matters worse, SpaceX's space business (which involves transporting satellites and other payloads to low Earth orbit and providing broadband internet to remote areas) seems to be slowing.

Data from private market researcher Sacra suggests the company's revenue grew by 18% year over year in 2025. That's not a bad figure, but it represents a substantial deceleration from the growth rates of 51% and 89% estimated for 2024 and 2023, respectively. Retail investors may arrive just in time to miss the huge growth in SpaceX's core business while being saddled with the risk and uncertainties of its pivot to AI.

3. Political risk could be a significant threat

Based on market results, Elon Musk is arguably the most successful investor of all time. And if the SpaceX IPO goes as planned, he will be the first person to lead two public companies (Tesla is the other) worth at least $1 trillion. That said, he also presents a significant risk to both companies due to his political activism.

Elon Musk's foray into partisan politics has caused immense brand damage for Tesla. The electric vehicle maker saw sales drop 9% in 2025 amid customer boycotts, particularly in Europe. SpaceX is somewhat shielded from this challenge because it relies on enterprise and government clients, but that doesn't make it totally immune.

In 2024, some members of the California Coastal Commission cited Elon Musk's politics when rejecting SpaceX's plans to increase launches in the state. Over the coming years, political backlash could affect SpaceX's ability to win contracts or secure necessary regulatory permissions, especially if a less supportive administration wins the White House. Investors should definitely sit on the sidelines of this IPO.

Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Meta Platforms, Nvidia, and Tesla and is short shares of Apple. The Motley Fool has a disclosure policy.