Be Warned: A Historical Triple Whammy Awaits the SpaceX IPO

Wall Street is making history at every turn in 2026. Last week, the benchmark S&P 500 (SNPINDEX: ^GSPC) and innovation-powered Nasdaq Composite (NASDAQINDEX: ^IXIC) climbed to fresh all-time highs. But the most exciting event is yet to come.

Although artificial intelligence (AI) superstars OpenAI and Anthropic are toying with the idea of going public later this year, Elon Musk's space and AI juggernaut, SpaceX, is on track to beat them to the punch. When SpaceX goes public, it's expected to obliterate the record for the largest initial public offering (IPO).

The wheels of the SpaceX IPO were put into motion on April 1, when the company filed a confidential IPO with regulators. Based on projected timelines, SpaceX could debut as early as the latter half of June.

Image source: Getty Images.

Several reports suggest Musk's company is seeking to raise $75 billion and earn a valuation of $1.75 trillion to $2 trillion. For context, Saudi Aramco holds the title of largest capital raise at $29.4 billion following its December 2019 IPO.

While the buzz surrounding SpaceX is electric, be warned that this year's hottest IPO is facing a historical triple whammy.

1. Large IPOs tend to flop

To begin with, SpaceX will have to overcome the stigma of brand-name IPOs stumbling out of the gate.

Since 1999, U.S. investors have witnessed five monster IPOs, as well as the aforementioned debut of Saudi Aramco in overseas markets. Only one of these six brand-name IPOs (Visa) was higher six months after its debut. Comparatively, Facebook (now Meta Platforms), Alibaba Group, General Motors, United Parcel Service, and Saudi Aramco all declined by 8% to 38% six months after going public.

Even though past events can't guarantee what's to come, the poor performance of newly public brand-name companies over the previous 27 years indicates that investors allow their emotions to get the better of their judgment.

Image source: Getty Images.

2. SpaceX's valuation is a historical eyesore

A second historical headwind awaiting SpaceX is its egregious valuation.

To be completely transparent, we don't know what's under the hood at Musk's SpaceX. According to a Reuters report in late January, the company generated $15 billion to $16 billion in sales last year. But this figure doesn't include AI start-up xAI or social media platform X, both of which are now under the SpaceX umbrella.

Despite not having these specifics, SpaceX is likely valued at a price-to-sales (P/S) ratio in the high double digits or low triple digits. Historically, companies at the forefront of a game-changing technology or trend haven't been able to sustain P/S ratios above 30, let alone close to or above 100.

3. History hasn't been kind to game-changing technologies

Thirdly, history has shown that every next-big-thing technology or trend for more than 30 years has navigated an early innings bubble-bursting event.

The reason bubbles form is that investors consistently overestimate the adoption and/or optimization of new technologies/innovations. Although demand for AI infrastructure solutions and space infrastructure is climbing at a breakneck pace, we're still quite a ways from the space economy and artificial intelligence optimizing SpaceX's sales and profits.

No high-ceiling addressable opportunity has escaped this bubble-bursting fate since the mid-1990s, which is potentially terrible news for SpaceX's early investors.

Sean Williams has positions in Meta Platforms and Visa. The Motley Fool has positions in and recommends Meta Platforms, United Parcel Service, and Visa. The Motley Fool recommends Alibaba Group and General Motors. The Motley Fool has a disclosure policy.