SpaceX Could Be the Ultimate Meme Stock -- Investors Should Avoid This Unprecedented IPO

SpaceX may be a remarkable company, yet its initial public offering (IPO) may not prove to be a remarkable investment. According to Reuters, SpaceX is expected to target an IPO valuation of around $1.75 trillion. That would put the rocket, satellite, and artificial intelligence (AI) company at a price-to-sales (PS) ratio close to 100.

SpaceX reported a net loss of over $4.9 billion in fiscal 2025. Against this backdrop, the company's aggressive valuation appears to assume years of near-perfect execution before the stock even starts trading.

Here's why SpaceX could become the ultimate meme IPO.

Image source: Getty Images.

Historical IPO performance

Recent IPO history offers a clear warning. According to a Reuters analysis of the 50 largest IPOs by valuation over the past five years, an index fund would have been a better investment choice in the majority of cases. On average, those IPOs rose 27% over five years, while the S&P 500 (SNPINDEX: ^GSPC) gained 53% over comparable periods. That comparison is also generous to IPO buyers, because it assumes they could buy at the offer price. Those who bought on the frenzied first day of trading generally fared even worse.

Even if SpaceX allocates around 30% of its IPO to retail investors, well above the usual 5% to 10% retail allocation, ordinary investors are still buying into an expensive IPO.

Risks to consider

SpaceX's fiscal 2025 revenue rose 33.2% year over year to roughly $18.7 billion. But the company's revenue grew at a much slower pace, around 15.4% year over year, to $4.7 billion in the first quarter of fiscal 2026 (ending March 31, 2026).

The connectivity segment, which is primarily driven by its Starlink satellite network business, accounted for 61% of the company's fiscal 2025 revenue and 69% of first-quarter revenue. These numbers highlight the company's growing reliance on the connectivity segment for revenue. Yet, Starlink's average monthly revenue per user fell from $81 at the end of fiscal 2025 to $66 in the first quarter.

Additionally, the Connectivity segment generated $4.4 billion in operating profit, while the space segment and AI segment lost $657 million and $6.4 billion, respectively, in fiscal 2025. In the first quarter, the Connectivity segment recorded roughly $1.2 billion in operating profit, while the space segment and AI segment again lost $619 million and $2.5 billion, respectively. The Connectivity segment's strong profitability is being more than offset by losses in SpaceX's unprofitable space and AI segments.

SpaceX has also spent $12.7 billion in AI capital expenditures in fiscal 2025 and another $7.7 billion in the first quarter. On the other hand, capital expenditures on the profitable Connectivity segment have been around $4.2 billion in fiscal 2025 and $1.3 billion in the first quarter. Public investors may be buying not only satellite broadband and rocket operations, but also an expensive AI infrastructure build-out.

Additionally, with CEO Elon Musk expected to retain 85.1% voting power after the IPO, public shareholders and even other institutional shareholders may have limited control over the company's growth strategy.

SpaceX may eventually become a great public company. But at nearly 100 times sales and several risks, the IPO looks more like a stock to watch out for now.

Manali Pradhan, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.