Prediction: The SpaceX IPO Will Be the Greatest Fleecing of Retail Investors We've Ever Witnessed

The big day is less than one week away -- and I'm not talking about the May inflation report. Friday, June 12, is the expected debut of what's arguably the most-hyped initial public offering (IPO) in Wall Street history: SpaceX.

While large language model developers Anthropic and OpenAI could both push for valuations of around $1 trillion, SpaceX is poised to become the largest IPO in history. Elon Musk's space and artificial intelligence (AI) conglomerate is aiming for a valuation of at least $1.8 trillion -- this would slot it in ahead of Musk's other trillion-dollar company, Tesla -- and wants to raise $75 billion. Overseas oil titan Saudi Aramco currently sits atop the IPO pedestal with a $29.4 billion raise following its December 2019 debut.

Image source: Getty Images.

The buzz surrounding SpaceX is thick enough to cut with a knife. It combines two of the hottest addressable opportunities on Wall Street (AI and the space economy) and is led by Musk, who has overseen a 26,000% return in Tesla shares since taking the company public in June 2010.

But SpaceX also looks to be the biggest trap ever set for retail investors. The historical and structural deficiencies of the SpaceX IPO will result in the greatest fleecing of retail investors we've ever witnessed.

Historical precedent is a mammoth problem for SpaceX

Beyond the hype, there are several reasons to be skeptical of SpaceX. Some of these headwinds are fundamental, such as the company's sizable operating losses, highly capital-intensive operating model, and subpar sales growth from AI start-up xAI, compared to revenue growth from Anthropic and OpenAI.

However, two historical headwinds stand out as particularly worrisome for everyday investors.

To begin with, mega-IPOs have a history of stumbling out of the gate. While they might price above their initial IPO range and trade higher on the day they debut, the six months following a brand-name IPO typically aren't pretty.

Hyped social media company Facebook (now Meta Platforms) tumbled 38% in the six months following its initial closing price, and peaked at a more than 50% drawdown. Meanwhile, the aforementioned Saudi Aramco shed 15% of its value in the six months after its debut. Emotion-driven stock moves rarely last more than a few weeks, which often leaves retail investors holding the bag when the post-IPO malaise arrives.

🚨YOU ARE THE EXIT LIQUIDITY

You are about to be offered the most expensive IPO in modern history.

SpaceX's S-1 just dropped. The headline numbers:

- 2025 revenue: $18.7 billion
- 2025 net loss: $4.9 billion
- Q1 2026: still losing money
- Reported IPO valuation target:... pic.twitter.com/vaPLoKjsGN

-- Thierry from arvy 🇨🇭 (@ThierryBorgeat) May 21, 2026

The other historical aspect of the SpaceX IPO that makes it incredibly dangerous to retail investors' pocketbooks is its valuation. While valuation is subjective and varies from one investor to the next, the time-tested price-to-sales (P/S) ratio tells an unmistakable and worrisome story.

According to the SpaceX prospectus that was made public on May 20, the company behind reusable rockets, satellite-based broadband service Starlink, xAI, and social media platform X generated $18.67 billion in sales last year. If SpaceX prices at a $1.8 trillion valuation, it'll be trading at a P/S ratio of 96!

History tells us that no public company at the forefront of a game-changing technology has ever been able to sustain a P/S ratio above 30 over the long run. A P/S ratio of nearly 100 is a glaring red flag that screams, "bubble!"

Image source: Getty Images.

Structural changes to the SpaceX IPO will inadvertently fleece retail investors

But historical precedent might not be the biggest issue for everyday investors. Rather, it's the structural changes and the proverbial hoops that major indexes jumped through to include SpaceX that can be the undoing of retail investors.

Notably, Nasdaq (NASDAQ: NDAQ) amended several of its long-standing rules to expedite SpaceX's inclusion in the Nasdaq-100. The "Fast Entry" rule change, which took effect on May 1, shortened the waiting period for Nasdaq-100 inclusion from around three months to just 15 trading days (i.e., July 7, based on SpaceX's expected June 12 debut) for megacap IPOs that would be among the 40 largest nonfinancial companies. Minimum float requirements were also eliminated.

But this wasn't the only change made. SpaceX can enter the Russell U.S. Equity Indexes and FTSE Global Equity Index Series after just five trading sessions. (i.e., beginning June 23, accounting for the Juneteenth holiday).

Rule changes for the SpaceX $SPCX IPO:

Index providers waived the profitability requirement and cut the seasoning window from 90 days to 5.

This forces over $30 trillion in passive 401k and retirement money to buy SpaceX at IPO valuations.

Bloomberg Intelligence estimates S&P...

-- Hedgeye (@Hedgeye) May 29, 2026

It's a somewhat similar story for the S&P 500 (SNPINDEX: ^GSPC). For decades, a company has needed to trade for at least 12 months and to have generated four consecutive quarters of GAAP profitability to be considered for inclusion. Both of these qualifiers may be waived, potentially leading to SpaceX's inclusion in the S&P 500 before the end of 2026.

On the one hand, fast entry inclusion into the U.S. Russell Equity Indexes and Nasdaq-100, and faster-than-normal inclusion in the S&P 500, will require passive exchange-traded funds that mirror these indexes to buy shares of SpaceX. We're talking tens of billions of dollars in forced buying activity by passive funds shortly after Musk's space and AI conglomerate goes public.

But herein lies the problem: SpaceX's float (i.e., tradable shares) will mostly be gobbled up by passive funds, which are required to do so. While this could pump up SpaceX's shares and valuation for a week or three following its debut, it sets the perfect trap to transfer wealth from retail investors to company insiders.

Great look at the SpaceX shares unlock schedule as well as the potential passive buying schedule from @JSeyff @FrancisSharoon Depending on the early post-IPO returns, this could really play with and disperse the returns of "passive" funds (which is why there's arguably no such... pic.twitter.com/KOuEkJlngF

-- Eric Balchunas (@EricBalchunas) May 28, 2026

Insiders hold an overwhelming majority of SpaceX shares, and the company isn't utilizing a 180-day lockup period. Typically, 180 days after a company debuts, insiders (company executives, board members, and/or early investors) are free to sell their shares. SpaceX is setting up a staggered resale system that allows insiders (not including Elon Musk, who agreed to a 366-day sell restriction) to begin cashing out as soon as the second trading day after the first quarterly earnings release (likely in August). These staggered hurdles, based on performance and time since its IPO, allow insiders to sell their shares to everyday investors.

This combination of historical precedent, structural rule changes to facilitate faster index inclusion, the company's thin float, and an accelerated potential cash-out schedule for insiders will leave retail investors holding the bag.

Sean Williams has positions in Meta Platforms. The Motley Fool has positions in and recommends Meta Platforms and Tesla. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.