Is SpaceX's Biggest Risk Also the Best Reason to Buy It?
Key Points
SpaceX is planning to go public later this year in a highly anticipated IPO.
Elon Musk might have supervoting shares in SpaceX, which could place his interests over those of shareholders.
Shareholders buy into Musk's companies because they believe in his vision.
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There are several upcoming high-profile initial public offerings (IPOs) that have captured the market's attention this year. OpenAI, parent company of ChatGPT, is expected to become a public company later this year, as is Anthropic. Both of these companies operate artificial intelligence (AI) platforms, and they're targeting valuations as high as $1 trillion.
That doesn't come close, though, to what might be the most highly anticipated IPO this year: SpaceX. The space exploration company, which has several other segments, too, is purported to be aiming for a valuation as high as $2 trillion, which would make it the seventh-most-valuable company in the U.S. if it went public today.
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Investors are very excited about the SpaceX IPO, to say the least. People are looking at how to invest pre-IPO, and the company has also said that it would allocate 30% of shares to retail investors. While investors clamor to get a piece of the company, it's worthwhile to consider what the risks are... as well as why you might want to buy it.
Image source: Getty Images.
It all comes down to Elon Musk
Elon Musk is the richest man in the world, and he has established himself by being involved in some of the most transformative companies in the world, including PayPal, OpenAI, and Tesla (NASDAQ: TSLA).
Tesla is more than a car company, or even an electric vehicle (EV) company. It's an AI-first company, and Musk is always pushing it to new places, including autonomous driving and robotaxis. Tesla stock has generated incredible wealth for shareholders, and the company is now the eighth-most-valuable company in the U.S. That's why shareholders pay a premium for Tesla stock. It's notoriously expensive and trades at a P/E ratio of 343 right now.
In addition to Tesla, Musk currently runs X, formerly Twitter, and SpaceX. Although SpaceX is receiving a lot of attention right now because of its IPO, it's actually been around for more than 20 years. It's already the largest rocket launcher in the world, and it owns Starlink, a low-Earth orbit satellite company that provides internet all over the world, as well as xAI, an AI company that owns the Grok large language model (LLM).
That's a lot, and that might be the biggest risk in owning SpaceX stock: Musk's attention to all of his businesses. Taking it a step further, he's planning to have supervoting rights for SpaceX, increasing risks in accountability and oversight. Musk hasn't always come through on his promises, and executives of public companies need to put shareholder interests first.
If that's one reason to bow out, what's the reason to buy? That would be Musk's vision. He is the leader who founded Tesla and SpaceX, and he has goals involving creating robotics and settling Mars. When investors are interested in SpaceX, they're buying into Musk's vision.
Even if that's you, I don't recommend buying SpaceX stock at IPO. It's highly expensive, and hyped-up IPOs tend to drop when the excitement wears off. However, for the right candidate, it could be something to consider down the line.
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Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends PayPal and Tesla. The Motley Fool recommends the following options: short June 2026 $50 calls on PayPal. The Motley Fool has a disclosure policy.
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