SpaceX Could Be the Biggest IPO in History. Here's What Happened to the Last 5 Mega-IPOs.
Key Points
SpaceX is targeting a $2 trillion valuation and a $75 billion raise, which would make it the largest IPO in history by a wide margin.
Of the last five mega-IPOs, only Meta Platforms has outperformed the market over the long term -- and even it was down significantly in its first year.
At 108 times sales, SpaceX would debut at nearly four times Meta's IPO valuation, despite growing more slowly and losing $5 billion last year.
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SpaceX is reportedly targeting a valuation potentially exceeding $2 trillion and a roughly $75 billion raise when it goes public later this year -- about 2.5 times the current record set by Saudi Aramco's $29.4 billion offering in 2019.
The company dominates global space launch, and its Starlink segment is generating nearly $11 billion in annual revenue. This is a real, cash-generating business with a genuine moat.
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So should you invest? Let's look at what happened to the last five "mega-IPOs" that have raised $15 billion or more.
Image source: Getty Images.
How the last 5 mega-IPOs have performed
Here's how the five largest performed relative to the market. I'll use the S&P 500 for stocks that trade on U.S. exchanges, the Tadawul All-Share Index for Saudi Aramco, and the Nikkei 225 Index for SoftBank.
| Company | Benchmark | Year | P/S | 1Y vs. Index | 5Y vs. Index | 10Y vs. Index | IPO to Today |
|---|---|---|---|---|---|---|---|
| Saudi Aramco | TASI | 2019 | 5 | (19%) | (57%) | -- | (51%) |
| SoftBank | Nikkei | 2018 | 1 | (2%) | (22%) | -- | (104%) |
| Alibaba | S&P 500 | 2014 | 20 | (11%) | 102% | (153%) | (153%) |
| Meta Platforms | S&P 500 | 2012 | 28 | (26%) | 201% | 211% | 1,125% |
| General Motors | S&P 500 | 2010 | 0.4 | (39%) | (83%) | (173%) | (334%) |
Sources CNBC, SEC, Reuters, History.com.
The track record isn't great. And that's putting it lightly.
The only stock to outperform the market over the long haul was Meta Platforms. And even that was down considerably at the one-year mark.
Why SpaceX's $2 trillion valuation is a red flag
There's another issue: valuation. SpaceX would be by far the most expensive stock to make a debut on this scale. If the targeted $2 trillion-plus market cap is achieved, the company's $18.5 billion in revenue would imply a price-to-sales (P/S) ratio of 108 -- almost four times as expensive as Meta shares when they hit the market.
Consider that at the height of the AI boom in late 2023 -- a time when Nvidia was tripling its revenue year over year -- Nvidia shares topped out at a P/S around 40.
Should you buy SpaceX stock at IPO?
The historical record is pretty clear: Most IPOs of this scale just don't pan out for investors -- short-term and long. Considering this and the fact that the stock will trade with such an extreme multiple, I can't recommend you buy SpaceX at IPO. If the share price falls considerably after the IPO, I might consider it. But I would not jump in at the beginning.
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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms and Nvidia. The Motley Fool recommends General Motors. The Motley Fool has a disclosure policy.
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