SpaceX's Historic IPO May Be Oversubscribed. Here's What That Means for You.

SpaceX is expected to make history -- and this may come as soon as June 12. The Elon Musk-owned company is planning for what may become the world's biggest initial public offering, an event that could push its valuation to $1.77 trillion.

The operation stands out in some ways from typical IPOs. For example, SpaceX has set a fixed price of $135 per share rather than selecting a price range as is generally done at this stage of the process. The technology and industrial giant has also made an effort to make the IPO a big event for retail investors; it's earmarking about 30% of shares for them. In most IPOs, only about 5% to 10% of shares go to the non-professional investor.

All of this, along with SpaceX's growth and innovation prospects, clearly appeals to investors, as reports say SpaceX's historic IPO is oversubscribed. So demand for the shares is exceeding supply. If you're aiming to invest in SpaceX, here's what that means for you.

Image source: Getty Images.

Retail investors and SpaceX

So, as mentioned, retail investors may play a bigger part in the SpaceX operation than they usually do in IPOs. The company is making shares available to these non-professional investors like you and me through various brokerages, including Robinhood Financial, Charles Schwab & Co., and others. You may have even received a message from your brokerage service inviting you to order shares. So it may seem as if getting in on this operation would be easy.

But, considering the level of demand, that might not be the case. Reuters, citing people familiar with the situation, reported that the operation is two times oversubscribed, with orders for $150 billion -- the company aims to raise $75 billion. This isn't surprising for a major IPO, particularly one that's involved in the high-growth industry of technology.

What does all of this mean for you if you're trying to get in on this major IPO? This news doesn't mean that shares have been allotted yet -- that should happen during pricing on June 11 -- but it does suggest that there may not be enough shares for everyone. SpaceX, through its greenshoe option, could increase the number of shares sold to accommodate some of the demand. IPOs that offer a price range at this stage also may adjust the price; it's unlikely that will happen in this case since SpaceX has set a fixed price.

Image source: Getty Images.

If you don't get in on the SpaceX IPO

So, while certain moves can be made to fill as many orders as possible, it's likely that some investors will be left disappointed. But here's the good news: If your SpaceX order isn't filled, this doesn't mean you've lost out on a once-in-a-lifetime opportunity. In fact, as I wrote earlier, a look at history shows the biggest IPOs haven't produced big gains in their first year of trading.

Instead, IPO stocks generally have offered investors various entry points over time. The key is to buy when valuation looks interesting and hold on for a number of years -- and often, valuation isn't at its most interesting level during the IPO.

Though SpaceX offers investors exposure to the exciting growth businesses of rocket launches, satellite-based internet, and artificial intelligence (AI), the company today still involves a good deal of risk -- and due to heavy capital expenditures in its AI business, reported a loss last year. It's likely that this period of intense investment will continue, and SpaceX's reliance on cutting-edge technology means its goals may take time to accomplish, too. (And as the company points out in its prospectus, it may not reach every goal due to this reliance on new technology.)

All of this means we should expect ups and downs from SpaceX in terms of earnings and stock performance at this stage of its story. And the good news for you is that, if you're interested in investing in this growth player but you aren't able to buy during the IPO, there may be plenty of opportunities later to invest on the dip.

Charles Schwab is an advertising partner of Motley Fool Money. Adria Cimino has no position in any of the stocks mentioned. The Motley Fool recommends Charles Schwab and recommends the following options: short June 2026 $97.50 calls on Charles Schwab. The Motley Fool has a disclosure policy.