History Offers a $974 Billion Warning Ahead of the Game-Changing SpaceX IPO
Key Points
Space economy and artificial intelligence conglomerate SpaceX will go public tomorrow, June 12, at $135 per share.
Structural changes, including fast entry into several major stock indexes, could propel SpaceX stock for several weeks after its initial public offering (IPO).
However, IPO euphoria fades, leading most mega-IPOs to tumble in their first year.
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Tomorrow promises to be a historic day for Wall Street. The Dow Jones Industrial Average (DJINDICES: ^DJI), S&P 500 (SNPINDEX: ^GSPC), Nasdaq Composite (NASDAQINDEX: ^IXIC), and Nasdaq-100 have been wildly vacillating ahead of the SpaceX initial public offering (IPO) on June 12.
Elon Musk's space and artificial intelligence conglomerate is selling roughly 555.6 million shares at $135 each, raising a record-shattering $75 billion and valuing the company at approximately $1.77 trillion. SpaceX should slot in as the eighth-largest publicly traded company, ahead of Meta Platforms and Musk's other trillion-dollar company, Tesla.
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While buzz ahead of this debut is off the charts, history offers an unmistakable warning that could cost retail investors dearly if ignored.
Image source: Getty Images.
Structural changes have SpaceX stock poised for early success
Certain structural dynamics of the SpaceX IPO afford it a decent chance of rocketing out of the starting gate. For instance, Nasdaq (NASDAQ: NDAQ) Global Indexes amended its Nasdaq-100 inclusion methodology (effective May 1) to fast-track SpaceX's entry into the index after 15 trading days, as opposed to the typical wait time of around three months. Low-float requirements were also waived.
The U.S. Russell Equity Index Series made a similar move by shortening the IPO inclusion period for large-cap stocks like SpaceX to just five trading sessions.
To be clear, this means only the S&P 500 will exclude SpaceX shortly after its IPO.
-- Hedgeye (@Hedgeye) June 4, 2026
FTSE Russell adds eligible megacap IPOs after the close of the 5th trading day.
Nasdaq adds them about 15 trading days after listing.
The S&P 500 kept its rules, so SpaceX waits the full...
Forced buying by index funds that track the Nasdaq-100 and relevant U.S. Russell indexes can boost SpaceX's share price after its debut.
Additionally, SpaceX is only offering 555.6 million of its shares, or a little over 4% of its outstanding shares. Index funds, mutual funds, and 401(k)s are likely to gobble up a substantial portion of its float, artificially lifting the company's share price.
Image source: Getty Images.
SpaceX can plunge 55% within its first year
However, historical precedent is clear: chasing after Wall Street's hottest IPOs when they debut is rarely a good idea.
Recently, the researchers at Truist Financial examined the performance of 30 of the most influential tech IPOs over the last 14 years, beginning with Facebook (now Meta Platforms). While some IPOs outperformed at the six-month mark after their debuts, including Palantir Technologies, Arm Holdings, and CoreWeave, which were all up by triple digits, only 43% of the companies analyzed were up after six months, with an average gain across all companies of just 1%.
Moral of the story-do NOT chase hot IPOs
-- Puru Saxena (@saxena_puru) June 3, 2026
Year-1 average drawdown = 55%
Year-1 median drawdown = 54%
Table: Truist pic.twitter.com/xt864JD4Xh
What's even more telling is the maximum drawdown these mega-IPOs endured during their first year as a public company. On average, the 30 stocks Truist examined plummeted by 55% in their first year, with 19 of 30 posting a peak-to-trough decline of at least 50%. A 55% max drawdown from SpaceX's $1.77 trillion valuation equates to about $974 billion!
Investor euphoria typically fades within weeks after a mega-IPO. While forced fund purchases and SpaceX's historically low float could prolong the situation by a few extra weeks, the company's staggered lockup schedule will allow insiders to begin cashing out in August. This may mark the end of SpaceX's historic run-up.
August will also mark SpaceX's first quarterly report as a public company. With IPO hype likely in the rearview mirror by then, the company's otherworldly valuation and operating losses will come into focus.
Based on what history tells us, caveat emptor, retail investors!
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Sean Williams has positions in Meta Platforms. The Motley Fool has positions in and recommends Meta Platforms, Palantir Technologies, Tesla, and Truist Financial. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.
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