I Called SpaceX's IPO Pullback Correctly. I Still Missed It. Here's the Lesson.

Being correct about a stock isn't the same thing as cashing in on that thesis. I just learned that the hard way with SpaceX (NASDAQ:SPCX). I refused to buy into its pre-IPO hype, which led me to predict back in June that SpaceX would eventually drop below its IPO price of $135 per share. I nailed that prediction, as SpaceX stock fell to a low of $104.83 per share shortly after it went public. Unfortunately for me, I didn't buy any shares after they dropped. I missed out, as SpaceX has since recovered, recently topping $143 per share and surpassing its IPO price.

Here's the lesson I learned about the costly gap between being right and acting, and how I plan to change my strategy when Anthropic goes public.

Image source: The Motley Fool.

My original thesis

I wrote about my potential interest in buying SpaceX stock after its IPO right before it went public in June. It was about to complete the biggest IPO in history, raising $75 billion in a deal valuing the Elon Musk-led space and AI start-up at almost $1.8 trillion. The mega IPO valued the company at an eye-popping 100 times revenue. I noted that this had it trading at a much higher multiple than Musk's other company, Tesla, which went public at 15 times sales, and was trading just under that level when SpaceX went public.

I further highlighted FactSet data showing the historical underperformance of large IPOs. It showed that only nine of the 36 companies with market caps above $15 billion that have completed IPOs on major U.S. exchanges have outperformed the S&P 500 since their IPOs. Contributing factors included failing to live up to their initial growth hype and an increase in the number of available shares after IPO lockup periods expired. Considering SpaceX's sky-high valuation, I thought there was a high probability that it would trade below its IPO price in the next year, which would allow me to buy shares at a lower price.

That dip came even faster than I anticipated. SpaceX stock began to slide shortly after its post-IPO pop, hitting a low of $104.83 per share on Aug. 3. Despite my stated intention of waiting for a post-IPO pullback, I didn't buy one share.

Why "waiting for a dip" wasn't the correct strategy

I had a very sound thesis for SpaceX's IPO. What I lacked was an actionable strategy. This isn't just hindsight bias. While I said I wanted to wait for a lower price, I never set a trigger price. As a result, I didn't have a condition to act when the price dipped. So, the dip came and went, without any action, causing me to miss the rebound.

What I should have done was set a price target, specific valuation multiple, or percentage decline. That would have given me a decision point. If SpaceX dropped to my target, I could have either bought the stock or set a new target based on new information. That way, I'm not looking back at what now appears to be a missed opportunity.

However, every missed opportunity is a chance for improvement. I plan to improve my strategy so I don't make the same mistake with future IPOs, especially Anthropic, which I'm even more excited about. The AI start-up could go public at an even bigger $2 trillion valuation, which is hard to justify. However, I won't want to miss the opportunity to buy shares if they drop to a more reasonable level, so I plan to set a target purchase price for a post-IPO pullback.

Being right was still the wrong call

I correctly called the post-IPO pullback in SpaceX stock. However, I went about that prediction the wrong way. I never set the price I was willing to buy. That's why it seems like I missed out since SpaceX stock dipped and has now recovered. If it had never dipped to my target price, I could have anchored to that thesis and not felt like I missed my opportunity. That's a mistake I don't plan on repeating with Anthropic. I plan to set a target price at which I'd buy shares of the AI start-up if it follows SpaceX's path with a post-IPO dip of its own.

Matt DiLallo has positions in FactSet Research Systems and Tesla. The Motley Fool has positions in and recommends FactSet Research Systems and Tesla. The Motley Fool has a disclosure policy.