SPACEX IPO - IS THE PRICE BASED ON EARNINGS POTENTIAL, A GROWTH NARRATIVE, OR MANUFACTURED SCARCITY
Controlled scarcity pushes price up. We see this with the crypto market. We see this with the diamond trade. We see this with art auctions. We see this with Good Class Bungalows. We see this with Certificate of Entitlements (COE) for vehicles.
SpaceX (Space Exploration Technologies Corp) engineered scarcity on both sides of the market, cultivating extraordinary demand through exclusivity, Musk's reputation, and a trillion-dollar growth narrative while limiting the supply of tradable shares.
SpaceX's initial IPO raised US$75Bn which is now the biggest IPO in history, surpassing Saudi Aramco's US$25.6Bn in 2019. Musk has earned the title of the world's first trillionaire.
We have seen lots of mention of Musk's wealth and the capitalisation of SpaceX in media and podcasts of financial experts, but all are just estimates as final prospectus was not yet available. SpaceX has filed their S-1 on 12 Jun 2026 now available on Edgar. Straits Times and CNA never show you because they don't compute, they simply reprint Western media.
The real mathMusk holds 849,494,440 Class A shares and 5,569,053,075 Class B shares of SpaceX x IPO price of US$135 = US$866.5Bn
He holds 13% shares in Tesla. At current market capitalisation of US$1.536Tn, Musk's holdings is worth US$202.8Bn.
SpaceX + Tesla makes Musk a US$1. 07 trillionaire.
And that does not yet include his holdings in xAI and X (Twitter).
Market cap after IPO:
Musk holds 849,494,440 Class A shares which is 11.3% of the total shares..
Thus total Class A shares = 849,494,440/11.3 x 100 = 7,515,649,912.
Musk holds 5,569,053,075 Class B shares which is 93.6% of the shares.
Thus total Class B shares = 5,569,053,075/93.6 x 100 = 5,949,843,029.
SpaceX capitalisation based on issue price of US$135
= (7,515,648,912 + 5,949,843,029) x US$135
= 13,465,491,941 x US$135
= US$1.818Tn
Market cap after Greenshoe option exercised:
The Greenshoe option allows the IPO underwriters to issue additional Class A shares. The option has been exercised which further increased the total raised from US$75Bn to US$85.7Bn. At issue price of US$135 it means the number of Class A shares subscribed was 555,555,555 and increased by 83,333,333 to 638,888,888.
That means total Class A shares increased from 7,515,649,912 to 7,598,982,245
That means based on IPO price, market capitalisation is now
= (A class 7,598,982,245 + B class 5,949,843,029) x US$135
= 13,548,825,274 x US$135
= US$1.829Tn.
The Free Float:
At IPO -- 555,555,555/13,465,491,941 = 4.1%
After Greenshoe option exercised -- 638,888,888/13,548,825,274 = 4.7%
Valuation narrative of SpaceXIn terms of market cap, SpaceX is now up there amongst the top corporations in the world -- NVIDIA ($5.02Tn), Alphabet-Google (US$4.53Tn, Apple (US$4.4Tn), Microsoft (US$2.93Tn) SpaceX (IS$1.83Tn), Saudi Aramco (US$1.72Tn and Tesla (US$1.52Tn
Valuation narratives are clear for all the companies except SpaceX. NVIDIA = chips + AI compute infra, Alphabet = digital advertising + cloud + AI ecosystem, Apple = consumer hardware + services, Microsoft = enterprise + cloud, Aramco = oil production, Tesla = EV.
SpaceX is complicated. xAI is developer of Grok and parent company of X (Twitter). SpaceX is parent company of xAI. Starlink at the moment is an operating division of SpaceX. Valuation narrative is:
SpaceX = rocket and space company
SpaceX (Starlink) = satellites / internet communication
xAI = AI infrastructure
X (Twitter) = social media platform
SpaceX mission statement :
"To build the systems and technologies necessary to make life multiplanetary, to understand the true nature of the universe and to understand the light of consciousness to the stars."
Most people would say the mission statement looks more like a civilisational philosophy than a conventional valuation framework.
Fans of Elon Musk may say every billion dollar platform initially sounded unrealistic before infrastructure adoption occurred. The mission statement is a technological vision and a valuation expansion mechanism simultaneously.
The company is saying SpaceX is not valuing itself as a rocket company, but as a foundational infrastructure for the future of human civilisation. It is building a vertically integrated structure for a claim on future civilisational markets, not merely aerospace revenue. The valuation narrative translates into Rockets - access to space, Starlink - planetary communication layer, xAI - integration + intelligence layer, Energy + AI compute - industrial layer.
The sales logic is -- if humanity expands beyond Earth, then launch communication, AI, robotics, energy and orbital infrastructure becomes foundational utilities, therefore the company building the backbone could capture extraordinary long term value. And so justifies the enormous TAM shown in the prospectus.
The enormous TAM
The world's entire economic output for a year is about US$120Tn. So Musk thinks SpaceX's TAM makes up 1/4 of the world's total economic output. What about food, health, education, communication, entertainment, defence, housing and a million other products and services? If 2 billion of the world's total population of 8.3 billion are working adults, Musk thinks everyone will spend US$1,200 per year paying subscriptions to Grok. The TAM of US$22.7Tn in enterprise application is shared in an already crowded field. The digital advertising of US$600Bn is where Google alone has US$300Bn of the market. But to be fair, wild numbers alone is not a scam, merely over-enthusiasm.
In today's industrial AI, infrastructure build demands extreme capital injection. Google recently sold shares for the first time in 20 years raising US$85Bn. Meta, which has spent years buying back shares at its height in prices, sold shares recently to raise US$30Bn and taken on some private loans. Open AI sold shares in March for US$122Bn. Anthropic has just filed draft prospectus for IPO which is expected to put its valuation above US$1Tn, overtaking OpenAI.
If you were thinking SpaceX's IPO cash will be used towards building some interplanetary data centre up in space as their mission statement suggests, you would be wrong.
Of the US$85.7Bn raised this round, US$20Bn will be used to retire the bridge loan that SpaceX took to purchase xAI + X which carries a compensation cost of US$3Bn.
SpaceX has exercised an option to acquire Anyspheres, the developer of AI tool called "Cursor". Sometime in September, SpaceX will have to use up US$60Bn of the IPO cash to satisfy this "Cursor" option which carries a penalty of US$10Bn for non-call.
For y/e 2025 SpaceX loss for the year was US$4.7Bn and cumulative loss was US$41Bn. SpaceX burns about US$1.8Bn per month, mostly in the AI segment. Research firm Cape Fear Advisors said disclosed contractual cash commitments of SpaceX through 2030 totals US$235Bn. This is the amount they need to spend in the next 4-1/2 years. Where will all the cash come from?
SpaceX has 2 major secured rental deals. Anthropic will pay US$1.25Bn monthly through May 2029 making a total of US$45Bn for AI compute (data centres). SpaceX also has a US$30Bn rental contract with Google. So essentially, what we have is SpaceX will receive payments for infra assets they do not yet have, and by customers with money they do not have yet.
There is no doubt SpaceX has locked itself into major defence contract deals with the government on the rocket and Spacelink segment -- US$4.14Bn Threat-Tracking Constellation (SB-AMTI), US$2.29Bn Space Data Network (SDN) Backbone, US$5.9Bn NSSL Phase 3 (Heavy Military Launches), US$1.8Bn NRO Intelligence Spy Network, US$10.8Bn Space-Based Interceptor Hardware. All signed contracts except the last which is under negotiation. Huge as these contracts are, it cannot cover the expected cash burns in the next 4 years.
An IPO without price discoveryNormally, IPO price discovery takes weeks to months. Company and underwriters set an initial price range, management goes on a roadshow to meet institutional investors, investors submit indications of interest (book-building), then underwriters analyze demand and adjust the price. The final IPO price is set the night before trading.
Several reports noted that SpaceX bypassed the traditional book-building process. They characterized it as Musk "setting" or "publishing" the price himself ahead of investor marketing. Practically, Musk did what he did because he can: Musk has 82% effective control over SpaceX, and the huge floatation buys investment banker subservience. The sheer scale of the IPO allowed Musk a big say on pricing both the issue as well as underwriting costs. Investment bankers were forced to accept underwriting fees of 75 basis points where IPO fees below 1.25% is unheard of. However, that does not mean $135 issue price was arbitrary. The underwriters still had to sell $75 billion of stock. Investor demand reportedly exceeded $250 billion, suggesting the market accepted the valuation.
The retail excitementInstitutional buyers of new listings are mostly long-haul investors. Musk initially allocated 30% of the IPO for retail buyers. This was eventually reduced to 20%. Still a very big deal considering traditionally IPOs allot only 5%. What could be the reason for this extraordinary large retail allocation?
Musk has frequently criticized Wall Street gatekeepers and promoted broader participation in wealth creation. A large retail allocation aligns with the message
Musk has a large following among Tesla investors, X users, Starlink customers and Space enthusiasts. Allocating shares to retail lets ordinary supporters participate rather than leaving gains primarily to Wall Street.
A large retail allocation spreads ownership among millions of investors rather than concentrating it in a few institutions. This reduces the influence of activist funds and large asset managers.
Retail investors create social media buzz, news coverage, strong first-day trading activity. The IPO becomes a cultural event, not merely a capital raise.
The IPO ecosystem played along. Many brokerage platforms broaden retail access (aligning with SpaceX/Musk’s goal of 20% retail allocation), by lowering or waiving normal minimum balance requirements for SpaceX. Example - Fidelity dramatically reduced its typical IPO eligibility threshold (often $100k–$500k) down to as low as $2,000; Robinhood and SoFi has no significant minimum balance requirements. SpaceX deliberately routed allocations through multiple platforms, with the more lenient ones (especially Fidelity, Robinhood, and SoFi) handling the bulk of the broader retail demand. This allowed far more retail investors to participate, boosting demand and helping absorb the offered shares without relying solely on institutions.
US brokers received the bulk of the retail allotment. UK and Japan received significant portions. In UK, retail sails was handled via the POP platform operated by Marex Financial. Japan was flooded with retail orders, handled via online platforms of Mizuho Securities, Rakuten Securities and SBI Securities.
Use of brokerage online platforms isn't new. But what's never seen before is the sheer scale both in terms of % and numbers of retail allocation and its accessibility.
US brokers received the bulk of the retail allotment. UK and Japan received significant portions. In UK, retail sails was handled via the POP platform operated by Marex Financial. Japan was flooded with retail orders, handled via online platforms of Mizuho Securities, Rakuten Securities and SBI Securities.
Use of brokerage online platforms isn't new. But what's never seen before is the sheer scale both in terms of % and numbers of retail allocation and its accessibility.
From a market-structure perspective, a large retail allocation can be viewed as a way to manufacture demand after listing. With 7 times over-subscription, many retail investors received smaller allocations than desired, leaving a large pool of potential buyers in the secondary market. Combined with a limited public float, this can contribute to strong trading performance after the IPO. Institutions create pricing stability, while retail investors can create enthusiasm. A 20% retail allocation suggests SpaceX may have been trying to harness both.
A spectacle of controlled scarcitySpaceX's IPO featured exceptionally tight supply control, designed to minimize selling pressure and support a high share price post-listing. This is far more restrictive than a typical IPO.
Although the IPO is huge, the free float is only 4.7%. The vast majority remained with insiders, employees, and early investors. This created an artificial scarcity, amplifying demand in the thin tradable supply.
There was no Secondary Selling in the IPO. The offering consisted entirely of new primary shares issued by the company. Existing shareholders sold zero shares at launch, keeping all pre-IPO holdings locked.
There is a staggered/tiered lock-up structure (instead of a standard 180-day hard lock-up). Eligible insider/employee shares can only be sold at certain times, under certain conditions, and restricted numbers of shares. Elon Musk's stake (~42% economic, much higher voting power) is locked for a full 366 days (until ~June 2027), with some performance conditions. This "metered" release spreads potential supply over many months rather than a single flood at 180 days, giving the market time to absorb shares while supporting price momentum.
Many brokers impose temporary "lock-ups" (anti-flipping restrictions) on retail customers who received SpaceX IPO allocations. These are not the same as the company's official lock-up agreements (which apply to insiders/employees). Instead, they are broker-specific policies designed to discourage quick selling ("flipping") of IPO shares -- Fidelity 15 days, Robinhood + Sofi + E*Trade 30 days. These broker-level restrictions helped reduce early selling pressure and keep prices up.
The near-term passive buying wave from passive funds is expected to have a strong upward pressure on prices. This is expected sometime week 4 of June and month of July. Passive funds include Index mutual funds, Exchange-Traded Funds (ETFs) -- such as Invesco QQQ (which tracks the Nasdaq-100), and other passive products -- like certain pension funds, insurance products, and institutional portfolios that internally track indexes
Many brokers impose temporary "lock-ups" (anti-flipping restrictions) on retail customers who received SpaceX IPO allocations. These are not the same as the company's official lock-up agreements (which apply to insiders/employees). Instead, they are broker-specific policies designed to discourage quick selling ("flipping") of IPO shares -- Fidelity 15 days, Robinhood + Sofi + E*Trade 30 days. These broker-level restrictions helped reduce early selling pressure and keep prices up.
The near-term passive buying wave from passive funds is expected to have a strong upward pressure on prices. This is expected sometime week 4 of June and month of July. Passive funds include Index mutual funds, Exchange-Traded Funds (ETFs) -- such as Invesco QQQ (which tracks the Nasdaq-100), and other passive products -- like certain pension funds, insurance products, and institutional portfolios that internally track indexes
These funds mechanically buy or sell shares of the companies in the index in proportion to their weight. They are “price-insensitive” -- they buy because the rules say they must, not because they think the stock is undervalued. These are investment vehicles that aim to replicate the performance of a specific market index (e.g., Nasdaq-100, S&P 500) rather than trying to outperform it through active stock picking. So their portfolio will reflect the percentage of stocks based on the index that tracks the market. SpaceX, listed on Nasdaq, is in the Nasdaq-100 list. It is also in the CSPR and Russell Index.
How much the passive funds need to buy to rebalance their portfolios depends on the weightage of SpaceX in the particular index. CSPR and Russel indexes take the market value of SpaceX free float. Nasdaq takes the market value free float x 3 up to a cap of 33.3%. Since SpaceX IPO has a free float of only 4.7%, Nasdaq index weightage will take 3 times of market value of its entire free float. In other words, passive funds based on Nasdaq index will have to buy more SpaceX share than those following CSPR and Russel indexes. Although the free float in percentage is small, its scale is massive, thus it has a significant impact on index weightage.
It is possible to quantify the near term demand coming from these passive funds. Based on IPO price of US$150, the market expectation is:
- CRSP (e.g., VTI, Vanguard total market funds) -- US$4Bn-US$7Bn
- FTSE Russell (Russell 1000 / 3000) -- US$6Bn-US$9Bn - Nasdaq-100 (QQQ, QQQM, etc.) -- US$7Bn-US$12Bn
So between closing week of June - July market expectation is a buying pressure of some US$22Bn-IS$27Nb from passive funds.
The price support will be amplified by lack of scripts due to structured lock-up of insider and employee shares, the lock-up by brokers on their customers, and the fact institutional buyers are long term investors thus leaving the free float to only those retail shares, which works out to just 20% of the 4.7%, ie 0.9% effective free float. Although passive funds are not forced to buy immediately and may spread their window of purchase over a few weeks, the staggered share lock-ups ensure low script availability during those windows.
To bring it all back:
Was Musk living up to his image of a liberalist or is he still the real capitalist hated by folks like Bernie Sanders and Elizabeth Warren? A classical liberal seeks to widen access and reduce gatekeepers. A capitalist seeks to maximize value. Perhaps we are seeing the genius in Musk here. A large retail allocation can serve both goals simultaneously. It allows ordinary investors to participate (the liberal ideal) while also creating a broader and more enthusiastic shareholder base that can support valuation (the capitalist objective).
The SpaceX IPO showcased both sides of Musk -- the capitalist who carefully engineered scarcity and the classical liberal who opened an unusually large portion of the offering to retail investors. The same mechanism served both ideals at once.
With total Class A + Class B shares of 13,548,825,274 and Musk holding 6,418,547,515 of these, every US$1 climb in the price of SPCX on Nasdaq, SpaceX's market cap increases by US$13.5Bn and Musk's wealth increases by US$6.4Bn.
With total Class A + Class B shares of 13,548,825,274 and Musk holding 6,418,547,515 of these, every US$1 climb in the price of SPCX on Nasdaq, SpaceX's market cap increases by US$13.5Bn and Musk's wealth increases by US$6.4Bn.
As this article goes to print, the latest price on Friday was US$185. SpaceX valuation has shot up by US$677Bn and Musk is US$321Bn wealthier!
All these based on valuation narratives and controlled scarcity, not performance.
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