10, 9, 8, 7…

Should you buy SpaceX?

Trick question. You probably can’t. Shares in the hottest-ever IPO in human history will be scarce in Canada. In fact, three of the four investors, funds and institutions wanting a slice of Elon won’t be sated. The IPO is oversubscribed.

Massively.

Reports peg current commitments at $250 billion for what was expected to be $75 billion worth of equity. Even at that level this company would be worth $1.7 trillion – with Musk retaining 42% of the float plus an iron grip on voting control.

In case you missed the memo, SpaceX issues its initial public offering Friday, with the opening subscription share price to be announced tomorrow. It will dwarf any other IPO by many multiples, indicating the rapidly-inflating value of money, the Elon Musk allure, the romance of space, the coolness of owning a piece of the first (maybe) interplanetary company, the insatiable interest in AI, or just public insanity, driven to orgiastic new heights by ol’-fashioned stock promoting.

Whatever. It’s happening. And lots of people worry about the impact on the market, plus the index funds that will soon make all their unit owners into Elon investors.

First, you should know this. SpaceX is not profitable. It loses billions annually, mostly because of the rocket-space-going-to-Mars part of the business. It lives because of fed money. The Starlink sat-based Internet business is a hit, and earned $11 billion last year. The artificial intelligence unit, xAI, is dodgy and best known for a model that can turn out sexualized pictures of your neighbour’s daughter. All together, this is a company that will not pay dividends or show a positive bottom line. Maybe ever.

So, it lives on hype.

Elon wants to go to the red planet and establish a space colony of a million people. He plans to launch a maze of AI data centre-satellites into space because hosting them on earth is too expensive. (Data centres need energy and cooling. Solar energy is free and space is cold.) SpaceX is also planning to furnish NASA with its ride to the moon for Artemis IV, and already is the biggest out-of-this-world transport company and Uber rocket service.

He’s a dreamer, a visionary, a weird person, a huckster and a political gadfly. Of course, Musk is also the richest human, so naturally millions of others want his glory to rub off on them, if only by owning a piece of his corp.

So, if you could, should you buy in? And what might we expect on feeding-frenzy Friday?

Expectations are the market price will, within seconds, exceed the subscription cost. Demand will be huge. Initial investors will see instant profits. Millions will be realized out of thin air. Possibly billions. Elon will be a trillionaire. Market history will be made.

What happens after that could be a whole different story. Glitzy, sexy IPOs have a history of soaring, followed by crashing. Remember that – unlike Apple, Meta, Microsoft, Nvidia and other tach titans – SpaceX is unprofitable. It may never pay a dividend. It’s true value will be in its market capitalization, which is based on investor appetite and demand. If that wanes, everything changes.

Meanwhile given the profile of this IPO, given Elon’s mythical stature and his political clout, legions of investors will become SpaceX shareholders whether they like it or not.

Matthew says this sucks. The blog dog points out that some indices are relaxing requirements to allow blow-out IPOs like SpaceX (with OpenAI and Anthropic to follow) to join them on an accelerated basis. The Nasdaq has already waived requirements for profitability and share float. How, he asks, can this be a good thing for shareholder protection?

“The concern being raised in some corners is that passive funds tracking these indexes would be mechanically forced to absorb large, low-float, unprofitable names at whatever valuation the market sets on inclusion day, potentially at the expense of existing constituents being sold to make room,” he writes. “Given that index ETFs are the cornerstone of the portfolio approach you advocate, do you or the team see this as a meaningful structural risk worth flagging or is the practical impact on a balanced, diversified portfolio likely immaterial?

Stefan, another engaged BD, is also growling.

“I see the rumblings online about how this is nothing but a grift, and privileged index engineering, where retirement savings become the exit liquidity for early private investors,” he says. The index providers have changed the rules so these huge IPOs can be added faster, and once that happens, passive funds, seem to have no choice but to buy.

“Fundamentally, I don’t want any part of this, it makes me want to divest.   However, I have to admit that following the “set it and forget it” method of passive index investing has served me very well as I reach the halfway point in my career. Things are absolutely on track, and our financial picture feels secure. At a glance, this just feels dirty. What’s your take?”

Easy. This is why we invest through broad-based, highly diversified funds that hold an entire market. You may end up owning a sliver of SpaceX, but you also hold the other tech behemoths throwing off billions in quarterly profits. Musk may hit a home run and his data-centre-satellites revolutionize human society. Maybe he’ll go crazy and blow it all trying to populate Uranus. Dunno.

Market rules should not be relaxed for a high-profile offering. But, then again, Steven Colbert should be on TV. And no one person should have a trillion dollars when millions suffer. It’s the only world we live in. So far.

About the picture: “This is Bentley – a working Farm dog,” writes Pete.  “A King Charles Spaniel bred to an Australian Sheep Dog.  He is responsible for protecting about 50 chickens from predators plus rounding them up at night and putting them to bed.  When he is not working, he likes to carry around his favourite stuffed toy. I believe one measure of wealth is not what you make, but how much you keep.  Residential acreage is taxed handsomely, but if you keep a few chickens, you can get farm status.  Farm status tax is almost nothing on the land and 2 dwellings are allowed on the parcel. I enjoy your blog.

To be in touch or send a picture of your beast, email to ‘[email protected]’.

Source: https://www.greaterfool.ca/2026/06/10/10-9-8-7/