The SpaceX IPO Is Coming. Here's Everything You Need To Know About IPO Risks and Rewards

Spacex's Ipo Sets Unprecedented Milestone in Capital Markets History

Elon Musk's rocket company, SpaceX, has officially filed with the SEC for what is set to become a landmark event in financial history. The IPO roadshow is reportedly launching the week of June 8th, with the company targeting a staggering valuation of up to $1.75 trillion and aiming to raise $75 billion through the public offering. This figure dwarfs the current record held by Alibaba, which raised $22 billion in its 2014 IPO, making SpaceX’s offering nearly three times larger.

Such a huge fundraising target is nearly unattainable in private markets, underscoring the massive scale of SpaceX's ambitions. Some analysts predict that the sheer size of this single deal could eclipse the combined proceeds of all U.S. IPOs in both 2024 and 2025, highlighting its historic significance.

The company intends to channel the funds from the IPO into several ambitious projects. Among these are building data centers in space, furthering the development of the Starship spacecraft, and expanding Starlink, SpaceX’s satellite internet service which is central to its business model.

Company Prioritizes Retail Investors Over Historical Ipo Norms

In a significant shift from Wall Street tradition, SpaceX is emphasizing retail investor participation in this IPO at an unprecedented scale. SpaceX CFO Brett Johnson has reportedly informed the consortium of banks working on the IPO that retail investors—everyday individuals rather than large institutions—will make up a larger portion of this offering than any in history.

Elon Musk is proposing to allocat ...

The initial public offering (IPO) process is a multi-stage journey that brings a private company onto public stock markets. It begins with the selection of underwriters, followed by regulatory filings, a high-stakes investor roadshow, pricing decisions, and finally, the stock's debut on a major exchange.

Ipo Journey Begins When a Company Engages Underwriters

A company's path to going public starts with hiring an underwriter, typically a leading investment bank such as Goldman Sachs, Morgan Stanley, or JP Morgan. These underwriters are responsible for due diligence on the company, assisting in determining its valuation, and building excitement in the investment community. For their services, underwriters generally receive a fee ranging from 3% to 7% of the total capital raised in the IPO. On a large-scale deal such as the potential $75 billion SpaceX offering, this fee could translate to billions of dollars for the banking syndicate.

After selecting underwriters, the company prepares and submits a registration statement to the Securities and Exchange Commission (SEC). This critical document provides full financial disclosure to the public, detailing revenue, profits, losses, company ownership, and the intended uses for the capital raised from the IPO.

Roadshow Pitches Ipo to Gauge Investor Demand and Set Pricing

Following regulatory filing, the company and its underwriters embark on a roadshow. This intensive 10 to 14-day marketing tour targets major institutional investors such as pension funds, mutual funds, and hedge funds. The company’s leadership and bankers present the IPO case, answer questions, and gauge interest.

During the roadshow, underwriters build what is known as "the book," keeping track of which investors are interested and the price points they're willing to pay. This information is essential for assessing overall demand for the offering.

The night before the stock begins public trading, the underwriters, together with company leaders, finalize the IPO price based on the commitments gathered and demand levels. This set price is what institutional investors will pay as the stock becomes available.

Stock Debuts on Major ...

Recent IPOs highlight persistent flaws in the structure of initial public offerings, particularly the systematic advantages afforded to institutional investors over retail participants.

Underwriters Underprice Ipos, Benefiting Institutions At Retail Expense

Underwriters commonly underprice IPO shares, creating a significant price surge—known as the first-day pop—when public trading begins. This undervaluation ensures that the gap between the offering price and the closing price on the first day accrues primarily to institutional investors who received early allocations. Retail investors, on the other hand, are typically unable to access shares at the lower IPO price and are left to buy at much higher prices once trading begins.

Value Flow From Ipo to Retail Demand

During high-demand offerings, this value transfer is especially acute. Institutions allocated at the IPO price often sell into the market frenzy, pocketing immediate gains at the expense of late-arriving retail buyers.

Figma's Ipo: Opens At $33, Closes At $115, 250% Gap Shifts $3.5 Billion to Early Institutional Allocatees

Figma’s IPO exemplifies this dynamic: the company went public at $33 per share and closed its first trading day at $115—a staggering 250% increase. Bloomberg reported that this price gap resulted in more than $3.5 billion being effectively given to investors who secured allocations in the IPO. The offering was massively oversubscribed, with demand outstripping available shares by 30 times, making it the largest first-day rise for a billion-dollar-plus IPO in U.S. history.

Bill Gurley Criticizes Outdated and Unfair Traditional Ipo Pricing

Bill Gurley sharply criticizes the traditional approach to IPO pricing and allocation. He notes that since the 1950s, finance and computer science students have been taught how to use automated trading algorithms to match supply and demand, yet IPOs deliberately sidestep these techniques.

Since the 1950s, Finance Students Have Understood Automated Trading Algorithms Based On Supply and Demand, yet Ipos Intentionally Avoid Using Them For Pricing and Share Allocation

Gurley emphasizes that despite the established and straightforward mechanism of letting price and demand determine allocations, IPOs continue to use a non-transparent process that enables select institutions to acquire shares below their market value. This, he argues, is unfair and outdated.

Direct Listings and Icos Use Real-Time Supply-Demand Matching to Determine Fair Prices, Showing Alternative Methods To Traditional Ipos

Gurley points out that other capital-raising mechanisms, such as direct listings and initial coin offerings (ICOs), rely on real-time supply-demand matching to set prices and allocate shares more equitably. These methods, which embrace transparent price discovery, ensure that those willing to pay the highest price get the shares.

Irony: Post-Ipo Trading Uses Pre-ipo Methodology to Prevent Mispricing

Further illustrating the system’s inefficiency, Gurley observes that on the morning after an IPO, exchanges use real-time supply and demand matching—the very approach ignored during IPO pricing—to determine the stock’s opening price. The gap between IPO and next-day pricing exists only because this method is not employed the night before.

Retail Investors Buying Ipo Shares Af ...

Employee equity can be a powerful wealth-building tool, but understanding the rules, restrictions, and risks is essential—especially around IPOs. Employees should be prepared for lockup periods, tax implications, restricted trading windows, and the dangers of concentrating their net worth in a single stock.

Employees Face Lockup Period Restricting Immediate Share Sales Post-Ipo Despite Equity Being Convertible

When a company goes public, a lockup period prevents insiders—including employees, founders, and early investors—from immediately selling shares. This contractual agreement typically lasts 90 to 180 days, with most IPOs specifying a 180-day period. The purpose is to avoid an immediate flood of shares on the public market, which could drive the stock price down sharply. Instead, the lockup ensures a more orderly market and allows the stock’s fair value to emerge without large insider trades.

For example, if SpaceX lists in July, employees likely won't be able to sell their shares until January at the earliest. During this lockup, the market price can move dramatically, leaving employees uncertain about the value of their equity on the day they finally can transact. The expiration of the lockup is a critical date for employees, who need to track it and plan ahead, rather than waiting until that window arrives.

Plan Equity Liquidation Strategy By Understanding Tax Implications

Before the lockup expires, employees need a strategy that considers tax exposure. The structure and timing of exercising equity, such as stock options, can trigger substantial tax liabilities—even before employees have liquidated shares and received cash proceeds. This can create significant cash flow issues if the tax bill becomes due ahead of an actual sale.

To avoid unpleasant surprises, employees should calculate what they owe in taxes before making any sales. Tax planning for equity events prior to lockup expiration helps employees understand their likely after-tax proceeds and prepares them financially to meet these obligations. A well-prepared plan is crucial to avoid scrambling when the sales window opens.

Post-Lockup, Employees Face Trading Restrictions During Earnings Blackout Periods

Even after the lockup period ends, additional trading restrictions apply. Companies often impose blackout periods around quarterly earnings releases, which limit trading for those with access to insider information. These blackout periods create liquidity constraints beyond the initial lockup and prevent employees fr ...

IPO and Market Opening Prices Differ; Retail Participation Typically Begins At Market Opening

Retail investors often conflate the IPO offering price with the price they will pay when they buy shares. In reality, unless retail investors are specifically allocated shares in the IPO offering, they typically start participating in the market when trading opens, not at the original IPO price.

Shares in IPO Offering

Only selected investors, usually institutional, gain access to shares at the set IPO price. Retail investors generally miss out on these allocations.

Market Opening Price Shows Corrected Mispricing By Institutional Investors

By the time trading begins for the public, the market opening price reflects institutional excitement and the market’s corrected valuation. Retail investors buy at this opening price, which has already been elevated by initial demand, not at the initial, lower IPO price.

Why Retail Investors Buy High and Experience Losses

Retail investors frequently buy in during the “IPO pop,” paying a premium as the stock price spikes at the open, which often leads to losses once the initial excitement dies down and prices normalize.

Retail Investors Should Use AI Tools to Review the S-1 Filing For Business Fundamentals

AI-powered tools have democratized the due diligence process, making it easier for retail investors to analyze fundamental company information filed in the S-1 prospectus with the SEC.

The Prospectus Details Revenue, Profits or Losses, Growth, and Risk Factors

The S-1 prospectus lays out the company’s actual revenue figures, profits or losses, growth rates, and a comprehensive listing of potential risks that could affect future performance.

SpaceX Reportedly Earns $15–$16 Billion Revenue, $8 Billion Profit

For example, SpaceX reportedly generates $15 to $16 billion in annual revenue, with roughly $8 billion in profit—a rare level of profitability for a private tech company approaching IPO.

AI Simplifies Prospectuses, Making Due Diligence Accessible to Retail Investors

AI shortcuts now make prospectus review much more accessible, distilling dense SEC filings into understandable analyses for retail-level investors. This accessibility empowers ordinary investors to assess company quality before buying shares.

Evaluate Valuation Multiple for Future Growth in Stock's Current Earnings

Understanding valuation is critical, especially when high growth expectations are built into the IPO price.

SpaceX's $1.75 Trillion Valuation Compared To $8 Billion Profit Reflects Over 100 P/E Ratio, Anticipating Extraordinary Growth

If SpaceX goes public at a $1.75 trillion valuation against $8 billion in reported profit, that sets its price-to-earnings (P/E) ratio above 100—a clear reflection that the market is pricing in extraordinary future growth.

Earnings Multiple Helps Investors Recognize Stock Price Reflects Future Profit Expectations

The P/E multiple quantifies how much investors are paying for each dollar of current profit, providing critical insight into how much future growth is “baked in” to the current price.

High Multiple Limits Room For Disappointment, Requires Flawless Execution to Justify Valuation, and Increases Downside Risk if Company Underperforms

A lofty earnings multiple means the company has little room for error. If growth fails to meet expectations, the stock price faces significant downside risk.

Monitor Lockup Expiration: Potential Stock Price Decline due to Insider Selling

Lockup expiration represents a pivotal moment in post-IPO stock performance and is a crucial factor for retail investors.

IPO Investing: Reliable Post-Lockup Price Drop Pattern

A consistent pattern in IPO investing is that share prices frequently decline when the lockup period ends, as insiders begin selling previously restricted shares.

Figma Stock Fell Over 40% Post-IPO, Showing Predictable Selling Pressure Before Lockup Expiration

Figma, for instance, saw its stock drop more than 40% in the weeks following its IPO debut—even before the lock ...