Elon Musk's SpaceX, the space exploration and artificial intelligence firm, is poised for a highly anticipated initial public offering later this month. However, Morningstar analysts caution that the company could be overvalued by as much as $1 trillion, urging prospective investors to exercise caution.
Record-Breaking IPO Valuation
SpaceX, which owns the Starlink satellite internet service and xAI—the parent company of social media platform X—is targeting a valuation of $1.8 trillion (£1.34 trillion) when it lists on the Nasdaq exchange. This would make it the largest stock market flotation in history. While the company has been accessible to some investors through certain funds, the IPO will allow private investors to buy shares directly, similar to Musk's other publicly traded company, Tesla.
Morningstar's Overvaluation Warning
Morningstar analysts argue that SpaceX is likely overvalued in almost any scenario, at least in the near term. They place a fair value of $780 billion (£580 billion) on the company, significantly below the IPO target. Much of the projected valuation hinges on future earnings from ventures that are not yet commercially viable, such as data centers in space, cargo transport to Mars, and the commercial potential of Grok, X's AI chatbot. Even SpaceX has acknowledged that some of these initiatives may be speculative and might never generate returns.
Governance Risks
The analysts also highlight governance concerns, noting that Elon Musk will retain majority control and decision-making authority due to the company's share structure. They stated, "The concentration of decision-making authority in a single individual creates governance risks that warrant careful consideration." They added that investors may find better buying opportunities after the IPO, as share prices often decline post-listing when early investors sell to realize profits.
Market Context
Recent IPOs have shown volatility. For instance, AI infrastructure firm Cerebras Systems went public in mid-May at $185 per share, surged to $311 on its first day, but later fell to $230—a 25% drop from its peak. Kathleen Brooks, research director at XTB, suggested that SpaceX's IPO performance could influence enthusiasm for OpenAI's upcoming listing later this year.
Financial Performance
SpaceX's prospectus reveals revenues of $4.7 billion (£3.5 billion) for the first quarter of 2026, but a net loss of $4.3 billion (£3.2 billion). Despite this, the company claims a total addressable market of $28.5 trillion (£21.2 trillion) if its space investments and plans succeed. The IPO is expected to be a landmark event, but investors are advised to weigh the risks carefully.
