SpaceX shares surges past $2 trillion in Nasdaq debut, closes in on Amazon
The stock's performance will also be a test for the so-called "Musk premium," which has been the force behind Tesla's $1 trillion-plus valuation
SpaceX shares jumped 19% in their Nasdaq debut on Friday, sending the company's value past $2 trillion (Dh7.3 trillion) to make it the sixth-biggest U.S. company by value and turning Elon Musk into the world's first trillionaire.
Investors jumped at the chance to get a piece of Musk's sprawling empire spanning rockets, satellites and AI after the record-setting $75 billion (Dh275 billion) IPO. More than 510 million shares worth about $84 billion (Dh308 billion) changed hands, even though SpaceX is currently unprofitable and generated only a fraction of the revenue brought in by similarly valued tech giants.
The launch was smoother than many observers expected, with trading kicking off late on Friday morning without the hiccups that had marred Facebook's debut in 2012. SpaceX shares ended the day at $160.95 (Dh591.15) a share to bring its value to $2.1 trillion (Dh7.71 trillion). The gain pushed SpaceX's market value past Broadcom, with Amazon next in line at $2.6 trillion (Dh9.55 trillion).
The trade capped off a lead-up fraught with anxiety over the Nasdaq exchange's ability to handle the launch, particularly after a recent swoon in technology shares raised concerns about stratospheric gains in AI-linked names. Mega-listings from AI heavyweights Anthropic and OpenAI are waiting in the wings.
Investors across the spectrum, from large institutions to retail fans of Musk, ended the day euphoric.
"For many investors, SpaceX is the closest thing to investing in the railroads during the Industrial Revolution and they are willing to pay the Elon Musk premium for that opportunity," said Seth Hickle, chief investment officer at Mindset Wealth Management in Indianapolis.
Analysts and portfolio managers said investors should brace for volatility, particularly early in SpaceX's life as a public company, due to its small relative float and high valuation. SpaceX's $18.7 billion (Dh68.6 billion) in revenue gives the company a price-to-revenue ratio of roughly 112, far above other megacap stocks.
"The question remains is, what happens in a couple of weeks from now. Right now, people want to bid the stock higher because it's a winner at this point. Whether it stays that way, that remains to be seen," said Todd Schoenberger, chief investment officer at Crosscheck Management in Washington, D.C.
Retail investors received about 20% of the allocation, far more than the typical IPO, with some even celebrating an allocation of one share.
SpaceX executives, including President Gwynne Shotwell and Chief Financial Officer Bret Johnsen, celebrated at the Nasdaq market site in New York's Times Square after ringing the opening bell on Friday. Musk held a separate event for employees in Texas.
World's largest IPO
The record IPO is a culmination of Musk's long-held ambitions in space and technology, and has stood out for rewriting Wall Street's IPO playbook and drawing legions of retail investors into the market.
At $75 billion (Dh275 billion), the deal's proceeds were more than double those of Saudi Aramco's record-setting 2019 IPO.
The valuation could rise further should underwriters exercise their right to sell additional shares, a decision typically made within 30 days after the offering.
Although SpaceX may have to wait for entry into the S&P 500 , its expected fast-track inclusion in the Nasdaq 100 will soon make it a major holding for passive funds and ETFs that track the index, creating a fresh source of demand for its shares.
"We have to go back 100 years to get comparable entrepreneurs. He's a visionary unlike others, and he executes extremely well," said Joel Shulman, CEO of ERShares, which manages an ETF that has an exposure to SpaceX.
It will take about a month before it gets added to that index under Nasdaq's new fast-entry rules, as opposed to a typical wait of as much as a year.
Some analysts expect SpaceX's debut to trigger a reshuffling of investor portfolios, creating selling pressure on other technology heavyweights as funds rotate into the stock.
A $28.5 trillion market opportunity
For all the excitement surrounding the IPO, determining what SpaceX is actually worth remains a difficult valuation exercise.
SpaceX said its market opportunity spans $28.5 trillion (Dh104.6 trillion), a figure it called the largest in human history. With its leading position in space - the firm says its operation is responsible for more than four-fifths of the mass launched into orbit over the past three years - and revenues from Starlink, some investors said it has a strong foundation upon which to build.
John Belton, portfolio manager at Gabelli Funds, said the best comparable to SpaceX is Musk's electric vehicle company Tesla, as each has an established business and "a moonshot opportunity on the other side."
"For Tesla, that's things like humanoid robotics and other future applications. For SpaceX, it's the AI business," he said.
The hurdles at its enormous valuation include efforts by rivals such as Jeff Bezos' Blue Origin to accelerate the commercialisation of space and pursue government contracts in a bid to unlock new markets beyond Earth. With revenue of $18.7 billion (Dh68.7 billion) in 2025, the company's market cap puts its price-to-revenue ratio at a lofty 94. Some analysts have already issued positive ratings on the company. Morningstar analysts earlier this month said it is more fairly valued at around $780 billion (Dh2.8 trillion).
"This is not a name you're buying based on fundamentals. For me, the analogy is Amazon. This was a company that changed the way we live," said Nancy Tengler, CEO and CIO of Laffer Tengler Investments. "If the stock drops to $100 (Dh367), that's not ideal, but it wouldn't change our long-term view. We want to participate."