Investors are being cautioned against the initial excitement surrounding Elon Musk’s upcoming SpaceX initial public offering, with warnings of potential selling pressure once insider lock-ups expire. The rocket, space, and AI company, founded by Musk in 2002, has grown into the world’s largest space firm. SpaceX plans to offer approximately 555.6 million shares at US$135 apiece, according to recent regulatory filings, which would value the company at a substantial US$1.77 trillion (A$2.5 trillion).
However, research firm Morningstar has expressed scepticism, valuing SpaceX at less than half the proposed amount, around US$780 billion (A$1.09 trillion). Equity analyst Nicolas Owens stated that shares are likely overvalued in the near term, anticipating better buying opportunities post-IPO. Despite these concerns, Morningstar expects an initial surge due to limited public share availability (3 per cent) coupled with significant demand from passive investors, given its fast-track qualification for the Nasdaq 100 index just 15 trading days after floating.
Local fund managers are raising concerns about the fast-tracking mechanism, which they say allows mega-cap stocks to bypass traditional scrutiny. Emanuel Datt of Datt Capital described it as a confluence of factors designed to attract retail investment. SpaceX is actively courting retail investors globally, including Australians via CommSec, and aims to raise up to A$1 billion from local participants, having lodged its prospectus with the Australian regulator. The investor enthusiasm is also evident in BetaShares’ Space Industry ETF, which has seen its assets balloon to A$45 million.
While Morningstar acknowledges an initial ascent, it warns of significant selling pressure in the months following the IPO. Successive tranches of stock held by private investors and employees are slated for sale, with lock-up expirations around 180 days post-float and additional early release windows throughout 2027. Despite Musk’s pledge not to sell his 40 per cent stake for at least one year, other shareholders will have opportunities. Pengana Capital, an early investor through its PE1 vehicle, plans to hold its substantial stake, anticipating ‘forced buying on a large scale’ from passive funds joining major indices.
