By Manya Saini and Lucy Raitano
May 21 (Reuters) – SpaceX’s record-shattering IPO has given Wall Street the kind of spectacle it has craved since the pandemic-era listings boom, but the once-in-a-generation market event may offer little insight into whether the broader IPO market is truly back.
The IPO is expected to capture the imagination of retail investors with a rare mix of sci-fi ambition and Silicon Valley hype, marrying promises of Mars exploration with bets on AI infrastructure and data centers in space.
But investors should not look at it as a bellwether for the broader IPO market because the company has little in common with a typical IPO candidate, more than half a dozen analysts and industry experts told Reuters.
“SpaceX is so large and extraordinarily valued that it doesn’t lend itself as a normal test case for the IPO market,” said Lukas Muehlbauer, IPOX research associate.
“The IPO market has reopened, but the appetite is still concentrated in companies that match strong thematics such as industrials, AI infrastructure, defense, energy and parts of biotech.”
A SpaceX listing expected to raise more than $75 billion at a valuation of roughly $1.75 trillion would dwarf every IPO on record and propel total U.S. IPO proceeds to their highest level since 2021, according to a Reuters analysis of Dealogic data.
FIRMS LOOK TO AVOID COLLISION WITH SPACEX
A deal of this scale could drain liquidity and investor demand from the market, pushing other IPO hopefuls to the sidelines, industry experts and analysts told Reuters in April.
IPO bankers expect investors to be heavily tied up with the SpaceX IPO given its sheer size and the pressure on many funds to participate in the landmark deal, one European equity capital markets banker said.
While smaller European deals may go ahead largely unaffected, larger IPOs are expected to face disruption because of their reliance on major U.S. investors, a second banker said.
“The wider narrative has been that some companies have accelerated their IPO plans to get ahead of SpaceX, which is momentum that could continue as issuers try to go public before the listing absorbs a large share of investor attention next month,” IPOX’s Muehlbauer said.
Several listings have made their way to the market in recent weeks, including AI chipmaker Cerebras and investment bank Lincoln International this month.
THE ‘FOMO’ TRADE
For many retail traders, the SpaceX deal is shaping up to be the ultimate FOMO trade, driven as much by Elon Musk’s cult-like following and scarcity value as by traditional valuation metrics.
“Humans are prone to herding and when they hear about how monumental this may be, they don’t want to miss out,” Brian Jacobsen, chief economic strategist at Annex Wealth Management.
Unlike a traditional IPO built around predictable cash flows, comparable valuations and measured growth forecasts, SpaceX is being sold on scale, scarcity and a futuristic vision that stretches far beyond Earth’s atmosphere.
The company’s IPO filing on Wednesday revealed that most of its $18.67 billion in revenue last year came from its Starlink satellite internet business, while its AI business continues to lose money.
Reuters reported in March, citing a source, that Musk was discussing allocating as much as 30% of SpaceX’s IPO to individual investors – at least three times the typical retail allocation – leaning on his fervent fan base and other loyal backers to help support the stock after its debut.
“Retail crowds often operate on narrative contagion, and SpaceX could be the most potent narrative ignition event in a generation and hedge funds could interact right alongside this enthusiasm,” said Michael Ashley Schulman, partner at wealth management firm Cerity Partners.
SIGNAL OR SPECTACLE?
Analysts said SpaceX’s success alone is unlikely to revive the IPO market, with a broader recovery tied instead to easing geopolitical tensions, more stable equity markets and reduced investor anxiety over AI upending legacy technology businesses.
“SpaceX’s IPO isn’t a market signal given how unique it is in terms of scale and scarcity. Index providers have had to bend or change their own rules to accommodate a company with such a large market cap,” Annex Wealth’s Jacobsen said.
The U.S. IPO market has remained stuck in a prolonged slump since the boom years of 2021, turning SpaceX’s expected listing into a defining moment for Wall Street’s hopes of a recovery.
To be sure, while it may be too unique to serve as a true proxy for the IPO market, experts said the stock’s debut performance could still shape broader investor sentiment toward new listings.
“The success of a SpaceX IPO doesn’t guarantee the success of other IPOs because the company’s unique business model has no real competitors,” said Reena Aggarwal, a finance professor at Georgetown University.
“However, if the IPO is unsuccessful for any reason, it will dampen the IPO market.”
(Reporting by Manya Saini in Bengaluru and Anousha Sakoui and Lucy Raitano in London; Editing by Noor Zainab Hussain and Saumyadeb Chakrabarty)
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