Why We're Not Purchasing SpaceX at its IPO Launch

[00:00:20]Welcome to this off-cadence cycle of our cream connect series. And the reason for this segment is because there's something massive happening in capital markets, all right? Likely you've heard of it. Likely it's been all over the news. And certainly as of June 12th, it will be even even a bigger dominant factor in the news, financial and a non-financial news cycles.

[00:00:42]And that's the SpaceX IPO, right? That initial public offering that's happening. And we have received tons of questions on this topic. And there's a lot of merit to those questions, right?

[00:00:54]There's a lot of sentiment backdrop on this individual stock. And it's very important that we address those, not only from an educational standpoint of what's happening, but also part of the reasoning of why the cream investment policy committee is not going to be purchasing the SpaceX IPO at its launch.

[00:01:13]So, without further ado, let's just get into it because again, the topic is fascinating. A lot of sentiment backdrop behind it. And it as there should be, but there's also good explanations behind kind of our decision and why we're choosing to go this route.

[00:01:29]For starters, SpaceX, which by the way stands for the space exploration technologies corp. The the name SpaceX is a much cooler sounding name. But this is an aerospace and tech company founded by Elon Musk in 2002, right? And officially here as of June 12th, 2026 at roughly around 8:30 to 8:40 a.m.

[00:01:52]Eastern time, Elon Musk is officially a trillionaire, the first trillionaire to be dubbed in the world, quite fascinating.

[00:02:00]But the the the the aim of SpaceX is to revolutionize space transportation, right? And the goal is to have humanity be multi-planetary, enabling people to live on other planets, right? Mars being a big aspect of that. And along the way, one of the things that it has done really well, and one of the things it continues to do well, rather it it's promoting, is this attempt to reduce the cost of space travel in ways that were never before thought possible, right? They've done that. It's pretty amazing the tech the technology aspect of what SpaceX has done, and it is a marvelous company for what it means that we're humans have have have been able to achieve uh for this potential for multi-planetary travel.

[00:02:43]SpaceX in general does five key things, right? Again, this is fairly broad. This is a quick backdrop on the company because although I started off with saying we're not going to be purchasing this across the Investment Policy Committee structure, it is really important to note how amazing this company is and everything they're doing, and then focusing on the investment implications as a result of that, but broadly speaking, right? SpaceX um they launch rockets and satellites, right?

[00:03:08]Reusable rockets. If you haven't experienced those videos where you see the rocket coming back down to Earth and being caught by two metal arms, quite fascinating. A tremendous innovation along along the way there. Um they provide a lot of high-speed uh internet globally via their Starlink satellites.

[00:03:24]Thousands of satellites they launch into orbit. They do a lot of extensive work with NASA, the Department of Defense, defense contractors. Um they launch satellites for the government. They take individuals, carry astronauts to the International Space Station. Um they are uh very much ingrained in that deep space exploration concept.

[00:03:45]And at the end of the day, they're also very much in the AI infrastructure space where think of data centers, right? All the All the artificial intelligence and the technology surrounding those components, they need a lot of energy.

[00:03:58]And that energy, those those machines, those servers have to be cooled down.

[00:04:03]What better way to cool those down than putting putting them up in space? It's a fascinating concept. Uh it's getting a lot of traction behind it. And certainly, I do hope for the better of the for humanity, for for our ability to be have be more energy sustainable, ability to expand AI usage in the world. That would be pretty amazing if they were to achieve that feat.

[00:04:26]So, in summary, SpaceX is an amazingly innovative company, right? It builds rockets, deploys satellites, enables internet capabilities, and is actively working to send us all to Mars. It's a pretty cool company. It's uh it's it's a uh all the sentiment around it is very much founded on the right reasons, right? It is It is a It's something that's never been out there before. And them going public, going from a private company to a public company, is quite an amazing feat and how they've been able to accomplish that.

[00:04:56]So, why is SpaceX going public? Via an IPO, or an IPO stands for initial public offering.

[00:05:05]Well, the term going public simply means transitioning from a private company to one that is now owned by the public via shares, right? Share of a company that they've sold in capital markets, right?

[00:05:18]Predominantly equity market.

[00:05:20]And companies go public for many reasons, but some of the main reasons are that they need funding, right? They need funding to grow.

[00:05:29]And you can grow by taking on debt via the bond market, or you can grow by going public and getting uh equity, right? Money by selling equity in the public markets.

[00:05:39]And investors, at the end of the day, purchase said shares when a company goes public in hopes that the company will continue to grow. Right? That is the ultimate investment in that company.

[00:05:50]Nobody's going to buy the shares if they think long-term the company will have no value.

[00:05:57]Specifically on SpaceX itself, right?

[00:06:00]SpaceX has been very public about how and why it's going to use some of these funds.

[00:06:05]Doing deep space exploration, planning for multi-planetary trips to Mars, planning for data centers in space.

[00:06:12]These are very capital-intensive projects and SpaceX needs the money to fund them.

[00:06:17]They also need money to fund liquidity for investors and employees, right?

[00:06:21]SpaceX SpaceX has been around since 2002 and many of those investors have seen a zero liquidity, not all of them but a many of them have seen zero liquidity in their investment in that they over the past 24 years. There needs to be liquidity in that structure for any business to sustain its investor base and continue to get investors.

[00:06:42]Therefore, IPOs in this particular way help fund some of that. You may have heard that the SpaceX IPO is going to generate hundreds of new millionaires across the country. That is reportedly to be the case.

[00:06:55]Part of also going public for SpaceX specifically is they have access now to future capital in a much faster manner, right? Going public from private from private to public, it's there's a lot of legal components that take that they have to have to go to take into effect.

[00:07:10]Now that they are a publicly traded company their ability to access capital becomes easier. There's less friction in that process, right?

[00:07:19]And that also allows for scalability of their business. Scalability to do to do more launches, scalability to generate a wider audience, right? Bigger purview, right? Bigger magnifying glass when you're public company in terms of how you're doing things, why you're doing things that way and so on and so forth.

[00:07:36]And lastly, right? Support new strategic space infrastructure. Those data centers that I talked about in space, that is going to be the future with a relatively undefined timeline of when that's likely to materialize, but all of that does bode well for SpaceX to be a public company because the visibility is important.

[00:07:57]The you know, we're we're going to get a really good purview into earnings on an ongoing basis and really just assessing the structure of the company as a function of what are they going to do in future years.

[00:08:09]With that in mind, right? What is SpaceX raising? How are they doing this in this IPO? Well, how much money are they raising? What does that even mean? Well, as of the early estimates, right? So, as of call it through early early in the day June 12th in the early stages of the IPO, SpaceX is targeted to raise approximately 75 billion dollars.

[00:08:32]That is an exuberant amount unlike anything we have ever seen before and I have some stats to showcase on that.

[00:08:39]Where some people or most people, rather, don't understand the the the sale of the company, meaning to what degree is the sale of the company percentage of the company being sold.

[00:08:51]That 75 billion dollars that is being sold or rather raised in capital markets is only a function of them selling 4 to 5% of the company.

[00:09:03]So, 85% of the company is going to remain in private hands.

[00:09:10]Right? You hear you'll you'll hear terms some like a float or percentage of float or or shares of float. The the term float simply means what are the tradeable assets or other tradeable shares in the market for a company like SpaceX. In this case, it's 4 to 5%.

[00:09:29]In relative comparison, that's about two to three times less than what the typical IPO sees in the in the in the markets.

[00:09:39]Typically, it's that 15% of a company that is sold to public markets, not only 4 to 5%, but because of the nature of this company, because of some of the amazing things they're doing, because sentiment is so high, right? They are getting away, for lack of better term, to sell only 4 to 5% of the company for such a massive capital raise.

[00:10:02]And this has been crowned as the largest IPO, rather, largest capital raise in stock market history. And I wanted to list the other four here just for perspective, right? So, if SpaceX is number one here in 2026, it's $75 billion raised.

[00:10:20]Saudi Aramco was the second largest.

[00:10:22]That was back 7 years ago in 2019 at close to $30 raised, and that was insanely exuberant back in 2019.

[00:10:32]Next was Alibaba, massive e-commerce giant in Asia, SoftBank Corp, and then NTT Docomo back in 1998 at $18 billion, which by the way, NTT is the largest telecommunications company in Japan. And that 18.1 billion in 1998 on an inflation-adjusted basis is roughly 35 36 billion dollars in today's money.

[00:10:56]So, these are just sizable IPOs, but as you can see, SpaceX is dwarfing the next four top records that were set in the history of the stock market. Quite amazing, and this is the first US company to make this top five list, right? Saudi Aramco, Alibaba, SoftBank, NTT, those aren't really US companies, rather not domiciled in the US, even though they are very multinational and do business in the US.

[00:11:23]SpaceX has now bucked that trend.

[00:11:28]So, I want to stress the fact that SpaceX being crowned as the largest capital raising in IPO and in stock market history does not itself produce a reason to avoid the stock, right? That simple fact that it is the highest in history in a raise rather irrelevant, right? The reason that we're talking about here is the fact of what does this mean for its valuation, right?

[00:11:53]And valuation is a term you're going to hear thrown around a lot.

[00:11:56]Valuation simply refers to what is the economic worth of a business. Similar to say, what is my cell phone worth, right?

[00:12:06]What is the valuation of that asset, of that company? It provides a dollar amount for selling a business, provides a dollar amount for securing future funding and so on and so forth.

[00:12:17]In the case of an IPO, right? The simplest way to calculate a valuation of a company is taking the raised capital that the company is generating based from the IPO, just dividing it by the company's percentage sold, right? What is the value that they sold?

[00:12:34]So in this case, right? If we have our target capital raise of $75 billion dollars and we know they're selling about 4 to 5% of the company.

[00:12:43]Dividing that figure reveals approximately $1.7 trillion valuation.

[00:12:50]I promise that is not a typo.

[00:12:53]$1.7 trillion valuation for SpaceX, right? Fascinating.

[00:12:59]Again that alone also is not a reason to avoid the stock.

[00:13:04]When I talked about the fact that it was being crowned as the biggest IPO not a big deal, not a reason to avoid it. Even $1.7 trillion also not a reason to avoid it.

[00:13:17]Where the $1.7 trillion becomes an issue, right? Where the what where the $1.7 trillion becomes questionable is what does that mean relative to earnings?

[00:13:28]Okay? So, in 2025, SpaceX reported $18.7 billion of revenue.

[00:13:37]Healthy number.

[00:13:39]But, for this revenue number to achieve a $1.7 trillion valuation, we have to apply a 91 times earnings multiple. That's a fancy term for saying 91 times earnings.

[00:13:53]Here's another way to look at that.

[00:13:56]Based on SpaceX's IPO from the raise capital relative to the percentage of the company sold, what what investors are telling the market is that they're willing to pay $91 for every $1 of future earnings that SpaceX generates.

[00:14:17]I'll say that again.

[00:14:19]What the market is telling SpaceX or rather what investors are telling us in the market that are buying SpaceX the stock at the at its IPO, is that they're willing to spend $91 for every $1 of future earnings that SpaceX generates in hopes that this immense backdrop, this fantastic future, that that this growth profile, all these amazing things they're doing are going to come into fruition and generate exuberant revenue above and beyond the $91 that they're willing to pay.

[00:14:50]To put this in better perspective, I created this table here to showcase how SpaceX compares to Nvidia, to Alphabet, which is Google, and to Meta Platforms, which is Facebook.

[00:15:02]And look at that Look at that revenue column. Let's go in the middle of that revenue column, right?

[00:15:07]SpaceX has minuscule revenue, minuscule revenue, relative to the next three giants that are very dominantly in the AI space, that are very dominantly in the future innovation of AI, whether it's in the semiconductor space or in the in the agentic AI space, you name it.

[00:15:30]Based on that revenue, if you go to left one time, the current revenue multiples through the end of last year and through the early part of 2026 that are being assigned to these names relative to SpaceX is minuscule.

[00:15:47]A company like Google, Alphabet in this case, that generates $422 billion has a revenue multiple of roughly 10 to 11 times, whereas SpaceX at just $18 billion has a 91 to 104 times revenue multiple, and we'll see how stock trades over the next week or so after June 12th.

[00:16:11]Nvidia is also a great example. And I use Nvidia as a relative comparison because that has been a tremendously innovative company, and I believe they are just getting started over the long term to innovate, and even Nvidia itself is slightly overvalued relative to future expectations.

[00:16:29]But what the market is telling us with the SpaceX IPO is that it's worth currently four and a half times more than Nvidia, yet it generates 14 times less revenue.

[00:16:42]Okay? So, stated one more time, SpaceX in its current IPO and its valuation, its capital raise, the market investors are accepting a profile for SpaceX in that it generates that it's worth four and a half times more than Nvidia, it generates 14 times less revenue.

[00:17:04]This should not go overlooked, right?

[00:17:07]There is a point of exuberance and sentiment that has to have some sort of objective assessment to kick in to say, "Wait a minute.

[00:17:15]This sounds amazing. Mars sounds pretty cool, right?

[00:17:20]Does this valuation make sense at these levels? And that's where we really have to start questioning.

[00:17:25]Really have to start questioning the investment implications of SpaceX, right?

[00:17:33]The growth trajectory of SpaceX has to be one of linear momentum to justify such a valuation, right? For many years.

[00:17:40]For an investor to pay $91 of for for earnings or rather to pay for to pay $91 today for $1 of future earnings of SpaceX, that linear momentum has to be has to be in place.

[00:17:56]Because includes including that in an aggregate portfolio today, we would have to make an argument that there's going to be no hiccups in the future. Uh now that they're publicly traded company, they have to report on a quarterly basis. Uh they have to release earnings, they have to release guidance.

[00:18:12]History hasn't that just taught us many lessons on this on on this exact phenomenon, right? And the vast majority of those lessons end up being hard lessons learned, right? History then just tends to repeat itself over time.

[00:18:29]And this is not to suggest that SpaceX is not going to buck every trend and be this exuberant growth profile and over the next 5 years we have a colony on the moon, we have a colony on Mars, fantastic data centers everywhere.

[00:18:44]But from an objective portfolio construction inclusion standpoint, including SpaceX in the portfolios would imply a completely sentiment-driven assessment that is likely more of a gut feeling and more of a venture capital type investment rather than an objective long-term risk-centric approach, right?

[00:19:05]Our stance, right? When I when I look at SpaceX and think when and how would this go in portfolios? When and how should somebody purchase the stock?

[00:19:14]I do believe there are going to be dislocations in the price of SpaceX, right? We're in the honeymoon phase of its initial public offering.

[00:19:22]It's likely to drive even higher prices in the near term.

[00:19:26]Or it could take a similar path to what happened with Meta Platforms or Facebook when it went public back in 2011.

[00:19:34]For those of you that remember what happened there, the exuberance, the sentiment profile was identical to what we're seeing with SpaceX.

[00:19:41]You know, what happened with that particular company is a decline by about 50% in the next 9 months before it actually went on in this massive secular growth cycle.

[00:19:52]And if that were to be the case, if we were to see a massive dislocation, which is very possible post the honeymoon phase, that's what's going to open up the opportunity for that dislocation to act accordingly and take advantage of that situation.

[00:20:07]So, with that in mind, hopefully you found this informative. Hopefully the SpaceX IPO is something that you're likely going to see it all over the news here starting on June 12th, probably all the way through the next month or so as the magnifying glass that's looking at the company just expands forever at this point given the amazing things that they're doing across industry, given the innovation.

[00:20:31]It's a fantastic company, right? Not downplaying the company, downplaying simply the sentiment profile, rather the valuation from the sentiment profile that's been dubbed the capital markets.

[00:20:41]If you have any questions whatsoever, please do not hesitate to reach out to our team. We're here for any and all questions and look forward to providing further guidance in the future.

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