The largest IPO ever

The initial public offering by Elon Musk's SpaceX has been perhaps the most ubiquitous event in the global financial and stock markets, as it was the largest IPO ever in terms of funds raised. 

On 12 June, SpaceX made its historic and record-shattering IPO of $75 billion. It also outright became the world's most valuable company at IPO with a valuation of nearly $1.78 trillion, by raising $75 billion at an offer price of $135 per share. 

No other company commanded a valuation of more than $1 trillion at the time of the IPO. Demand for the shares were unprecedented, attracting more than $350 billion in orders from retail investors, institutions and sovereign wealth funds. 

The company, listed on the Nasdaq under the name of Space Exploration Technologies Corporation, ticker SPCX, sold 555.6 million Class A common stocks in its IPO. After underwriters fully exercised their "greenshoe" overallotment option to purchase additional 83,333,333 Class A common stocks to meet investor demand, the total offering was over 638.9 million Class A common  stocks.

SpaceX raised $10 billion more than initially planned when it sold shares to the public on 12 June, raising a total of $85.7 billion.

At the time of IPO, SpaceX's accumulated loss amounted to $41.3 billion.

SpaceX witnessed extreme post-trading swings in prices. Its 52-Week Price Range (up to 14 August) was $225-104.83. 

The company released its second quarter earnings (ended June 2026) on 4 August 2026. It reported $7.8 billion in revenue for the second quarter, a 92% increase from the revenue of $4.1 billion in the same period last year, while net loss was $541 million compared to loss of $1 billion a year earlier.

Space Exploration Technologies Corporation designs, manufactures, launches, and operates products and services built on technologies, including rockets and spacecraft. The company's core business segments include Space, Connectivity, and Artificial Intelligence (AI).

SpaceX's IPO has commanded the most expensive valuation multiple of any mega-cap tech company in history at the time of IPO. At $135 per share, ​SpaceX's trailing price-to-sales multiple was roughly 94: more than P/S multiples of some of the biggest companies such as ​Nvidia, Amazon and Meta. 

Since SpaceX generated a ‌loss last year, it cannot be compared on a price-to-earnings (P/E) ratio basis. 

The company stated in its prospectus filing that it has identified the largest actionable Total Addressable Market (TAM) in human history which it estimated at $28.5 trillion.

The role of index provider

Index funds are built to track the performance of a specific financial market benchmark.   

In the SpaceX IPO, the role of  index funds came under serious scrutiny as some index funds altered their long-held rules to expediently accommodate SpaceX in their indices.

The rules change went into effect on 1 May 2026 — approximately six weeks before SpaceX's 12 June IPO. Some observers argue this rule was instituted apparently to pave the way for inclusion of SpaceX's nearly $1.78 trillion debut in the index. 

The lock-up scenario 

SpaceX's lock-up schedule is a unique, staggered insider lock-up structure rather than a traditional flat 180-day lock-up. The schedule is divided into distinct stages: first release of about 911.5 million shares (about 20% of restricted holdings) occurred on 6 August 2026 (two trading days after its 4 August Q2 earnings report). 

It increased the free float from 4.2% at the time of IPO to 11.2%. The remaining lock-up release is as follows:

• 20 August 2026 (Day 70): 7% time-based tranche release
• 9 September 2026 (Day 90): 7% time-based tranche release
• 24 September 2026 (Day 105): 7% time-based tranche release
• 9 October 2026 (Day 120): 7% time-based tranche release
• 24 October 2026 (Day 135): 7% time-based tranche release
• Late October/Early November 2026: ~28% tranche unlocked 2 trading days after Q3 earnings results
• 8 December 2026 (Day 180): Expiration of the standard 180-day lockup for remaining employee/insider balances
• February – August 2027: Extended institutional investor tranches
• 12 June 2027 (Day 366): Full release of CEO Elon Musk's separate locked stake

Debate over shareholding structures and corporate governance

The shareholding structures and the consequent corporate governance including the voting rights of public shareholders have been subjected to widespread criticism. Musk will serve as CEO, chief technology officer, and chairman, and will control the election of directors and enjoy voting control. 

It has a "dual-class" share structure that prevents any effective challenge from independent shareholders. He holds  more than 90% of Class B common stocks: each holder of Class B common stock is entitled to 10 votes per share. 

Musk holds about 12% of class A common stock, which carries one vote per one common stock. As a result, Elon Musk will hold more than 82.4% of the total combined voting power. Public investors hold Class A shares (1 vote per share); Class B investors wield "significant influence over critical matters requiring shareholder approval," IPO filing said. 

The structure "will limit or preclude investors' ability to influence corporate matters and the election of  directors," according to the registration statement.

The company's S-1 explicitly states that public investors "will not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of Nasdaq." 

SpaceX qualifies as a "controlled company" and has exercised its right to exempt itself from the exchange's majority-independent-board requirement. But the company will abide by the rules which require it to establish an audit committee composed  entirely of independent directors. 

Morgan Stanley Capital International (MSCI) awarded SpaceX its lowest possible ESG (Environmental, Social and Governance) rating, CCC, one day before the company's record $75 billion stock market debut, citing high risk exposure and weak management.

AIs are inherently highly capital intensive. Evercore ISI, the research arm of an investment bank,  forecast SpaceX's capital expenditures to increase from $20 billion last year to $360 billion by 2030. 

It estimates spending doubling to a staggerring $732 billion in 2031 — $666 billion of which is exclusively for the company's AI division. SpaceX believes its most promising growth opportunity is artificial intelligence (AI), to which it attributes $26.5 trillion of its $28.5 trillion TAM. 

It is unlikely that SpaceX will be able to earn profit anytime soon. The technology sector, however, has different dimensions, and operates by a different set of principles. 

Technology companies do business in highly dynamic conditions where  speed and scale are deemed  more important for long-term sustainability than early profitability or dividend. Investors in high-growth technology companies  do not evaluate current earnings.

Instead of relying on Earnings Per Share (EPS), Earnings Before Interest, Tax Depreciation and Amortization (EBITDA), they are inclined to focus on metrics that signal future cash flow potential. 

As widely used metrics like the Price-to-Earnings (P/E) ratio cannot be applied to unprofitable companies, investors have to rely on alternative yardsticks, such as Price-to-Sales (P/S), which implies deferring present profitability in the hope to maximise ultimate long term Enterprise Value (EV). 

Investors drawn to tech stocks generally seek and pursue capital appreciation rather than steady dividend income.

Judged by past records and achievements, SpaceX remains one of the most innovative and forceful companies in the world. However, translating radical ideas and projects into consistent profits at a trillion dollar valuation is indeed quite challenging.

Md Ziaul Haque Khondker is a former chairman of BSEC and former managing director of ICB.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views and opinions of The Business Standard.