June 12 (Reuters) – SpaceX SPCX.O shares jumped 19% in their Nasdaq debut on Friday, sending the company’s value past $2 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 IPO. More than 510 million shares worth about $84 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 a share to bring its value to $2.1 trillion. The gain pushed SpaceX’s market value past Broadcom AVGO.O, with Amazon AMZN.O next in line at $2.6 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 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.
Spencer Platt via Getty Images
‘Almost Surreal’
The 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.
“Elon deserves an extreme premium because of his track record and his vision for calling technology trends early,” said Shaun Maguire, a Sequoia Capital partner who has led the firm’s $2 billion investment in SpaceX. Sequoia Capital’s investment is worth over $20 billion at the IPO price, a person familiar with the matter told Reuters.
At $75 billion, the IPO’s proceeds were more than double those of Saudi Aramco’s record-setting 2019 IPO.
SpaceX’s valuation could rise further should underwriters exercise their right to sell additional shares, a decision typically made within 30 days after the offering.
“Seeing the company that I joined when it was just some sketches on paper become this valuable is almost surreal,” said Tom Mueller, a founding SpaceX employee who spent 18 years at the company and a shareholder, who is now CEO of Impulse Space, a spacecraft startup.
An estimated 4,000 current or former SpaceX employees will become millionaires based on the value of their SpaceX shares, according to Hill.com.
Although SpaceX’s lack of profitability makes it ineligible to join the S&P 500 .SPX, 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.
It will take about a month before SpaceX 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. On Friday, shares of other space firms and satellite companies declined sharply, with Planet Labs PL.N down 9% and EchoStar SATS.O down 11%.
SpaceX said its market opportunity spans $28.5 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.
Some analysts have already issued positive ratings on the company, but Morningstar analysts this month said it is more fairly valued at around $780 billion, and CFRA on Friday started coverage with a sell rating.
“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.