SpaceX IPO: Boom or Bust?

Last Friday, the Space Exploration Technologies Corporation (SpaceX) released a small portion of its shares to the public in an initial public offering, or IPO.  The majority of shares continue to be held by Elon Musk and other private investors, but this public access to the future earnings of SpaceX drew a flurry of interest and excitement.  SpaceX set the initial price for its IPO shares at $135 per share, but the price quickly surged and now sits around $180 per share, making SpaceX the 6^th largest company in the world by market capitalization (only trailing behind Nvidia, Google, Apple, Microsoft, and Amazon).  

In the weeks surrounding the SpaceX IPO, many investors have been left wondering whether this opportunity to hold SpaceX shares is likely to end in a boom or bust.  On the one hand, SpaceX has engaged in a fascinating line of work with seemingly unlimited growth potential.  The company is able to launch cargo such as satellites into space with unparalleled reliability, cost efficiency, and scale.  It reuses rocket boosters and other parts for launches, which significantly reduces the cost per launch.  It has leveraged this ability to launch satellites to build its mobile and broadband service, Starlink Mobile, which is poised for a competitive advantage over other mobile providers in remote areas in particular.  SpaceX also has a hand in social media and the artificial intelligence world through its ownership of X (formerly Twitter); its development of the large language AI model, Grok; and a very large-scale data center, Colossus.

On the other hand, due in part to the massive amount of spending on research and development for the space launch business, SpaceX posted net losses in 2025 and only a modest profit in 2024.  Like most growth companies, its future profitability rests largely on unknowns—whether its next-generation Starship rocket will further decrease launch costs and expand the company’s reach to the moon and Mars as predicted, to what extent Starlink Mobile will increase its market share, whether SpaceX will be able to build orbital data centers as they claim, etc. 

Given this mix of excitement and uncertainty, it is not surprising that investors and the financial press have wildly varied opinions on SpaceX as an investment.  Fortunately, for those of us at PFS who use Dimensional funds for our investments, Dimensional makes decisions on the holdings in its funds by relying on a sound, academic-based investment strategy, rather than by trying to predict the future.

What does that mean for investment in SpaceX?  First, in light of its IPO policy, Dimensional is not going to be in a hurry to buy shares of SpaceX in its funds.  Dimensional is always circumspect about purchasing stocks immediately after the IPO given the volatility, liquidity constraints, and short-term underperformance of IPO shares after the first day of trading. Its policy is to avoid purchasing IPO shares for up to a year after their release.  While many IPO shares enjoy strong returns on the first day of trading, access to that early pop in share price often requires that investors hold an allocation of shares from the underwriting bank that is facilitating the IPO.  In the year following the first day of trading, Dimensional has found that IPOs typically underperform the U.S. stock market on average.  Also, early investors in IPOs frequently face lock-up periods that restrict trading, and in the case of SpaceX, additional allotments of private investor shares are scheduled to become available to the public in the coming months, making it likely that investors might gain a better deal on SpaceX shares once the supply of shares in the public market increases.

Furthermore, as a general investment policy, Dimensional underweights exposure to growth companies and companies with low profitability in its funds, and both of these characteristics apply to SpaceX.  Therefore, when Dimensional does begin adding SpaceX shares to its funds, it will likely be in a smaller percentage of the fund than would be suggested by the company’s market capitalization, unlike market-capitalization weighted indices like the Russell 3000.

So, is the SpaceX IPO a potential boom or bust?  Most likely it is somewhere in between. Private and public investors in the company are exhibiting a high degree of optimism in technological developments that are still very uncertain, but the company does have great potential and some impressive technological advances already under its belt.  Relying on Dimensional’s strategy, which is based on years of academic data on investment returns, we look forward to adding SpaceX shares to our portfolios over the coming year, but we know that we will have less exposure to SpaceX than its $2 trillion+ valuation would demand if we invested purely based on the percentage of the U.S. market that the company comprises.  This strategy of underweighting growth and low profitability companies has a proven track record over the last 100 years of data, and we trust that it will continue to provide solid investment returns into the future.