Dr Yifei Zhang
17 June 2026
Whenever monumental news breaks, I tend to use this column to examine a basic principle. SpaceX’s current bid to come to market in what could be the largest initial public offering (IPO) in history undoubtedly highlights an enduring tug of war in the world of valuation: narrative vs numbers. On one side is Elon Musk’s vision of Mars and the boundless universe, a story powerful enough to set everyone’s pulse racing. On the other are the hard financial realities: revenue, expenses, and cash flow. The size of the gap between the two will determine whether a stock turns out to be gold or merely a bubble. SpaceX is a textbook example precisely because this space-technology company has pushed that contest to the extreme.
A fundraising legend that steals the show
On 20 May 2026, SpaceX, the company led by Elon Musk, the world’s richest man, formally filed its IPO documents with the US Securities and Exchange Commission. The company plans to trade under the ticker symbol “SPCX”, and to list simultaneously on Nasdaq and the newly established Nasdaq Texas exchange. Market rumours put its target valuation at between US$1.75 trillion and US$2 trillion, with proceeds potentially exceeding US$80 billion. The sheer scale of the offering would surpass the previous record of roughly US$29.4 billion set by Saudi Aramco’s IPO in 2019, marking a deeply significant financial milestone and quite possibly making Musk the world’s first trillionaire.
What is intriguing is that the company’s full-year revenue in 2025 was merely about US$18.7 billion, representing a year-on-year growth of 33%, while it recorded a net loss of about US$4.9 billion for the year. The most direct measure—the price-to-sales ratio—suggests that a US$1.75 trillion valuation is equivalent to roughly 95 times sales. By comparison, Palantir, a company in the S&P 500 Index, has had a price-to-sales ratio of only about 67 times at its highest. How can a company that remains loss-making justify such a valuation? This is the financial issue most worth unpacking in this IPO, and it also offers an initial indication of the gap between narrative and numbers.
Returning to rational analysis
To analyse this phenomenon, one must first understand that SpaceX has long ceased to be merely a rocket company. Today, it consists of three major segments: the space business responsible for rocket launches; the connectivity business operating Starlink satellite internet; and the artificial-intelligence business brought in this year, including xAI, the Grok model, and the social media platform X. Investment banks are using a sum-of-the-parts valuation approach, valuing each business segment separately before adding them together.
Of the three segments, the one that truly generates profit is Starlink. In 2025, it contributed approximately US$11.4 billion in revenue, accounting for over 60% of total company revenue, and generated about US$4.4 billion in operating profit alone. Its in-orbit satellite count exceeded 9,600, representing about two-thirds of active satellites worldwide. It has more than 10 million users across 160-plus countries. Starlink is therefore clearly the company’s cash cow and valuation anchor.
By contrast, the segment weighing down the accounts is precisely the newly incorporated xAI. In 2025, this AI business alone lost about US$6.4 billion, pushing the company from a profit of approximately US$790 million in 2024 into loss territory.
The rocket business itself is not growing rapidly, but it plays a crucial role in reducing costs. Through the reusable Falcon 9 rocket, SpaceX has lowered the cost of sending each kilogram into orbit from the industry norm of around US$18,500 to approximately US$2,700, a reduction of as much as 85%. This is comparable to transforming a Boeing 747 that is scrapped after every flight into a reusable passenger aircraft, thereby rewriting the economics of the entire space industry. As for science-fiction-sounding projects such as Mars colonization and space-based data centres, in financial terms they are more like call options: worth very little today, but preserving the possibility of becoming extraordinarily valuable if they eventually materialize. Even analysts regard them as long-dated valuation options. Investors’ willingness to pay a premium for this future promise is precisely the psychological foundation of the high valuation, and also one reason the story eclipses the numbers.
However, when the fair values of the three business segments are added together, most independent analyses arrive at a total below the target IPO valuation. Some research institutions put the sum-of-the-parts valuation range at US$1.1 trillion to US$1.7 trillion. Other forecasts place the median at around US$1.25 trillion, nearly 30% below the target, describing the valuation as one that can be sustained only if everything goes right. Some sharp critics have even argued that, stripped of its narrative, SpaceX is really only a company worth about US$600 billion.
This highlights the core tension in valuation: the contest between numbers and narrative. In its prospectus, SpaceX claims its total addressable market could reach as large as US$28.5 trillion, almost the size of the entire US economy. When a company invokes such a grand narrative to raise capital, investors should think carefully what they are buying: cash flows or a belief about the future.
A string of warning signals
Another point worth noting is the snowball effect of valuation itself. SpaceX’s private-market valuation rose in just over a year from approximately US$350 billion at the end of 2024 to US$400 billion in mid-2025, and then to roughly US$800 billion by year-end. Each semi-annual employee share sale reset the price higher, while expectations of a public listing fed back into the pricing of the latest round, forming what markets often call a “reflexive feedback loop”. In other words, the price rises because everyone believes it will rise. Such self-fulfilling expectations can create legends, but they can also trigger a stampede for the exits. At the same time, the governance structure warrants scrutiny. Through Class B shares carrying 10 votes each, Musk controls about 85% of the voting rights while actually holding only about 41% of the shares. Even if investors buy the stock, they will have virtually no say in corporate decision-making. That is a classic agency problem.
This IPO also includes an unusual arrangement: as much as 30% of the shares will be reserved for retail investors, far above the normal allocation in new listings, and at the same subscription price offered to institutional investors. On the surface, this appears to be the democratization of opportunity, but some are concerned that it could turn the stock into a meme stock, leaving retail investors to buy at inflated prices. In fact, market enthusiasm has already emerged. An exchange-traded fund focused on the space theme and offering indirect exposure to SpaceX saw its assets exceed US$2.6 billion within two months. Moreover, once SpaceX is listed and included in such indices as the Nasdaq 100 and the S&P 500, passive funds will be forced to buy the stock, potentially generating tens of billions of US dollars in additional demand. Yet the space business is extremely risky. Around the time of the filing, a New Glenn rocket developed by Blue Origin, owned by Amazon founder Jeff Bezos, exploded during a test. It was a timely reminder of just how uncertain the industry is ― a single failure can be enough to cool the narrative instantly.
As for SPCX, one point that must not be overlooked is that Starlink, which underpins the entire valuation, is expressly banned from use in Hong Kong, Macau, and Mainland China. Even if local investors buy the stock, they will not be able to use its flagship product. At the subscription level, it will not be easy for Hong Kong retail investors to secure an allocation of SPCX directly, as brokers are likely to give priority to professional investors with liquid assets of at least HK$8 million. Most people will ultimately still have to buy the stock in the open market on its first day of trading. In addition, investors should also beware of two tax traps. Non-US residents are subject to a 30% withholding tax on dividends. If US assets held in an individual’s name exceed US$60,000, the holder’s heirs may also face US estate tax of up to 40% after the holder’s death. SpaceX’s decision to choose Nasdaq over Hong Kong Exchanges and Clearing Limited also once again shows that major technology companies still prefer the US market, even though Hong Kong has previously hosted mega-listings such as Alibaba and the Industrial and Commercial Bank of China.
Key investment considerations for “sci-fi stocks”
Looking ahead, the SpaceX story is in fact a microcosm of the entire space economy. Only when rocket launches become more frequent and satellite internet becomes more widespread will new businesses such as satellite direct-to-phone connectivity and space-based AI computing capacity have a chance to take shape. Yet the active development of these blueprints may still require years, or even decades. Following closely behind, AI giants including OpenAI and Anthropic are also preparing to go public. This wave may well be part of the AI boom, and while it may dominate the spotlight for now, the challenges it faces are also formidable.
In the confrontation between dream and reality, narrative inspires visions of the future, while numbers help investors understand the present. Investors should always consider both sides, as relying solely on either can cloud their judgement. The most practical lesson from this epic IPO may not be whether investors should chase it, but rather the need to distinguish between narrative and numbers. Before making a decision, investors may wish to ask themselves how much of a premium they are willing to pay for imagination, and then adjust their position size according to the level of volatility they can tolerate. After all, in the world of asset allocation, no matter how magnificent the vast sea of stars may be, it should form only part of a portfolio, not the whole of it.
Disclaimer: This article is for educational and informational purposes only and does not constitute investment advice or a solicitation to invest. Investors should exercise independent judgement based on their own risk tolerance.
