Deep Dive: The SpaceX IPO

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Today is a genuinely historic day in financial markets.

SpaceX — the rocket and satellite company founded by Elon Musk in 2002 — begins trading on the Nasdaq today under the ticker SPCX, at an IPO price of $135 per share and a valuation of roughly $1.75 trillion.

That makes it the largest IPO in financial history. By a long way.

The previous record was Saudi Aramco's $29 billion offering in 2019. SpaceX raised $75 billion in a single day. That's nearly three times the previous record.

But here's the thing about SpaceX.

The headline numbers — largest IPO ever, $1.75 trillion valuation, Elon Musk now running two of the world's ten most valuable companies — are the least interesting part of the story.

The interesting part is what the S-1 actually revealed about the business underneath those numbers. Because when SpaceX filed its public prospectus last month, it was the first time the world got a real, audited look at the finances of a company that had spent 24 years carefully avoiding exactly that.

And what the S-1 showed is a genuinely complicated picture.

By the end of today's issue, you should understand:

Let's get into it.

Most people think of SpaceX as a rocket company. That's how it started. But the business that listed today is three very different things bundled together.

Segment one: Space.

This is the original business. Building rockets. Launching satellites and cargo into orbit for NASA, the US Department of Defense, and commercial customers. The Falcon 9 — SpaceX's workhorse rocket — completed 165 launches in 2025 with a 100% payload delivery success rate. That's an extraordinary track record in an industry where launch failures historically weren't uncommon.

SpaceX also has the Starship programme — the most powerful rocket ever built, central to NASA's Artemis moon landing programme and Musk's long-term Mars ambitions.

In 2025, the Space segment generated $4.1 billion in revenue. It also ran at a loss, because the cost of developing Starship is enormous and those costs have to go somewhere on the income statement.

Segment two: Connectivity — which is really Starlink.

This is the part of the business that actually makes money.

Starlink is SpaceX's satellite internet service. It provides high-speed internet to homes, businesses, ships, aircraft, and governments through a constellation of satellites in low Earth orbit. In 2025, Starlink generated $11.4 billion in revenue — 61% of the entire company's total. It had 10.3 million subscribers by Q1 2026, up from 2.3 million in 2023.

More importantly, Starlink is the only segment that's consistently profitable. It generated $4.4 billion in operating profit in 2025.

This matters a lot. Because when you strip everything else away, the core investment thesis for SpaceX is really: you're buying Starlink, and you're getting everything else at whatever valuation the market puts on it.

Segment three: xAI.

In February 2026, SpaceX merged with xAI — Elon Musk's AI company, which owns the Grok chatbot and the social media platform X (formerly Twitter). It was an all-stock deal that valued xAI at $250 billion.

Overnight, SpaceX went from being a rocket and satellite company to also being an AI company and a social media platform.

The xAI segment generated $3.2 billion in revenue in 2025. It also generated a $6.4 billion operating loss.

That combination — significant revenue, much larger losses — is what makes xAI so consequential for how you think about the overall business.

Before the S-1 filing in May, SpaceX's financials were essentially private. The company occasionally shared selective data with investors. But audited accounts? Never.

The S-1 changed that. And the picture it painted was more complicated than the public narrative had suggested.

The headline numbers:

Total revenue in 2025: $18.7 billion, up 33% from 2024.

GAAP net loss in 2025: $4.94 billion.

Adjusted EBITDA in 2025: $6.58 billion.

That gap between a $6.58 billion EBITDA profit and a $4.94 billion net loss needs explaining, because it's central to how SpaceX presents its own financial story.

EBITDA stands for Earnings Before Interest, Taxes, Depreciation and Amortisation. It strips out several large non-cash costs — primarily depreciation on the Starlink satellite constellation, stock-based compensation, and capital expenditure on new infrastructure — to show how the underlying business is performing.

The argument for using EBITDA is that depreciation on satellites and infrastructure isn't really a cash cost today — it reflects the cost of assets that were built in prior years. The counter-argument is that those assets eventually need replacing, and the capital required to replace them is very real.

The more important number is the free cash flow figure. SpaceX generated $1.9 billion in free cash flow in 2025 — which tells you the business, before the xAI merger, was generating real cash from its operations.

The pre-merger picture was actually good.

Here's a detail the S-1 reveals that's easy to miss.

Before the xAI merger, SpaceX on a standalone basis was estimated to have generated around $791 million in net profit in 2024. A profitable rocket and satellite company, growing fast, with a cash-generative satellite internet business at its core.

The xAI merger turned that profitable company into a loss-making one.

Which brings us to the most important part of the whole story.

The decision to merge xAI into SpaceX before the IPO is the most consequential and most debated aspect of this whole offering.

Here's what it means in practice.

xAI generated $3.2 billion in revenue in 2025. But it also generated a $6.4 billion operating loss. That loss is now SpaceX's loss. The profitable satellite business is now subsidising the unprofitable AI and social media business.

Before the merger, an investor buying SpaceX was buying a clear thesis: satellite internet is a genuinely large and growing market, Starlink is the dominant player, and rocket launches provide a profitable and strategically important supporting business. Clean, comprehensible, and increasingly cash-generative.

After the merger, that same investor is also buying exposure to Grok competing against ChatGPT and Claude, the X platform and all its associated political controversy, and a data centre infrastructure business that's still in early stages.

One analyst described it clearly: it's like buying a high-yielding savings account and then someone bundles it with a startup burning hundreds of millions a quarter. You don't get the savings account separately anymore. You get the whole package.

Why did Musk do it?

The honest answer is that opinions differ and Musk hasn't fully explained it. One reading is strategic — by merging xAI's computing infrastructure with Starlink's satellite network, he's positioning SpaceX as vertically integrated across the entire AI and connectivity stack. There's already a data centre called Colossus 1 that signed a $1.25 billion per month contract with Anthropic. The vision is eventually to operate AI data centres in space, powered by near-continuous sunlight.

Another reading is more cynical — xAI needed capital and credibility, and packaging it inside SpaceX's IPO was an efficient way to get both.

Either way, public investors are now asked to price all four businesses — rockets, Starlink, AI, and social media — as a single entity, at a $1.75 trillion valuation, without the ability to separate them.

Here's the issue that doesn't get enough attention in the mainstream coverage of this IPO.

SpaceX has a dual-class share structure.

That simply means there are two types of shares. Class A shares — the ones being sold to the public in the IPO — carry one vote each. Class B shares — the ones Musk holds — carry ten votes each.

The result is that Musk controls approximately 85% of the voting power at SpaceX after the IPO.

What does that mean in practice?

It means that public shareholders, as a collective, have essentially no ability to influence major decisions. Can't vote out the board. Can't block an acquisition. Can't remove the CEO. The S-1 risk factors are explicit about this: it describes SpaceX as a "controlled company," meaning it's exempt from certain corporate governance requirements that protect ordinary shareholders.

There's also a specific provision in the governance structure that effectively means Musk can only be removed from the board by a vote of Class B shareholders — which he controls. In other words, Musk can only be fired by Musk.

Why does this matter for investors?

When you buy a share in a normally governed company, you're buying a financial claim plus a degree of accountability. If management makes bad decisions, shareholders can push back through their votes, through activist investors, through the threat of a hostile takeover. These mechanisms aren't perfect, but they exist.

When you buy a Class A SpaceX share, you're buying a financial claim without the accountability mechanism. You're betting entirely that Musk's judgement will continue to be good. If he decides to merge SpaceX with Tesla, or redirect Starlink revenues toward a Mars mission, or make another acquisition that loads losses onto the balance sheet — there's nothing public shareholders can do about it.

That's not necessarily a reason not to invest. Musk's track record at building valuable companies is extraordinary. But it's a risk factor worth understanding clearly, because it's different from almost every other large public company investors are used to buying.

At $1.75 trillion on $18.7 billion in 2025 revenue, SpaceX is trading at roughly 94 times its annual revenue.

That number has no precedent among the world's most valuable companies.

For comparison, Apple trades at around 8 to 10 times revenue. Microsoft at around 12 to 15 times. Even high-growth software companies that have been market darlings typically trade at 20 to 40 times revenue.

94x is a different category entirely.

What justifies it — in theory?

The argument is forward-looking, not backward-looking. Investors aren't paying 94x for today's $18.7 billion revenue. They're paying for what they believe Starlink becomes as it scales to 50, 100, or 200 million subscribers globally. They're paying for the government launch contracts that have no other domestic competitor at SpaceX's cost and reliability level. They're paying for whatever the AI and space computing opportunity eventually becomes.

The bull case is that Starlink alone could eventually generate $100 billion or more in annual revenue if it captures a meaningful share of global broadband. At that revenue level, a $1.75 trillion valuation looks much more reasonable.

The bear case is that the path to that revenue is long, expensive, and uncertain. ARPU has been falling — average revenue per user dropped 18% to $81 per month between 2023 and 2025 as SpaceX traded price for volume. Competition in satellite internet is intensifying. xAI is burning cash with uncertain payoff. And the company's accumulated deficit now stands at $41.3 billion.

The honest position is this: 94x revenue is not a valuation you can justify from current financials. It requires believing in a specific version of the future. Reasonable investors can disagree about whether that future is likely enough to justify today's price.

There's one more thing worth noting.

Fifteen days after today's listing, SpaceX is expected to be added to the Nasdaq 100 index. That triggers automatic, mechanical buying from every index fund and ETF tracking that index — estimated at $22 to $27 billion in forced purchases. That buying isn't driven by analysis. It's driven by the rules of how index funds work.

That's a significant technical tailwind in the near term, and it's one reason institutional investors have been positioning around the listing.

The SpaceX IPO is one of the most interesting case studies in finance you'll encounter for years.

It combines almost every major concept that comes up in investment banking, equity capital markets, and asset management interviews.

IPO mechanics. SpaceX went from a confidential S-1 filing on April 1st to trading today — about ten weeks. Understanding the timeline, the SEC review process, the roadshow, and the pricing mechanic is directly relevant for any ECM or corporate finance interview.

Valuation complexity. How do you value a conglomerate with three very different businesses at different stages of maturity, different margin profiles, and different competitive dynamics? The answer is you typically try to sum-of-the-parts — value each segment separately and add them up. But SpaceX's structure makes that harder because the segments share infrastructure, personnel, and a single governance structure. Understanding why that complexity affects valuation is a sophisticated point that interviewers will appreciate.

Governance and shareholder rights. The dual-class structure and what it means for shareholders is directly relevant for M&A, advisory, and capital markets roles. Questions about governance come up regularly in interviews, and being able to explain what a controlled company is and why it matters is a strong signal.

The EBITDA vs GAAP debate. SpaceX's use of adjusted EBITDA to tell a more positive story about its financial performance is extremely common among high-growth companies going public. Understanding the difference — and why sophisticated investors look at both, not just management's preferred metric — is a core analytical skill.

If an interviewer asks:

A strong answer could be:

SpaceX is genuinely one of the most extraordinary companies ever built.

The Falcon 9 rocket completing 165 launches in a single year with a 100% success rate is a level of operational excellence that would have been considered science fiction twenty years ago. Starlink connecting 10 million households across 160 countries through a constellation of satellites in low Earth orbit is one of the most remarkable infrastructure achievements of the past decade.

Whether the IPO is priced correctly is a separate question. At 94x revenue, the market is asking you to believe in a future that's plausible but not certain. And the governance structure means you're making that bet without the usual accountability mechanisms that protect shareholders when things go wrong.

That tension — between an extraordinary business and a complicated investment proposition — is what makes this IPO worth studying carefully rather than just admiring the headline numbers.

The best analysts in any finance role are the ones who can hold both of those things in their head at the same time.

That's what today's deep dive is about.

That’s all for now. Have a good weekend!

Afzal