The Australian – Why Elon Musk’s SpaceX IPO is raising red flags for investors
When it comes to IPOs, you generally don’t want to be a member of any club that will have you. But, Australian retail investors are being given access.
Whether it’s the timing, the size, or something more sinister, the SpaceX IPO is poised to be one of the more polarising stockmarket milestones in recent times.
This article was first published in The Australian on 09 June 2026.
In the blue corner are those who say SpaceX is a golden ticket to the definitive global and space infrastructure giant of the century. In the red corner are the more cynical, suggesting the IPO is nothing more than an exit strategy for billionaire insiders, leaving small retail investors holding the bag. The truth is likely to be a bit of both.
Excitement surrounding the market’s biggest ever float has travelled well beyond Wall Street and the NASDAQ. SpaceX took the unusual step of making its prospectus available to the Australian Securities and Investments Commission (ASIC), allowing ordinary Australian retail investors to participate.
But navigating the prospectus requires some patience. The S-1 reveals all prior periods have been rewritten to include xAI and X (formerly Twitter) as if they had always been part of SpaceX. This reminds investors they’re not just buying into a rocket business, but X (formerly Twitter), Starlink, and xAI.
The bull case for SpaceX includes believing founder Elon Musk’s claims of building data centres in space. It also rests on the company being the absolute low-cost gatekeeper to orbit, essentially operating a toll road or a private railroad to space. Historically, space launch was a single-use, wildly expensive proposition. SpaceX’s reusable Falcon 9 rocket has radically changed those economics, slashing launch costs by 85 per cent to roughly $US2,700 per kilogram. If the next-generation Starship vehicle succeeds, costs could plummet by another 99 per cent while expanding payload capacities fivefold. The scale of this operation is already unprecedented, with SpaceX completing over 650 orbital launches and capturing more than 80 per cent of all global payload weight launched into orbit since 2023.
Consequently, the company is the primary logistical partner for NASA, the Pentagon, and commercial satellites worldwide.
Starlink is the revenue maker
Yet while rocket launches capture the public imagination, the satellite connectivity division, Starlink, makes the money, and the company also generates more revenue from renting out its Nvidia chips to Anthropic than from its rocket systems.
Starlink generated over $US11bn of the company’s $US18bn total revenue in 2025, operating roughly 9,600 maneuverable satellites that account for three-quarters of all active satellites globally. By aggressively undercutting legacy telecommunications providers, SpaceX appears to be executing a classic loss-leading strategy to lock in millions of high-margin, recurring subscriptions across 164 countries. The dream is a $US28.5 trillion total addressable market spanning defence, telecom, and eventually, data centres launched directly into orbit.
The price premium
The bears argue the valuation is divorced from reality. At a market cap of $US2 trillion, SpaceX would trade at a trailing price-to-sales multiple of well over 100 times, and 50 times forecast revenue. Amid an AI bubble, it’s almost puerile to point out that paying such a massive premium leaves zero room for operational error, and if subscriber growth slows or broader market multiples normalise toward standard industrial or aerospace benchmarks, a 60 per cent share price collapse would not be a surprise.
The capital expenditure required to feed this beast is immense. Driven by the hyper-competitive AI arms race against OpenAI and Anthropic, capital spending exploded from$US4.4bn in 2023 to $US20.7bn in 2025. Over 61 per cent of that recent spend was funnelled into securing tens of thousands of Nvidia GPUs and building massive terrestrial computing clusters like the Colossus data centre in Texas. This massive cash burn resulted in a net loss of nearly $US5bn in 2025, with cash reserves plunging from $US24.7bn to under $US16bn in just the first quarter. If it continued, you could reasonably expect future dilutive capital raisings.
Governance concerns
Other critics flag major structural and corporate governance red flags, colourfully describing the investment as buying into a corporate fiefdom. The IPO is expected to feature a dual-class share structure in which the public receives Class A shares with a single vote, while insiders like Musk retain Class B shares with ten votes per share. Essentially, only Musk can sack Musk. Furthermore, the company has reportedly mandated that shareholder claims under federal securities laws be resolved through binding private arbitration rather than in public courts, thereby shielding the company from public judicial review.
The most cynical view of the float suggests it is a cashless chain of mergers designed to bail out the billionaires and venture capital firms – such as Andreessen Horowitz, Sequoia Capital, and Ark Ventures – who helped fund the controversial $US44bn purchase of Twitter (Now X) in 2022. By folding the financially troubled social media platform into xAI, and then folding xAI into SpaceX, the loss in Twitter’s value has effectively been transferred onto SpaceX’s balance sheet.
You may own SpaceX whether you like it or not
A typical float allocates up to 90 per cent of its stock to institutions and only 10 per cent to the public. This is because ‘instos’ pay brokers the most money, so their loyalty is rewarded with stakes in the most successful IPOs. But SpaceX is reportedly offering 30 per cent of its stock allocation to ordinary retail investors. Have professional money managers refused?
At the same time, the Nasdaq exchange has reportedly changed its rules for SpaceX, allowing “fast entry” into the Nasdaq 100 index within just 15 trading days, bypassing the traditional year-long seasoning period designed to protect passive investors.
Ensuring passive index funds must buy the stock means you’ll probably own some shares whether you like it or not, while it also guarantees there are buyers for stock the early billionaire backers would like to offload. It’s feeding the ducks while they’re quacking.
By floating a tiny sliver of stock – less than 4.5 per cent of total shares – and forcing immediate, multi-billion-dollar buying from passive index funds and retirement accounts, the stock price could easily experience a short-term boost. However, the loosening of regulations such as the index inclusion rules has historically signalled peak excitement.
What to do
A price jump creates a perfect window for early backers and insiders to cash out while retirees and junior savers in ETFs are left to decide whether they’re buying the future or being set up to hold a bag of dung at the end of the AI bubble.
I admire what SpaceX has built. But I have considerably less admiration for how this float was constructed. I’m definitely sitting this one out.
This article was first published in The Australian on 09 June 2026.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
He is also author of best-selling investment guide-book for the stock market, Value.able – how to value the best stocks and buy them for less than they are worth.
Roger appears regularly on television and radio, and in the press, including ABC radio and TV, The Australian and Ausbiz. View upcoming media appearances.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
The forthcoming SpaceX initial public offering (IPO) has me a little nervous.