SpaceX - Momentum Trap Or The First $100 Trillion Company?

Thu 11:27am by Edward Croft

26 comments 955 reads

Many years ago we opened a 332-page bank prospectus that nobody wanted to read. The TSB float of June 2014 was unloved, unfashionable and - once you did the sums - really rather cheap. The shares popped up 11% on day one and the company was bought out at a 27% premium within nine months. I’d been an IPO skeptic for some time, but in this case, the crowd's lack of enthusiasm was quite a reliable contrarian guide to profits.

This week we've been reading a more popular dossier. SpaceX filed its S1 for its IPO on 20th May, and today it lists on Nasdaq under the ticker SPCX at a fixed $135 a share. That’s roughly a $1.75 trillion valuation, the largest IPO in history.

Where TSB was the IPO nobody wanted, SpaceX is the one everybody wants. The deal is apparently over two times subscribed, with demand double its $75 billion fresh capital raise.

Up to 30% of the offer is going to retail investors - which is multiples of the normal allocation and just shows the demand that the fame of Elon Musk brings. My own son came back from a post-university trip reporting that all his friends have an investment thesis to pile into the “SpaceX, Anthropic and OpenAI” IPOs "because they will all rocket." That, for what it's worth, is about as pure a sentiment signal as we’ll ever get.

So let me do with SpaceX what we did with TSB - open the prospectus, run the numbers, and let our ranking framework do the talking.

We might as well start with the punch. I'm afraid, it's predictable news. By our StockRanks methodology, SpaceX looks like a textbook Momentum Trap.

SpaceX is a genuinely great company

I want to be fair here. SpaceX is, plausibly, the finest engineering company of its generation. The published numbers on the operating business are really rather impressive.

Starlink - its Connectivity segment - booked over $11 billion in revenue in 2025, up 50% year on year, with operating income of nearly $4.5bn growing 120%. That's a seriously profitable, fast-growing business with more than 10 million subscribers and a 63% EBITDA margin.

Its Space (rockets/launch) business is a near-monopoly: more than 80% of all global mass to orbit since 2023, a more than 99% Falcon mission success rate, and roughly 9,600…

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Silver Moon

6:52am

Today's the day that teddy bears have their picnic.

Saltash Bob

7:19am

Great analysis thanks Ed, confirming what we learn daily from subscribing and reading these daily postings, rather than relying on social media, coupled with a FOMO for our investment advice and actions.

af20001

7:59am

Usually when such an event occurs, all further launches are put on hold until the failure mode has been identified and potential remedies put in place. In the case of SpaceX with their numerous launches per month, it would prove to be quite expensive! More likely to happen with Starship than Falcon 9 you would think, assuming they ever get Starship working (another potential risk).

Jeremy Rea

8:47am

Edd,

Genuine question, given this.....

Value Rank ≈ 2.

Price-to-sales is roughly 94x (about 87x on forecast 2026 revenue). Nvidia is on (only) 19x!
P/E and P/FCF are meaningless, as both earnings and cashflow are negative. No dividend and a negative earnings yield, while price-to-book is somewhere around 25–35x.
Six classic value ratios and six red lights. Ouch.

what does a company need to do to score zero? Or, how did SPCX even manage to score 2?

Edward Croft

9:07am

The ValueRank could be a 0! The ranks I've calculated are at best just estimates.

The Momentum Rank too frankly is based on non-public information...

When it does get a rank, you'll probably find that it's nowhere near 96. It really depends how it performs after IPO. I'd also presume that the first price history point that we will get will be the close after the first day, so the IPO price will not be the first price point in the time series.

It will end up being the close price on the first day. Given other IPOs, I wouldn't be surprised if it ends up trending anywhere. It could be up or down, but I would be very surprised if it ended up, after six months, in the top decile of highest performers in the US stock market.

So it would be no surprise to see the momentum rank at about a 50 or even lower, which then would then push the overall StockRank even lower. And we all know what StockRanks style is lower than a momentum trap.

9:12am

I was surprised, given the status of it's value score components, that it scored as much as 2!

cshfool

10:41am

Next stop, sucker stock, or worse Mag 7?. What's concerning is that if this is fast-tracked into the S&P500 then low cost momentum funds (previously known as index trackers - see Fundsmith AGM 2026) could be forced to buy this mid 2027. Nasdaq 100 and Russel 1000 funds will doubtless already have it in their sights. No space in my portfolio.

Richard van Woerden

10:44am

What I found useful in his post is the reminder that there's a whole bunch of other unlisted companies like Stripe and DataBricks that might also want to IPO sometime too. More places to invest our money (some of which might even be profitable!)

chrisgb

10:56am

Found this video on the problems of AI centres in space -

Conclusion - v expensive now but mid 2030s onwards might be the way to go, assuming chips are still power hungry.

rmillaree

11:30am

Usually when such an event occurs, all further launches are put on hold until the failure mode has been identified and potential remedies put in place.

there was me thinking space X has had many such incidents - and that they just carried on anyway treating it as lessons learned. i am pretty sure they even expect failure with some stuff - what better way to see if something works than give ita try - am i losing the plot or is your assertion not wide of the mark. I would make an exception for manned space vehicles - a different level of safety is clealry needed there and you cant do stuff on ten fly as you can do with rockets that are basically "consumables". Ok it might happen at soem stage that they do find something that does delay for months - but Falcon 9 has over 650 launches - is that nor enough to suggest that anything that could go wrong could be fixed by simply defaulting back to whaat has worked up till now.

PhilHofGrowYourDough

11:58am

There were 24 flights of the Space Shuttle prior to the Challenger disaster. They had become run of the mill and there was no longer the big fanfare associated with the early launches. The conclusion of the disaster was that the commercial pressures to launch the flight overruled the concerns due to the very cold pre-launch conditions. The rubber O-rings that sealed joints in the booster were frozen solid and became inflexible leading to a fuel leak.

Nothingventured

12:21pm

My source is Copilot, so this info might be wrong; the index trackers can't front run exposure. They can buy the stock on day 15 of trading when SpaceX joins the NASDAQ index. Sounds ridiculous to me but that's a USD1.5T pool of cash who's managers are forced buyers on day 15. If I get an allocation I plan to sell on day 15 "to meet instructional demand".

raigersfield

12:24pm

Recommend Ed reads FT Lex today….and repents…..

Logical David

12:41pm

Adding to Ed's short list of First Year Drawdowns vs Offer, I thought some readers might be interested in some more well known IPOs and their maximum First Year Drawdowns:

David.

12:42pm

space X aint nasa - and i made clear in my post manned spaceflight is different kettle of fish to unmanned rockets - you can accept more frequent failures with unmanned stuff

i see zero read across from nasas extended delay to space X.

at as you say the specific issues were flagged up before the the rocket tookoff - just crazy management that ignored the risks perhaps soem em work at boeing now ?

i remember at school we had to make up our own neswpaper front page story - mine was about the shutttle exploding with the booster fuel tanks being the issue - i did that story about 3 weeks before the Challenger disaster - i think it kinda spooked out my teacher somewhat that i predicted that one before it happened. perhaps the only decent stuff i ever did in english classes.

one thing with being strapped to a rocket and blasted into space - you gotta face the reality that the chances of you dying are higher than most other forms of transport if not all.

1:20pm

I just have the normal FT sub - Lex is normally poor... summary?

yiannos1

1:39pm

Very well balanced and informative article, by that I mean excellent!

All the best

1:41pm

Well there is a limited launch window to Mars, which if missed will delay the launch for 2 years, so there will be immense time pressures, no doubt with Elon insisting his engineers sleep under their desks. The only advantage they have is that they should have produced multiple ships and multiple boosters so in theory they could hot swap a configuration.

I'm sure he has every confidence and he'll be on the first manned flight. Let's see what the underwriters of his key man policy think of that.

Revs8

2:00pm

Very nicely put article. I’m watching this one from the sidelines.

2:36pm

I would perhaps go as far as saying manned missions to Mars are a pipe dream until it happens - so much stuff to overcome to get to that point - thats not to say Musk wont be trying to deliver on his promise.

SpaceX - Momentum Trap or the first $100 trillion company?

SpaceX is a genuinely great company

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Edward Croft

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