SpaceX IPO: What risks should investors consider? What to do if you don't get SpaceX IPO allocation?

SpaceX IPO: At roughly 110 times trailing sales, Elon Musk-led company's valuation assumes years of rapid growth, raising the stakes for investors if the company falls short of expectations.

Elon Musk-led SpaceX ⁠could easily ⁠dwarf many of the biggest U.S. IPOs on record, including those of Alibaba, Visa and Facebook, now Meta Platforms, which analysts say reflects high growth expectations from the rocket and satellite company that it may struggle to meet. SpaceX is targeting a valuation of roughly $1.75 trillion in its upcoming initial public offering, in what could be the biggest-ever stock market debut by a U.S. company on Wall Street.

SpaceX IPO Risks

At roughly 110 times trailing sales, SpaceX's valuation assumes years of rapid growth, raising the stakes for investors if the company falls short of expectations.

Some analysts have cautioned SpaceX's valuation reflects lofty expectations for future growth, leaving little room for disappointment. In addition, it operates in a capital-intensive industry where launches, satellite deployments and regulatory developments can affect financial performance.

SpaceX in its IPO prospectus said it does not expect to be profitable any time soon. The stock is also unlikely to qualify for inclusion in the S&P 500 in the near future because the index requires companies to meet profitability and other eligibility criteria.

SpaceX's lofty valuation could come under pressure as Anthropic and other marquee AI companies prepare to go public and as shares held by early investors and employees gradually enter the market once their lockup periods expire.

SpaceX IPO Allocation?

Investors who do not receive shares in the IPO can still buy SpaceX stock once it begins trading on the public market on Friday. However, the shares may move sharply when trading opens, particularly if demand exceeds the number of shares available.

In popular IPOs, stocks often have a "pop," soaring above their offering price on the first day, as investors who missed out on getting all the shares they wanted allocated at the IPO price chase a limited number of shares.

Investors can also invest in SpaceX through index funds like the Nasdaq ⁠100, which has granted the company fast-entry into the index that tracks the 100 biggest companies trading on the tech-heavy exchange.