The long anticipated market debut of SpaceX has finally arrived, and it did not disappoint the frenzied bulls. Shares surged 45% on opening, valuing the rocket maker at a staggering $180bn. For the City of London, this is a moment of both awe and unease. Awe at the sheer scale of capital being deployed into the private sector. Unease at the frothy valuations that now characterise the ‘new space’ economy.
Elon Musk’s right hand man, Gwynne Shotwell, described the journey as “employee number one” in a rare interview. She spoke of the early days when the company was barely solvent, burning cash at a rate that would make a dot.com CFO blush. Now, she is sitting on a paper fortune that would make a sovereign wealth fund jealous. It is a story that the markets love: rags to rockets, disruption to domination.
But let us drill down into the numbers. The IPO raised $8.4bn, with institutional investors scrambling for allocation. The retail army, powered by trading apps that make buying shares as easy as ordering a takeaway, piled in at the open. This is the same army that drove GameStop to absurd heights. The difference this time is that SpaceX actually has revenue: $4.6bn last year, mostly from launching satellites and NASA contracts. But the valuation is still 39 times trailing earnings. That is not a growth stock. That is a moon shot.
What worries me is the narrative around ‘strategic assets’. The UK government has been keen to attract space companies, offering tax breaks and regulatory easements. Yet the money flowing into SpaceX is overwhelmingly American. British pension funds, always late to the party, will likely pile in after the first quarterly pop. That is the classic pattern: retail gets the dregs, institutions get the allocation.
The broader market implications are clear. We are seeing a bifurcation: a handful of tech and space stocks trade at euphoric multiples while the rest of the economy languishes. Inflation is sticky at 3.2%, and the Bank of England is caught between a rock and a hard place. Raise rates too fast, and you kill the recovery. Hold steady, and you fuel asset bubbles. The SpaceX IPO is a symptom of this liquidity glut.
Let us not forget the fiscal angle. Government contracts are a key revenue driver for SpaceX. The US taxpayer is effectively underwriting the company’s R&D. That is brilliant for the shareholders but it raises questions about the allocation of capital. Is this the most efficient use of public funds? Or are we simply funnelling money to billionaires while infrastructure crumbles?
For the City, the message is mixed. There is money to be made, but the risk of a correction is real. When the rate cuts come, as they inevitably will, the high-beta names will get hit first. The retail herd, chasing the next big thing, will be left holding the bag. As always, the bottom line is this: the SpaceX story is inspirational, but the valuation is aspirational. Tread carefully.
