$1.75 trillion! Valuation Myth or Capital Black Hole? A comprehensive guide to understanding SpaceX's epic IPO.

Since Apple's market value exceeded the $1 trillion mark seven and a half years ago, investors have become accustomed to seeing large tech companies achieve thirteen-digit valuations in the public market. Currently, the most highly anticipated is the space exploration company SpaceX, controlled by Tesla founder and the world's richest person, Elon Musk, which has announced plans to conduct a large-scale initial public offering (IPO) in the coming months. Competitors in the field of artificial intelligence, such as OpenAI and Anthropic, may also go public this year, with their valuations soaring to the tens of billions of dollars. Reports indicate that SpaceX's IPO is expected to raise up to $75 billion, surpassing the record set by Saudi Aramco in 2019 of $29.4 billion. SpaceX's valuation could exceed $1.75 trillion, but it remains to be seen if public market investors are willing to buy stocks to support this valuation. SpaceX has transformed from a relatively weak player in the aerospace industry to a giant in space exploration, securing billions of dollars in government contracts and becoming a pillar of the U.S. space program. In addition to its rocket launch business, SpaceX also owns the satellite internet broadband service Starlink project, which has become the company's main source of revenue. In February this year, SpaceX acquired xAI in an all-stock deal, gaining Grok - a money-burning artificial intelligence company whose flagship product is the Grok AI assistant. Additionally, SpaceX also owns X (formerly Twitter), further enriching its business portfolio. SpaceX's IPO will be a huge market event, giving both large and small investors the opportunity to participate in Musk's rapid development vision - creating a giant company that integrates space and artificial intelligence. However, skeptics believe that investors may be concerned that Musk will deplete funds from SpaceX, the industry leader, to fund xAI - one of the many participants in the highly competitive field. Why is SpaceX planning to go public? Although SpaceX is believed to have considerable cash flow, mainly from the Starlink project, the company still needs more funds to achieve its ambitious goals. In a staff memo in December last year, SpaceX stated that funds from the IPO would be used for the continued development of the Starship rocket, space AI data centers, and lunar base construction. SpaceX could choose to continue raising funds in the private market instead of going public. However, according to sources, SpaceX's funding needs seem to have increased significantly after acquiring xAI. xAI burns about $1 billion in cash per month, primarily for computing infrastructure costs, including training artificial intelligence models. Additionally, as a public company, SpaceX can raise funds from a wider market, helping its AI business attract funds faster than its competitors such as OpenAI and Anthropic PBC before going public, as both have invested billions in their respective AI dreams. What is SpaceX's target valuation and transaction size? An insider revealed that SpaceX is considering setting a fundraising target of $75 billion. Previously, another source indicated that SpaceX had discussed a possibility of raising over $70 billion with potential investors. Both these figures are much higher than the previously reported target of $50 billion. SpaceX's target valuation for the IPO could exceed $1.75 trillion. The biggest question is whether such a valuation can truly be sustained in the public market. Analysts evaluate a company's value based on its future earnings and growth, industry competition, and profit margins. However, valuation is not an exact science. Especially in a bull market, investors sometimes pay higher prices for company stocks based on factors beyond financial fundamentals. Some may believe that the enormous potential of SpaceX's space business is enough to support its stock price at a level higher than what its current financial situation can support. But challenges surrounding the xAI business may diminish its attractiveness. For SpaceX, the downside of going public is that the company must publicly disclose financial data every quarter and explain to Wall Street analysts and public investors. Additionally, if the stock price fluctuates significantly or drops sharply due to negative news, the company's plans may be affected. What is the IPO timeline? If everything goes as planned, Musk could potentially take SpaceX public as early as June 2026. Reports suggest that SpaceX has selected several of Wall Street's largest banks to handle the IPO filing process, including the financial disclosure information required by the U.S. Securities and Exchange Commission, which investors want to see before deciding whether to invest. Typically, this process begins with a confidential filing. Even so, SpaceX may announce to the public that it has taken this step. After submitting the confidential filing, the U.S. Securities and Exchange Commission (SEC) initiates a process that usually takes two to three months, provided there are no major delays. Once the review is complete, the company usually makes the filing public. This public filing will fully disclose SpaceX's financial situation and kick off a 15-day public review period. After the review period ends, the company will officially begin the stock sales process, usually within a set price range, but the final price has not been determined. How to participate in the IPO? Once the price range is determined, banks will accept stock subscription orders from institutional investors. At the same time, retail investors can place orders through brokerages affiliated with the banks. Some so-called "retail investors" who use popular trading platforms like Robinhood Markets and SoFi Technologies may be able to place orders directly through these platforms for certain IPOs, but their allocation for popular IPOs may be very limited. On the day before trading begins, SpaceX and the banks will agree on the final stock price that initial investors need to pay and the number of shares to be issued. When determining the stock price, SpaceX and the banks must balance the interests of existing shareholders, who want to avoid dilution of their shareholding, with those of new investors who want to acquire shares. Once the pricing is set, trading of the stock will begin the next day. What preparations are being made on Wall Street? The magnitude of this offering, unprecedented on Wall Street, has attracted numerous bankers to help SpaceX go public, with most of the major banks on Wall Street participating in some way. However, the true prestige of financial institutions comes from leading the offering and participating in critical decision-making such as marketing, pricing, and distribution. Currently, five major banks - Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, and Morgan Stanley - are the main underwriters of the offering, but their specific roles are still unclear. How will the acquisition of xAI by SpaceX before the potential IPO impact the company? Not everyone is pleased with SpaceX's acquisition of xAI ahead of its IPO. This is because xAI is burning through a lot of money, which could weaken the attractiveness of SpaceX's core business, especially the Starlink project. Investors who thought they owned shares in a space company now face a significant risk exposure in the field of artificial intelligence. And for investors who are bearish on the artificial intelligence industry, they suddenly bear another potential loser in the highly competitive arena. If SpaceX is seen as a bloated conglomerate, its valuation may be lower than expected. Musk believes that the business covering rockets, space internet, artificial intelligence, and social media constitutes a "vertically integrated innovation engine", particularly helping the company seize commercial opportunities in building data centers in space. An analyst from Pitchbook stated that consolidating all businesses under one roof would present a unique proposition: "The combination of Starlink's user growth, deployment advantages, and direct access to ground stations exists nowhere else in the public markets." How will SpaceX's IPO impact Musk's control of the company? Before the acquisition of xAI, Musk owned less than half of SpaceX after numerous rounds of private fundraising bringing in external investors (including Peter Thiel's Founders Fund, Fidelity Investments, and Alphabet). It is currently unclear how much of SpaceX Musk will own after completing the xAI transaction. SpaceX is considering a post-IPO ownership structure that would allow insiders (potentially including Musk himself) almost complete control over key strategic and company decisions. Investors attracted by SpaceX's potential and Musk's track record may not mind this, but if issues arise and investors boldly demand a change in leadership, it could cause trouble. How will Musk pitch SpaceX to IPO investors? The core of this pitch is that SpaceX dominates the commercial space industry, has enormous growth potential, and is closely tied to industries such as defense and telecommunications. In addition, SpaceX has Starlink, a global high-speed internet service that is a "cash cow," and significant competitive advantages in the rocket launch business. The harder part is convincing investors that these businesses can also help SpaceX dominate in the field of artificial intelligence. To get investors to accept SpaceX's huge valuation, Musk will also leverage his popularity and past performance, supporting the many investors who have profited from holding Tesla stock - Tesla's stock price has nearly tripled in the past decade. For some potential IPO investors, this may be the best advertisement.