SpaceX IPO: What investors should know before buying in

SpaceX, the rocket company drawing intense interest from investors worldwide, lists on the Nasdaq on Friday. Korean retail investors will be able to buy shares that day. Experts caution that high volatility is expected on listing day, and that any follow-on purchases warrant a careful approach.

Elon Musk's aerospace company plans to raise $75 billion (approximately 114 trillion won) through its initial public offering, targeting a valuation of $1.75 trillion (approximately 2,667 trillion won). That would vault SpaceX straight into the top 10 companies by global market capitalization, leapfrogging both Meta and Tesla. The company's valuation has risen roughly 100-fold in just a decade — from $12 billion in 2016 to $1.25 trillion at the time of its merger with xAI this year.

The record-setting valuation has fueled a heated debate over pricing. Last year SpaceX posted sales of only $18.7 billion while recording an operating loss of $4.9 billion. Its price-to-sales ratio, based on last year's revenue, stands at roughly 96 times — far above Nvidia's 13 times, Tesla's 15 times and Apple's 10 times. The market, in other words, is pricing in future growth potential rather than current earnings.

On creditworthiness, the picture is more positive. Bloomberg reported that SpaceX told investors it had secured investment-grade ratings from major credit rating agencies including Moody's, Fitch and S&P. The market has taken note of the fact that a loss-making company managed to obtain investment-grade status. SpaceX posted a net loss of $4.28 billion in the first quarter of this year. However, analysts say contracts with Google and Anthropic provide medium- to long-term revenue visibility.

Korean retail investors were not allocated shares in the IPO. To invest, they must either buy SpaceX shares directly on US markets or gain exposure through domestic or overseas space and aerospace exchange-traded funds.

The first thing investors should confirm is when trading actually begins. SpaceX lists on the Nasdaq under the ticker SPCX on Friday. IPO stocks, however, do not begin trading the moment the regular session opens. Even after the US market opens at 10:30 p.m. Korean time, the exchange must first consolidate IPO allocations and incoming orders. In practice, first trades often begin between midnight and 3 a.m. Korean time, though the exact start varies by stock.

Investors should also watch for volatility on the first day of trading. Brokerages at home and abroad advise caution about chasing the stock on listing day, as IPO shares frequently swing sharply in early trading depending on supply and demand.

Kathy Donnelly, co-author of the investment book "Lifecycle Trade," said that "many IPO stocks tend to surge on their first day of trading, then fall below the opening-day low within a few weeks," adding that "the stronger a company's growth story, the more likely expectations are already priced into the shares."

The retail investor allocation is another variable. SpaceX is reported to have set aside roughly 30 percent of the total IPO offering for retail investors — an unusually high proportion given that the typical retail allocation in US IPOs runs between 5 and 10 percent.

The concern is that a high retail allocation can amplify early price swings. When Robinhood listed in 2021, it allocated 20 to 35 percent of its IPO shares to retail investors, yet the stock tumbled more than 8 percent on its first day of trading.

A limited float could add to the volatility. The shares being released to the market through this IPO amount to $75 billion — roughly 4.2 to 4.9 percent of the company's total valuation. With so few shares in circulation, the stock price could move sharply in early trading as supply and demand fluctuate.

Conversely, the float could surge once lock-up periods expire. Existing shareholder holdings are expected to come to market in three broad tranches. Shares held by employees and general investors will become eligible for sale on a rolling basis starting two days after the second-quarter earnings release through 180 days after listing. For certain key investors and executives, the lock-up runs from two days after the fourth-quarter earnings release through two days after the second-quarter 2027 earnings release. CEO Elon Musk's stake becomes eligible for sale 366 days after listing.