Everybody seems to know that SpaceX went public last week. Space Exploration Technologies Corp (Ticker: SPCX) sold 555,555,555 shares to the public with the help of a gold-plated group syndicate led by Goldman Sachs. Today, the group exercised a greenshoe option that allows them to allocate another 83,333,333 shares of SPCX to satisfy eager, would-be shareholders. Who wouldn’t want to own SpaceX? It’s an investment in the future! And the future is space, satellites, AI, and AI in space and on satellites. And don’t forget colonies on Mars!
Just read the company’s recent SEC filings like Space Exploration Technologies – S-1/A#2, and they will gladly tell you their plans for the future and why you need to buy their stock. For starters, there is this gem:
Our Mission: “To build the systems and technologies necessary to make lifemultiplanetary, to understand the true nature of the universe, and to extend the light of consciousness to the stars.”
As the largest initial public offering (IPO) in history, SpaceX has been a major topic this week on Wall Street and Main Street. Friends, neighbors, and acquaintances have asked about it and everyone wants an opinion.
Having a strange idea of fun, we spent some time with SpaceX’s S-1 filing – some 400 pages worth. The more we read, the more frequently the cartoon character Buzz Lightyear came to mind. For those who missed the Toy Story movie series, Buzz is a child’s toy. He looks like a cross between a man and a rocket ship, who believes he is a real space ranger, destined for intergalactic missions. His mantra: “to infinity and beyond.” In his mind, there are no ordinary limits, only forward motion and expanding horizons, despite plenty of evidence to the contrary.
You see where we’re going here, right?
The SpaceX S-1 filing materials are full of Buzz Lightyear imagery like this one on page 136:
The filing is full of wondrous sections like this one entitled “Why This Matters Now”, presumably “This” means “Why YOU need to BUY SpaceX shares NOW!
Why This Matters Now
For the entirety of its existence, human civilization has lived on a single celestial body: Earth. The current paradigm, in which human civilization is confined to one planet, exposes humanity to existential threats that are unpredictable and uncontrollable on a planetary scale. These threats include naturally occurring catastrophic events—such as asteroid impacts, volcanic activity, or solar fluctuations—as well as man-made global conflicts. Geological and astronomical records indicate a non-zero probability of extinction-level events occurring over periods measurable in millions of years. Reliance on a single planetary home constitutes a single point of failure and carries existential risk with a probability of one that must be solved. By moving beyond the only home we have ever known, we ensure species-level redundancy and that the light of consciousness will not be tied to a single planet subject to the inevitable hazards of a harsh and vast universe. We do not want humans to have the same fate as dinosaurs. We want to give them a reason to look ahead with excitement, with the prospect that we are entering an age of abundance with an endlessly prosperous and exciting future.
Translation: Be a part of the future. It’s a small price to pay to save mankind. Only a fool would say otherwise, right? Partially due to this kind of out-of-this-world rhetoric, SpaceX is now one of the largest companies on earth (measured by its price). Indeed, when it comes to narrative and story, SpaceX checks all the boxes. Everyone wants to be a part of a glorious future. Few people will vote for dinosaur level extinction for humanity.
But despite all the hopes of space tourism, in-orbit manufacturing, passenger transport to the Moon and Mars, energy production in space, and asteroid mining (yes, all mentioned by SpaceX as possible future endeavors), the SpaceX IPO transfers an enormous amount of wealth to existing shareholders while exposing new investors to extraordinary risk. In the here and now, we can’t see how SpaceX can deliver enough to warrant its current price.
What I noticed this week is that the more we told people to avoid SpaceX, the more unpopular that opinion became. Beautiful images of space and rocket diagrams are stimulating, but our opinion of SpaceX is unchanged. If anything, it’s firmer. Don’t buy it!
But the expected opinion was and is positive. It’s the opinion people want. Not espousing the purchase of SpaceX shares is basically just admitted that you like to kick puppies… cute ones.
When you talk about valuation, eyes glaze over. It’s better than a lullaby for getting the kids to sleep. Worse, it’s very apparent that people don’t really know what you’re talking about… or simply don’t care.
And that lack of understanding or apathy is how you get the dislocation between price and value that SpaceX represents.
Valuing a company is a basic question/comparison of what we get for what we pay. The problem isn’t that the story is wrong. It’s that the story becomes so dominant that it crowds out the discipline of asking a basic question: what is SpaceX worth and what does it earn today relative to the price being paid?
Should a company valued at $2 Trillion make money? If so, how much? When (if ever) will SpaceX make money? Such trivial and terrestrial concerns.
At that point, valuation isn’t just ignored. It feels almost irrelevant. Like an outdated constraint on something that is clearly headed “to infinity and beyond.”
Nonetheless, the price of SpaceX is in the stars, while the underlying fundamentals are stubbornly earthbound.
I asked someone today if they would pay $2 trillion for a company that loses money and probably will lose money for the foreseeable future.
The answer: “Where would I get $2 trillion?” And there is the disconnect and the fundamental misunderstanding that most people have with investing. More on this in a minute.
Let’s take a step back.
SpaceX (via its underwriters) offered 555,555,555 shares to the public last week. Does that sound like a lot of shares? It is. And the asking price for each share was $135 per share. 555 million shares multiplied by $135 each means that SpaceX raised $75 Billion by selling a piece of its business to outside shareholders. It’s the largest such sale of shares in history.
But all the hype obscured a lesser publicized fact – the 555 million shares represented approximately 4% of all SpaceX shares on a pro-forma basis.
That means 96% of SpaceX shares are still owned privately by Elon and Friends.
Naturally, the demand for SpaceX shares was/is greater that the supply… for now. There are tons of SpaceX shares. Roughly 13 billion on a fully diluted pro-forma basis. But on the first day of trading, ONLY 555 million were sold to the public. This is by design. Perceived scarcity. Ravenous demand met with a paltry supply of stock. Could they have sold more? Sure. And they just did. But the intention is to maintain scarcity, build anticipation, and slowly release shares to an eager market of hungry buyers.
Today, the underwriters exercised what is known as a “greenshoe option” that allows them to get an additional 83,333,333 shares from SpaceX to sell to eager would-be shareholders.
But demand (owing to the Buzz Lightyear effect outlined above), is still tremendous and since the IPO, the shares of SpaceX have gone UP. What a shock!
At the IPO stock price of $135 a share, SpaceX had a valuation of $1.75 TRILLION. That’s $135 multiplied by the TOTAL number of shares or 13 billion. The shares today are approaching $200 a share, putting the value of SpaceX at closer to $2.6 TRILLION.
At the $135 IPO price, SpaceX was valued at approximately 92 times revenue. Not profit. Total Revenue in 2025 was approximately $19 billion. Net Income? Negative. Certainly $19 billion is not chump change, but this is the total sales figure in 2025 for a company that folks are eagerly buying for $2 TRILLION or MORE. Those numbers should seem at odds with one another. The equivalent of spending millions on a house in a bad neighborhood. That math makes no sense regardless of how rosy the Buzz Lightyear future looks. At the current price, SpaceX is valued at 135 times its 2025 revenue. Farcical and dangerous.
Roughly 13 billion TOTAL shares of SpaceX exist. “Only” 555 million of them were sold to the public. There is an actual scarcity of shares that are currently available for sale, but long term? That scarcity is a myth. Elon & Friends will eventually sell more and more SpaceX shares and the scarcity – real and perceived – will go away. Quarter after quarter, reports will come out showing the underlying business fundamentals. Reality can only be ignored for so long.
Just like people focusing on their car payment and not understanding what they are paying for the whole car, investors too often think in terms of the price of a single share without seeing how that share figures into the bigger picture. One share is a fractional piece of the entire business. If you know the price of a piece and the total number of pieces, one can value the whole. This often helps illustrate when price and value are disconnected
Think of any company and its shares like a pizza. The whole company is the pizza and shares are like individual slices. Buy all the slices and you own the whole pizza or just buy individual slices. SpaceX is like buying a slice of pizza for $5. That doesn’t sound terrible in today’s world. But then you realize the slices are very small and the whole pizza has been sliced into 1000 slices. $5 for an infinitesimally small slice or the whole pizza for $5000? Your choice!? Either way, it better be one damn good pizza.
If SpaceX was a pizza, it would be cut into roughly 13 billion slices. Today, each slice costs (or changes hands for) nearly $200 per slice. Price for the entire pie? $2.6 Trillion. That’s Trillion, with a “T”. In the world of valuation, one doesn’t get more pie-in-the-sky than that!
Understanding the slice vs. whole pizza analogy, one doesn’t have to have $2 trillion to pay $2 trillion for SpaceX. Every time someone pays $135-200 a share for 1 share of SpaceX, they are assigning a value to and/or paying a price for the company of approximately $2 trillion or more. $2.6 trillion for the whole or $200 a slice is the same math.
13 billion shares X price per share of Space X = equity value of the whole company
On nearly every metric and measure, the deck is stacked against outside SpaceX shareholders. Valuation, governance, and incentives. Will anyone stop to notice? Right now, it’s a frenzy and in these moments, rational thought fails. Price momentum is all people see. It was up yesterday and it will be up tomorrow. Until it isn’t…
SpaceX and Elon may be household names, but ask anyone about the business of SpaceX or its fundamentals and the result is a blank stare or a shrug. Fear and greed are the drivers here. Am I the only person who doesn’t own SpaceX? It goes up every day! Momentum builds and people lose their senses.
If you know an investor who has read the SpaceX filings and still wants to buy the shares, send them our way! We would love to know what we missed.
It’s better to recognize narrative dominance (story over everything) when one sees it. Don’t give in to Buzz Lightyear thinking (are you voting against the future?) and irrational hubris. Valuation blindness (how do you put a price on human progress?) is expensive.
But everything old is new again…
Many years ago (in a galaxy far, far, away), a client exasperatedly said “you’re the young guy in this office certainly YOU should understand what’s going on. Why aren’t you buying internet stocks?” When I confessed a preference for understandable companies that made a profit, he grunted, shook his head in disbelief, and walked away.
It wasn’t the answer he wanted.
At around the same time, another client (a dentist) slid a matchbook-sized, folded piece of paper across a conference room table. It had 6-10 company names on it. With a stern countenance, he said, “THESE are the ONLY companies that I want in my portfolio.” Each one was (of course) a large tech company whose stock was up and presumably would go up forever.
It was a fun meeting.
In the 1990’s, internet and favored tech stocks went up EVERY DAY. Only a fool wouldn’t pile in. It didn’t end well. The shares went up in price until they didn’t, because it became impossible to ignore that the underlying value just wasn’t there. Some tech firms went bankrupt, while other shares fell so much that previous gains were a distant memory.
In the short run, positive price movements and a sexy story are very powerful. A memorable bumper sticker started circulating:
Our contrary message is be careful what you wish for. The current environment is fraught with danger.
Not since those days has the stock market (and a specific segment thereof) invaded the public consciousness so completely. In recent months, when gold was going up daily, there were those pounding the table for gold. The same for energy stocks. But nothing has approached the madness around AI and related tech stocks in the past months.
SpaceX is the cherry on top of what we believe is a speculative sundae waiting to melt. The prices being paid are too high for fundamentals we believe are too little or transitory. In short, buyer beware.
At some point, narratives meet reality.
For Buzz Lightyear, the Toy Story character, he is forced to recognize the truth when he sees a Buzz Lightyear television commercial. He realizes he is not a real space ranger at all, but a mass-produced children’s toy. The identity he has been living is not the truth of what he is.
Markets don’t usually deliver that realization so cleanly or succinctly, but valuation has a similar function over time: it is the discipline that tests whether the story is supported by what is actually earned and owned.
With SpaceX, the risk is not that the ambition and mission is false, but that the narrative becomes so dominant—so reinforced by price action, scarcity, and investor excitement—that it temporarily replaces the need to ask what is being paid for what actually exists today. What version of the future is already discounted in the current price?
Eventually, every “to infinity and beyond” story meets its equivalent of that Buzz Lightyear TV commercial moment, when the market is forced to reconcile aspiration and belief with valuation.
We believe SpaceX is destined for a reality check and its shares will not stay in orbit.
Disclosure: Devotion Capital does not have a position in SpaceX shares for clients or otherwise.
