• Record SpaceX IPO frenzy masks uncertain true demand, post-listing trajectory
• Valuation support from index flows, AI deals could be offset by cash burn
• Political risk on longer-term outlook if Democrats win midterms, White House

Elon Musk must be pleased. SpaceX’s colossal, record-breaking USD 75bn IPO is reported to be nearly four times oversubscribed.

Index inclusions should guarantee a flood of near-term support for the stock; retail investor participation will likely come in at 30%-40% of the book.

In that context, SpaceX should be braced for a post-IPO pop running to infinity and beyond.

The question is whether gravity can exert any pull-on Musk’s ambitions.

From overinflated early demand driven by index weight predictions, through to the prospects of a very different US political environment in the run up to the 2028 race for the White House, it is worth running the rule on risks that could weigh on SpaceX’s stratospheric valuation over the medium term.

Large IPOs have a coercive dynamic when index inclusion is guaranteed. Investors in actively managed funds will demand participation in the world’s largest IPO; allocations will be scaled back.

This creates an order ratchet where investors subscribe for stock with the expectation their orders will be scaled back. Is the demand really four times? Does that reflect appetite that will spill over into the aftermarket? It’s impossible to tell.

If orders have been overinflated to try to guarantee a sizeable allocation, then the index funds buying in the aftermarket should absorb any early churn from institutions selling surplus shares.

This would of course depend on how overinflated orders were. If certain funds have ordered a significant multiple of the true level of oversubscription, anticipating scale back, their allocations would come in far larger than expected. It is not unknown for investors to overorder by as much as 10x to secure an IPO allocation in a hot listing.

Offloading excess stock could lead to an early surprise in trading.

A surprise that could be compounded as broker restrictions encouraging retail investors not to flip the stock unwind over 30 days.

Moreover, S&P last week refused to fast-track SpaceX into the S&P 500, in a setback for Musk in securing immediate post-IPO demand.

But the decision by Nasdaq and FTSE Russell to roll out the red carpet for index inclusion by tweaking entry criteria – and with MSCI indices already permissive on that score – mean enough passive jockeys should be riding into town to provide support for the stock on its 12 June debut and in the following weeks.

Indeed, passives need to take around 30% of the USD 75bn deal in the days immediately after the listing, according to reported calculations validated by this news service. There should be more than enough index demand to absorb any early selling.

All of which would seem to point to a conservative view that the rockets-to-AI behemoth will hold its USD 1.77tn valuation, even if traditional fair value approaches would peg it closer to USD 780bn-USD 1tn.

More optimistic views are available. No one disputes the achievements and ambition of SpaceX’s space launch and satellite internet Starlink businesses. SpaceX’s super heavy-lift Starship program – run out of the company’s massive Starbase, Texas facility – is emblematic of the reach and ambition that leaves it with no realistic comparables.

And while SpaceX is leveraging that status to list at 92x annual revenues of approximately USD 19bn, the company has unveiled two mega-contracts with Anthropic and Alphabet that take run-rate revenues closer to USD 45bn.

Applying that number, the revenue multiple falls dramatically to 39x. “How many more deals like that before SpaceX begins to look cheap?” one tech-focused lawyer said.

That said, cash burn across SpaceX’s xAI operations is growing equally dramatically, with capex projected to hit USD 30.8bn in 2026, up 142.5% year-on-year.

Despite so much of this cash thrown at improving its Grok AI model, the fact that SpaceX is renting out huge compute power to rivals raises questions over how confident it is in the long-term prospects for own LLM – and therefore Elon Musk’s vision of a vertically integrated galactic provider of super intelligence.

And what happens to these mega-contracts with Anthropic and Alphabet in three years? Or earlier, if either party invokes the 90-day contract termination clause?

With the technology moving so fast and corporate executives beginning to demand ROI on AI projects, it’s impossible to project compute requirements that far out.

Midterm malady?

Equally impervious to crystal ball gazing are the wild swings of the US political cycle.

This matters to SpaceX, which collected 20.9% of its consolidated FY25 revenue from a mysterious Customer A – unquestionably the US federal government. SpaceX’s government contracts are estimated to amount to USD 22bn.

And while Musk has had a rollercoaster relationship with President Donald Trump, he has used his profile on the X social media platform, and campaign donations, to embed himself as the pre-eminent figure on the radical right.

If Democrats take the House this Fall – and maybe even the Senate – that could change the mood music towards SpaceX in Washington DC.

With Musk having set himself against liberal priorities and gutted government programs while leading the DOGE campaign, Democrats on Capitol Hill “will want to see some level of accounting for the past two years” if they regain control of key committees, according to Erin Caddell, president of Washington DC-based public policy consultancy Anchor Advisors.

Democrats are split on whether to “investigate everything” linked to the Trump administration, including Musk’s federal contracts, or focus on their own policy agenda to win over American voters ahead of the 2028 presidential election, Caddell said.

“But there will be rabble-rousers,” he noted.

The current ranking member of the House Appropriations Committee is Rep. Rosa DeLauro (D-CT).

“Listen, President Elon Musk, and their [sic] unelected cabal of billionaire supporters – you are stealing appropriations that belong to so many American families and businesses,” Rep. DeLauro said in a typically fiery address in February 2025.

For his part, Musk has described Rep. DeLauro as an “awful creature” who “needs to be expelled from Congress!”

No love lost there.

Actually stripping SpaceX of any government work would be extraordinarily difficult, Caddell argued. The process for appealing federal contracts is highly formalized and “a universe Musk knows really well”, he added.

“You have to mess up pretty badly for the government to kick you out,” Caddell said.

But mood music could still take its toll, especially if California Governor Gavin Newsom sustains his lead as the favorite to win the Democratic nomination for 2028. Newsom has described Musk as “one of the great disappointments”.

“If Newsom wins, SpaceX stock goes down,” Caddell noted.

This week, not many will be looking as far as November, let alone to 2028. But Musk is a divisive figure in charge of a unique business operating in frontier technologies.

In such uncharted territory – and with so much money at stake – the last thing investors would want to hear is: “Starbase, we have a problem.”