rewrite this title SpaceX – How to Navigate the Hottest IPO of 2026 – Nanalyze

The 250-page SpaceX S-1 filing document is finally available to the public and it’s best broken down into three sections – space, connectivity, and AI. Understanding these various businesses and their synergies will allow us to answer an important question that everyone is asking. Should I invest in SpaceX and at what valuation? Everything you need to answer that question can be found in today’s piece.

A Hard Rule for IPOs

While the term “initial public offering” conjures up images of massive wealth creation events, the reality is much different. Initial trading day “price pops” are not uncommon but are a bit distorted. That’s because the difference between the IPO price before being publicly traded instantly changes when a stock becomes public. For example, Figma $FIG had a proposed price of $33 a share but opened at $85 a share. Everyone talked about that “+158% first trading day gain” as if everyone benefited from it. The reality is that it was only realized by the small number of investors holding shares prior to the IPO and only if they sold. Nine months later those same shares traded for 75% less.

Lesson One: Do not fall prey to FOMO

An excessive amount of volatility surrounds most IPOs which is why we established a simple rule to avoid hype. We will not consider buying shares of any IPO until they’ve filed a 10-K or 10-Q as a publicly traded company. That gives some time for the dust to settle. Even then, we’re in no rush to invest. IPOs don’t fare that well in the medium term either. A gentleman named Jay Ritter produces perhaps some of the most comprehensive analysis of IPO returns which shows that on average most IPOs underperform the market for the three-year period following debut. That brings us to lesson two.

Lesson Two: See Lesson One

There is more hype around SpaceX than we’ve ever seen around any IPO. Do not fall prey to FOMO. There’s no rush to invest in any company. With our enthusiasms tempered, let’s dig into the three SpaceX businesses we mentioned earlier.

Space (SpaceX)

Launching rockets into space is what SpaceX is best known for, and over 80% of mass sent to space flew on a SpaceX rocket last year. Revenues for this segment only grew 8% year-over-year yet the total number of launches increased by 23%. That means two things are true. SpaceX has only captured 1% of the $370 billion opportunity they claim exists in space launch, and this segment ought to be growing a lot quicker. The reality is that internal launch missions will likely suppress revenues for the launch segment well into the future.

A large and growing share of SpaceX capacity goes to launching Starlink satellites of which there are over 9,600 in orbit giving them a commanding 75% share of all active maneuverable satellites. So the launch segment subsidizes the growth of Starlink which is an exceptionally profitable business. This diminishes the appeal of launch as a growth business as they’ll likely be doing more subsidized launches down the road to put data centers in space for their AI infrastructure segment. (More on this in a bit.) Add to that any sort of missions Musk might take for the purpose of pure exploration which won’t show any tangible ROI. By the way, what’s the ROI of establishing a colony on Mars? Anyone? We need something more compelling than “space mining” or “saving humanity from the sun eventually exploding” otherwise you’re just funding Musk’s grandiose dream.

Ideally, we want the launch segment to remain sufficiently profitable so it’s not a huge drain on the company’s resources. At 22% of total revenues and a marginal contributor to profitability, it’s hardly the main focus of the company. That would be Starlink, an opportunity we called “a new trillion-dollar industry” back in 2019. Musk is even more optimistic and describes this as a $1.6 trillion opportunity – $870 billion for broadband services and $740 billion for mobile.

Connectivity (Starlink)

Starlink’s contributions have absolutely soared over the past several years. Below is the company’s revenue growth broken out from the connectivity segment (Starlink) which is carrying the entire business in terms of growth and profitability.

SpaceX management has set a goal of 25 million active Starlink users by the end of 2026, a 150% increase from today’s numbers. Their second generation satellite promises 10x the data density – or bandwidth – of the current model, which is said to attract new customers. At roughly 22,000 new additions per day, they’re currently about two years away from that goal, so new contract growth will have to accelerate. The biggest constraint will always be infrastructure, and BNP-Paribas says the following about current capacity:

Starlink has capacity for 20 million broadband subscribers today. This could increase to 40 million [with Starlink] launching more v2 mini satellites with Falcon 9, and theoretically >150 million if Starship is successful with launching v3 satellites. 

If 10,000 satellites can support 20 million subscribers then that’s about 2,000 subscribers per satellite. To service 150 million they would need about 75,000 satellites. That’s far more than the 15,000 they’ve been approved to launch with another 15,000 pending FCC review. That means the technology will need to improve dramatically for the network to scale. And even at 150 million subscribers, they’ll have only captured about 2.5% of the 6 billion internet users across the globe. While the U.S. remains Starlink’s largest geography at roughly 25%, Reuters recently reported that Brazil and Argentina now make up 20% of their user base. Global domination comes down to Starlink providing the infrastructure needed to offer bandwidth to people – whether via dish or direct to mobile – cheaper than the competition.

Starlink generates just over $11 billion in revenues today – about 60% of the company total. Given this segment’s present and future contributions to the broader company, it ought to be given most the attention. However, the mania around AI stocks right now means that Musk has leaned into that opportunity as the main justification for the massive valuation they’re likely to command once the IPO gets priced.

AI (xAI)

Let’s start with what we traditionally think of for revenues on X – customer subscriptions (think blue checkmarks) and ads which should be largely returning to normal following all that backlash everyone has already forgotten about. While ads may see a nice boost from AI being able to place “the perfect ad at the perfect time,” this revenue stream will be limited by total platform users on X. That’s also going to be the growth rate we see for subscriptions. So X platform usage becomes a proxy for revenue growth.

Musk thinks this is a $1.36 trillion opportunity which seems rather far-fetched unless he develops the “everything app” we’ve all been waiting for – the WeChat of America if you will. So the valuation of these two components – social media subscriptions and ads – ought to reflect appropriate comparables which they currently don’t. Where the excessive valuation will come from is two areas – “AI infrastructure” and “Enterprise Applications.” The latter is a vague bucket that relies on xAI replacing traditional software, or whatever other lofty aspirations Elon Musk has at any given time. Perhaps this is where their purchase of Cursor will lie, an AI coding company they’ve largely committed to purchasing within 30 days of the IPO presumably using $60 billion of the roughly $75 billion they plan to raise. So let’s shelve that for now and consider “AI infrastructure.”

xAI’s consumer-facing LLM, Grok, only accounts for 10-15% of total xAI revenue. The real money is made by leasing out supercomputer access to AI companies, most notably Anthropic. The Claude parent reportedly agreed to spend $15 billion annually over the next three years in order to access xAI’s Colossus data center. This would be SpaceX’s largest contract by far and could be a significant growth driver. However, we’re skeptical of the “neocloud” business model that has relatively low barriers to entry and intense competition. The Anthropic deal is cancelable by either party with 90 days’ notice, meaning this revenue is far from guaranteed.

Another risk that touches on all areas of SpaceX’s business would be the U.S. government which was responsible for 20% of revenues last year, but probably the biggest risk is simply Musk himself. All these business areas are subject to his changing views of what the business ought to be focused on. Ultimately he’s going to use this IPO as a cash grab to amass as much capital as possible, valuations be damned, because you can’t put a price on saving humanity by colonizing Mars. Establishing “a permanent human colony on Mars with at least one million inhabitants” is part of Musk’s compensation plan. In other words, don’t expect to receive dividends anytime soon.

Valuing SpaceX Stock

One of the biggest mistakes retail investors make is thinking that a share price reflects valuation. If SpaceX shares trade at $500 or $5, it really doesn’t matter. We need to focus on what the company is worth. For any company you calculate market cap by multiplying outstanding shares by a share price. Here’s an example of what this calculation might look like for SpaceX:

Valuation: $1 trillion

Outstanding shares: 13 billion

Proposed share price: $76.92

Right now people are debating what valuation might be – $1 trillion to $2 trillion – which is quite the wide range. We also don’t know the outstanding share count which is said to be revealed in early June.

For disruptive growth companies, we don’t focus on price-to-earnings because we don’t expect them to be profitable. For now, we can use the $1 trillion proposed valuation and last quarter’s revenues to calculate a modified price to sales ratio we refer to as our “simple valuation ratio” or SVR. Here’s that number calculated for various valuation levels being banded about.

$1 trillion valuation / ($4.7 billion * 4) = 53.2

$1.5 trillion valuation / ($4.7 billion * 4) = 79.8

$1.7 trillion valuation / ($4.7 billion * 4) = 90.4

$2 trillion valuation / ($4.7 billion * 4) = 106.4

As a rule, we don’t invest in companies with an SVR over three times our catalog average. Right now our catalog average is hovering around 7, so let’s say we wouldn’t invest in anything over 21. That’s a broad cutoff rule that has worked quite well for us historically, but it doesn’t tell us how much SpaceX ought to be valued at. That answer is complicated because each segment reflects a different valuation based on what’s happening today.

Starlink presents a blue ocean opportunity with recurring revenue and strong margins and should naturally be ascribed a premium valuation on its own merits. Launch services would be valued much more conservatively since it currently subsidizes Starlink and comes with slower growth. Social media and advertising add some high-margin revenue but might be reaching capacity as the X platform matures. That shouldn’t deserve a higher valuation than any other social media platform. Finally, AI infrastructure would intuitively be valued like any of the other neocloud providers out there, but these companies are also being hyped lately, so it’s hard to know what a “fair” multiple is these days.

We quickly see exactly why SpaceX commands such a high valuation, and why it’s so hard to appropriately value. It’s not just a rocket company, just like Tesla isn’t just a car company. Like Tesla, we can expect to see a lot of volatility which will inevitably present better opportunities to enter a position.

We’re sticking to our cutoff rule because that’s what it’s there for. When SpaceX grows into their lofty valuation or they see the same sort of volatility inherent to Tesla’s valuation, there will be opportunities to add at cheaper (probably much cheaper) valuations. Figma showed us just how quickly valuations can come back down to earth. Perhaps this is more about what value to put on Musk’s aspirations because that seems to be what drives his companies more than anything.

Buying Pre-IPO Shares – Good Luck

The SpaceX situation is unique because Musk plans to offer retail investors a large pool of shares – about 30% of the offering – for direct purchase at IPO price via major brokerages. While this sounds good on paper, the reality is likely to be a lot different.

This feature was offered in the past by brokerage firms trying to attract retail accounts and we observed probably a dozen or more of such offerings. Expect the same to happen here with all kinds of marketing collateral offering “access to SpaceX pre-IPO shares.” The actual allocations are decided by each broker and can reflect a lottery-type allocation per account (usually quite small on average). Given the insanely high demand for pre-IPO shares – which isn’t a good thing at all – do not expect to receive any meaningful allocation. Expect to “show interest” with a cash commitment that is then locked until decisions are made.

As of now there will be no lock-up on shares so a certain number of folks will look for “muh situational trade” which ought to create an interesting first day of trading. For all practical purposes, you should no longer be thinking about pre-IPO shares and “buying SpaceX before the IPO.” No last minute FOMO by investing in risky SPVs in hopes of a quick pop. When the IPO actually goes through, we’ll quickly figure out who actually holds the shares they claim to.

For those wanting to buy shares post-IPO, learn how to calculate valuation using the example we showed you earlier. Then, establish a cutoff before shares begin trading. Maybe it’s 20 like us, maybe it’s 50, or maybe it’s some other number that sounds good to you. The cutoff number isn’t important. It’s having a cutoff number. It’s putting rules in place in your investment process – guardrails – that will save you from falling for all the FOMO out there. Then apply this rule across all stocks in the same way.

The question everyone is asking hasn’t been answered yet. Would we invest in SpaceX? After their first SEC filing as a publicly traded company, and with an SVR below our cutoff, we’d might go long SpaceX because it’s just too interesting to not be a part of. If we ever do, Nanalyze Premium subscribers will be the first to know.

Conclusion

Given the extremely high levels of interest in SpaceX shares we’ll be providing updates on the situation in the Nanalyze Market Open, a daily email we send to our Nanalyze Premium subscribers. The two key pieces of information we’ll be waiting for – expected in the next several weeks – will be the total number of shares outstanding and proposed IPO price which will be applied to those folks holding shares prior to the IPO. Our Discord community will be a great place to see what retail investors are being offered at various brokerages. Given the almost certain excessive valuation we have no plans to participate in the offering via pre-IPO shares or otherwise.