SpaceX IPO Scandal

SpaceX is currently preparing for what's expected to be the largest IPO in history, with a target valuation as high as $1.75 trillion. To put that in perspective, that's larger than Meta or Tesla and it would comfortably unseat Saudi Aramco for the title of the biggest stock market debut of all time. The offering is expected to see massive demand from retail investors, who have, up until now, been unable to invest, as the company is private. Now, in the aerospace world, there's a very important distinction between astronomy and astrology. Astronomy is the branch of science that uses math to calculate orbital mechanics, so your multi-billion dollar rocket doesn't turn into a very expensive firework. Astrology, on the other hand, is the belief that you should stay home from work next week because Jupiter's feeling a bit spicy. Usually, the people building rockets and the people casting horoscopes don't have very much in common. Elon Musk obviously cares about astronomy, the science. He has, after all, spent decades talking about the importance of going to Mars and building rockets. We know that he also loves a bit of numerology too. No one finds the numbers funnier than Elon Musk does. With the IPO enhancement, we've learned that he loves a bit of astrology too, as SpaceX has reportedly set its sights on IPOing this June because Jupiter, Venus and Mercury will be forming a rare conjunction in the sky. And I suppose that's auspicious. On top of that, June also happens to be the month of Musk's 55th birthday. And, to top it all off, there are rumours that the date being targeted is June the 9th. Yep, that's right, June the 9th or 6-9. If Musk was a bit younger, it would be on 6-7, but he's not. He's a 55-year-old man, so 69 it is. Well, the planetary alignment makes for a great headline. The timing is possibly driven by a much more terrestrial concern, the race for capital. As of early 2026, the private markets are starting to look tapped out. Venture capital funds that have spent the last few years aggressively funding the AI boom are now facing a liquidity plateau and are under pressure to finally return some cash to their own investors. At the same time, Musk is in a high-stakes race to reach the public markets before his rivals, OpenAI and Anthropic, soak up all of the available demand. Bankers are quietly warning that there might not be enough spare change in the public markets to support three massive capital-intensive AI listings at the same time, and the first mover might get the biggest slice of the pie. With XAI burning through a billion dollars a month and massive data centre projects requiring billions more in infrastructure, Musk may not be just watching the stars, he might be watching the exits too. The planetary alignment might be a nice bit of branding, but it's possibly the fear of being second in line at the ATM that's really fueling the countdown. This rush to the public markets represents a significant change of heart for Musk. For over a decade he has insisted that SpaceX would not go public until his Mars transport system was fully in place. He argued that the short-term pressures of being a public company, where investors obsess over quarterly performance and short-sellers hit you with large sticks, would be a distraction from the long-term goal of making life multi-planetary. But as we head towards the June 2026 listing, the Mars transport system is still very much a work in progress, and Musk has recently started sweeping those red-planet ambitions under the rug, like an embarrassing teenage phase. The new mission and the core of the IPO pitch is focused on the Moon, a destination that Musk once dismissed as a waste of time. He now describes the Moon as a stepping stone and the overriding priority for securing the future of civilization. It turns out that this shift of focus is a lot easier when you've been foreshadowing it for years, even if accidentally. Elon Musk has been wearing his famous Occupy Mars t-shirts since 2019, which a number of people have pointed out actually features a red-tinted picture of the Moon during a lunar eclipse. It's possible that he hasn't abandoned his Mars mission. Maybe he just took a close look at his own chest and realized that he's been accidentally advertising for the Moon all along. But before we dig into the financial black hole of space-based data centers, let me tell you about this week's video sponsor, Saley, an eSIM provider who makes it incredibly easy to travel and stay connected without having to pay ridiculous foreign roaming charges, find a local SIM card or ruin your trip searching around for public Wi-Fi networks that you can use. I tried Saley out last summer and I found it really convenient. It's an app that you install on your phone which allows you to stay connected in over 200 places around the world. There's no need to buy and swap SIM cards like I used to do. Instead, you just download the app and use it whenever you're traveling. You just select the country and plan you want and activate an eSIM before you leave home. When you land, your phone automatically connects to a local network with no hidden charges. It's much cheaper than roaming and takes just seconds to get going. There's no fussing around at the airport. You can book an Uber, access GPS or make a call. If you're traveling soon, get an exclusive 15% discount on Saley data plans. Download the Saley app and use the code BOIL at checkout. The transition from a high-flying rocketry and satellite firm into what we might now call the triple x conglomerate, SpaceX, XAI and X, has been described by supporters as an act of genius and by critics as a massive bailout. This is because just as the SpaceX IPO was being finalized, Musk decided to fold XAI into SpaceX at a $250 billion price tag. Merging a rocket company with an AI startup is strange enough, but XAI comes with some particularly heavy social media baggage. Last year, XAI, the AI company, used its shares to buy Elon Musk's Everything app, X, the platform formerly and in truth still known as Twitter. This means SpaceX investors are now, by extension, the proud owners of the 17-ranked social media website, a business that has been struggling with a persistent exodus of both users and advertisers since Musk bought it for $44 billion in 2022. To justify the $250 billion price tag, you have to believe that XAI is a top-tier player in AI. Currently, ChatGPT and Google's Gemini dominate the field, holding over 85% of the market between them. Grok, by comparison, sits at a distant 3.4% market share. One problem is that Grok is effectively an island. While XAI recently launched a standalone Grok app, the vast majority of its usage remains trapped inside Twitter. Most of Grok's use is just fact-checking tweets or generating unfiltered memes that have landed the company in regulatory hot water in Spain, France and the UK. While SpaceX is said to be profitable, generating about $8 billion in EBITDA last year, XAI is a money furnace, burning through a billion dollars in cash every month. In a world where AI could be a winner-take-all market, much like internet search was, being a lower-ranked player like XAI is possibly a dangerous place to be. That danger is exacerbated by a growing talent drain. Since the start of the year, a significant number of key staff have left XAI, including six of the original founders who were poached from Google and DeepMind. It's hard to justify a frontier AI premium when the very people who have built the model have left the building. Musk's explanation for the merger, delivered in a press release that reads like the script of a low-budget sci-fi epic, is that we need to build orbital data centers to extend the light of consciousness to the stars. He argues that space-based AI is the only way to scale because space is called space for a reason. It's a move that mirrors the SolarCity merger from 2016, where Musk used Tesla's balance sheet to bail out a struggling solar company he also happened to own. As Bloomberg's Matt Levine pointed out, the innovation engine here isn't just about rockets, it's about a fundraising ability that allows Musk to negotiate with himself and set his own valuations without the nuisance of independent board oversight. Amusingly, right before I filmed this video, Elon Musk tweeted that XAI was not built right the first time around, so it's being rebuilt from the foundations up. Which might lead SpaceX investors to ask, if this was the case, why did they just pay $250 billion for it? For the banks and venture capital firms who were stuck in the underwater Twitter deal, the merger is fantastic news. It effectively swaps their social media equity for shiny new SpaceX stock right before a massive IPO. And while SpaceX investors might be wondering why they're suddenly subsidizing an anime girlfriend chatbot, most are unlikely to complain. In the world of investing alongside Elon Musk, loyalty is the primary currency. If you complain too loudly about the corporate governance, you risk being cut out of the next auspicious planetary alignment. To justify merging a rocket company with a money furnace chatbot, the IPO narrative relies on a very specific vision of the future, based around the importance of moving the world's AI computing power off-planet. Musk's argument is that terrestrial data centers are hitting a wall because of land, power and cooling constraints. His solution is to launch a constellation of a million satellites to act as orbital data centers, directly harnessing near-constant solar power in the vacuum of space. At first glance, the pitch might seem to have a certain logic. It's always sunny in space and there are no neighbours to complain about the noise. But in practice, the engineering hurdles are huge. Take cooling, for example. On Earth, we keep servers from overheating by blowing cold air or water over them, a process called convection. In the vacuum of space, there's no air to move heat away. The only option is to use massive radiators that eject heat as infrared radiation. We've already seen a test of this concept. A startup launched an AI satellite a few months ago that was about the size of a small refrigerator, carrying an NVIDIA H100 chip. While the chip was able to successfully train a tiny AI model on the works of Shakespeare, it couldn't run around the clock because it had to shut down frequently when it got too hot to function. The company's next version is scheduled to launch later this year and they say that it will carry the second largest cooling radiator array in space, the only larger one being the cooling array on the International Space Station. So, to run just a handful of AI chips in orbit, you need hardware that rivals the most expensive structure ever built by humanity, the International Space Station, and then you have to scale that up to the one million satellites mentioned in the SpaceX press release. To reach the gigawatt scale Musk is talking about, you would need solar arrays and radiators measuring roughly four kilometers in length. Getting something that size, roughly the size of 40 football fields, into orbit and maintaining it would be a logistical nightmare. It would be a giant, fragile sail vulnerable to every piece of space debris in low earth orbit. Then there's the issue of Starship. The entire Sentient Sun business model relies on SpaceX reaching an insane flight rate. We're talking about launches every hour carrying 200 tons per flight, according to SpaceX's own press release. Currently, Starship is still in the frequent explosion phase of development, while the engineering team has achieved the incredible feat of catching a 70 meter booster with giant robot arms, the rocket is yet to perform a full orbital mission or prove that it can reliably deploy payloads without what SpaceX calls a rapid unscheduled disassembly. To round out the sci-fi sales pitch, Musk has even proposed building factories on the moon. I'm not making this up. According to the press release, the plan is to manufacture satellites taking advantage of lunar resources and then fire them into deep space using an electromagnetic mass driver, basically a giant space railgun, a technology that the U.S. Navy spent over 500 million dollars on over a 16 year period with no success. Apparently the railgun prototypes suffered from extreme heat and physical stresses, the types of problems which would be only more of an issue in space. It's not clear to me why a factory on the moon would be more efficient than the factory in even the most remote places on earth or what moon resources Musk is planning on taking advantage of. I would imagine some sort of supply chain still needs to be developed there. It is a bold vision and it represents a massive u-turn for a man who spent decades calling lunar missions a distraction from going to Mars. If you remember in 2017 he claimed that he would be sending at least two cargo missions to Mars in 2022 to find water sources and establish power, mining and life support infrastructure so that the first crewed missions could follow in 2024. He later reaffirmed this target in 2018 and again in 2020 before the timeline was delayed. Ultimately building a data center in a desert or a specialized warehouse on earth will always be cheaper and easier than trying to build them in space or manufacture and launch them from the moon. Andrew McCallop, an engineer who works for a space startup, has built a web-based calculator that allows the cost of an orbital data center to be compared with the cost of an equivalent terrestrial one. It estimates that building a one gigawatt data center and running it for five years on earth costs around 16 billion dollars, excluding chips, and an orbital equivalent would cost over 50 billion dollars, some more than three times as much. The thing is that building a few data centers in Texas won't justify a 1.75 trillion dollar valuation. For that you need a sentient sun and a moon catapult. Now this is possibly a recurring theme for Elon Musk. The idea that the hardest way of doing something is actually the most efficient. This is, after all, the same man who once claimed that digging miles of tunnels underground would somehow be orders of magnitude cheaper and faster than just building a road on the surface. Apparently if you can convince investors that laws of physics and basic accounting are just optional suggestions, you can put almost any price tag on the results. If you can ignore the sentient suns and the lunar catapults for a moment you're still left with the daunting task of justifying a 1.75 trillion dollar sticker price for SpaceX. To be clear, that doesn't mean that Elon Musk won't get that price. It just means that it would be extremely difficult to explain. Based on what's being reported, this isn't just a regular IPO. It's a carefully managed liquidity event for a company that's simply outgrown its capacity to source new funding in the private markets. For more than 20 years SpaceX has existed in a private market bubble where valuations are set by small isolated capital raises rather than the cold reality of daily public trading. But as former head of equity capital markets from Bank of America Craig Cobbin points out in the Financial Times, the laws of financial gravity are a lot harder to bend than space time. The primary metric for any high growth tech company is the enterprise value to sales ratio. It's particularly favored for rapidly growing firms that are either not profitable or have inconsistent earnings. This is because sales figures are often more stable and less susceptible to accounting distortions than net income or EBITDA. The ratio tells you how much are you paying for every dollar of revenue the company brings in. Facebook, Cobbin points out, went public at 11 times forward sales. This was considered extremely expensive at the time and it pushed the boundaries of what public markets were willing to tolerate. To add more context, most high growth tech companies back then were trading at much lower multiples. Google, for instance, was trading around 5 to 6 times sales. SpaceX is looking to list at roughly 94 times its 2025 revenue. Even if we use the most optimistic projections for 2026, the ratio still sits at over 60 times sales. For context, that's significantly higher than Palantir, which currently has the highest multiple in the S&P 500. Not everyone thinks that that price is crazy, however. The analysts at PitchBook recently made the case that a $1.75 trillion valuation is expensive but justifiable if you assume that Starlink will reach 1.2 billion users by 2040. The deep flaw in that math is a concept called the total addressable market. Based on Hans Rosling's research in the book Factfulness, there are only about 1 billion people on the planet who earn more than $32 a day. Most of those people live in the United States and Western Europe, and most people in those parts of the world already have access to wired broadband, which is both faster and cheaper than Starlink. A total addressable market of 1.2 billion users being able to spend over $100 a month solely on internet connectivity is next to impossible. Starlink is a brilliant tool for people in remote areas, gold miners in Sudan or the military in Ukraine. But it's ill-suited for cities where the dish needs a clear view of the sky and because satellites suffer from network congestion when too many people connect to the same one all at once. Realistically, there are only about 32 million households in the world who can afford the service and don't already have wired internet access. Most of that group already have access to the internet using mobile phone networks and less than half of them might feel that cellular speed and connectivity is not good enough and are willing to pay up for Starlink access. Expecting Starlink to jump from its current 10 million subscribers to 1.2 billion is like expecting everyone on the planet to start drinking Fiji bottled water even when they already have access to clean drinking water. We are already seeing the limits of this growth in the financial data. Elizabeth Lopato at The Verge recently pointed out that a 2024 Morgan Stanley report projected that Starlink revenue would reach $19 billion the next year on the strength of 6 million subscribers. SpaceX then managed to reach 9.2 million subscribers that year, more than 50% better than expected, but its revenue was only $16 billion. This implies that as Starlink grows its customer base, its margins are falling. Let's talk about the company's questionable profitability next. SpaceX recently touted $8 billion in EBITDA, but as a number of analysts have noted EBITDA, earnings before interest taxes depreciation and amortization, is a very generous lens through which to view a company like SpaceX, which has very high research and development costs and very high depreciation. EBITDA is often used to help investors compare very similar businesses that have made different investment and accounting decisions over time, but companies that essentially run the same business and you're just stripping out leverage choices, the jurisdictions they're taxed in and their accounting choices over the timelines they've chosen to spread out their costs. This can make sense. It's a great way to make a clean comparison of the cash flow generation power and business operations of two very similar widget manufacturing companies. In the case of high capex businesses with enormous cash burn on early stage research and development operations, EBITDA becomes very questionable. SpaceX satellites have a useful life of around five years. This means that when you capitalize the build costs of these satellites and send them up to space as investments on your balance sheet initially, you later incur depreciation expenses where you spread out the costs of those satellite builds over their five-year useful lifespans. Excluding significant expenses like this that are core to the business's ongoing operations and capacity to generate future cash flow is particularly distortive for a business like SpaceX. They simply couldn't continue to run their proposed operations without continuing to replace these satellites. Excluding the cost of the satellites and the cost of getting them into low earth orbit to claim profitability is somewhat ridiculous. If you then account for the billions in cash used to build Starship in terms of research and development, the thing Musk is alluding to as profit starts to look quite difficult to ever capture. Very large research and development spend to go to Mars or to go to the Moon can only be recouped with high volume future deployments or high payload usage of the tools that they design and build. In practice, the launch market of delivering cargo into space has exhibited very little growth outside of SpaceX delivering its own Starlink satellites into space, leading to the question of whether this is a growth business at all. When you move away from EBITDA and start analyzing the actual profitability, the picture is not nearly as pretty. It's essentially the picture of Dorian Gray of financial statements. The IPO pitch looks young and flawless but the balance sheet in the attic is looking increasingly gnarled. While SpaceX is a 16 billion dollar revenue business, leaked documents showed that XAI generated just 120 million dollars in revenue during the first nine months of 2025. To put that in perspective, XAI is currently burning through 1 billion dollars a month to build its data centers. That means that XAI spends its entire annual revenue every six days. By merging the two businesses, Musk is using the mode of the rocket business to subsidize the astronomical costs of the AI business, all while asking the public to pay a massive premium for the privilege of owning shares. Ultimately, SpaceX might be an extraordinary engineering success, but as a public investment, the price you pay for the expected growth will matter. If the valuation is based on comic book heroic assumptions about capturing a that either already have better internet access or can't afford to pay for the service, the final frontier for investors might be a very long way down. This all leads us to the question of how Elon Musk actually expects to get that 1.75 trillion dollar price tag. The answer isn't found in the physics of rockets, but instead in the physics of the stock market. The most important thing to understand about this IPO is that SpaceX isn't selling the whole company to the public. They're likely only releasing a tiny float. The financial press is suggesting that just 5 to 10 percent of the total shares might be issued. By keeping the supply of stock artificially low while marketing it to every retail investor on the planet, this could create a supply squeeze before the opening bell even rings. When everyone wants a piece of the future, but there are only a few shares to go around, the price has only one way to go and that's up. Craig Cobbin wrote about this low float strategy a few years ago in the Financial Times, where he pointed out that a lot of recent tech IPOs had floated only a tiny number of shares, often between 7 and 10 percent, compared to the historical average of 20 percent. He used the example of Instacart, where only 8 percent of the shares were floated, and of those 60 percent went to cornerstone investors and 5 percent to friends and family. This left a tiny supply of shares to be traded, presumably to cultivate a sense of scarcity. The real magic for SpaceX might happen with the index inclusion trap. This isn't just a lucky break for Elon Musk. It's reported to be driven by a specific demand from him. According to Reuters, SpaceX made early inclusion in the Nasdaq 100 index a necessary condition for agreeing to list on the exchange. In response, the exchange is consulting on a new rule that allows SpaceX to join the Nasdaq 100 after just 15 trading days, bypassing the year of price discovery required for every other company. And it isn't just the Nasdaq either. Bloomberg reports that S&P Dow Jones Indices is also considering historic rule changes to fast-track SpaceX into the S&P 500. This is significant because there are roughly 24 trillion dollars tied to that index. Maybe Elon can get on the phone to the people at Russell to see if he can get SpaceX classified as a value stock too. If SpaceX is added to the S&P 500 and the Nasdaq 100, every passive investor will find themselves buying the stock at whatever price the supply squeeze has manufactured. As veteran fund manager George Noble points out, the proposed five-times float multiplier used to determine its Nasdaq index weighting is shameless structural manipulation. It effectively turns every pension fund into exit liquidity for SpaceX insiders, where your retirement account is being forced to buy into a bubble designed by the seller. As Noble argues, the rules are being rewritten to benefit IPO issuers and early-stage insiders and your capital is the tool being used to enrich them. We've seen this movie before. In December 2020, Tesla was added to the S&P 500 after a massive run-up in price. Since the day of inclusion, Tesla has underperformed the broader index by more than 20%. The passive investors who were forced to buy in at a huge valuation right before sales started drying up became the bagholders while the early insiders took their victory laps. SpaceX may be an extraordinary engineering company, but it has been sold to the public as a financial miracle at a price that is, to me, very difficult to explain. That doesn't mean that the IPO will fail or the stock price will fall, but a lot of things will have to go right for SpaceX for it to be a good long-term investment. If you found this video interesting, you should watch my video on MicroStrategy's infinite money glitch failing next. Don't forget to check out our sponsor Salee using the link in the video description. See you in the next video.