SpaceX’s highly anticipated IPO is generating some of the biggest financial headlines in years. We spoke with Portfolio Director Frank Newman to break down what’s happening and how the IPO process works.
What is the SpaceX IPO and why is it creating so many headlines?
On the evening of May 20th, SpaceX, founded by Elon Musk, filed its S-1 prospectus publicly, kicking off one of the first steps to becoming a publicly traded company via an initial public offering (IPO).
The sheer scale of this offering is setting the stage for this to be one of the largest IPOs in history, as SpaceX looks to raise nearly $75 billion, and is targeting a company valuation of nearly $1.8 trillion.
What is an IPO?
An IPO is where a private company will become public, offering shares of the business to all investor types, not just institutional or more sophisticated investor groups. An IPO is also an opportunity for prior investors of SpaceX, including employees or founders, to transfer their ownership shares to the public, raising cash and exiting either some or all of their investment.
How will this IPO work?
On June 12th SpaceX is set to become a publicly traded stock listed on the Nasdaq exchange under the symbol SPCX. Here’s how the day will unfold:
Final IPO price is set that morning, reflecting the price at which sellers will transfer shares to new buyers
Nasdaq assesses supply and demand for the stock and sets the first public trading price — this may happen well after the 9:30 a.m. ET market open
Think of it like a controlled auction — designed to avoid hectic trading at the opening bell
Once the first trade is made, SpaceX becomes a publicly listed security available for customers with a brokerage account — including Ally Invest — to buy and sell shares
Important things to keep in mind
While the excitement around an IPO is understandable, IPOs come with real risks that every investor should weigh carefully. Here’s what to consider:
Allocation isn’t guaranteed
Given potentially high demand and heavy price fluctuation, brokerages cannot guarantee that customer orders will be filled. Beyond allocation uncertainty, investing in IPOs carries other risks.
Volatility is the norm, not the exception
Newly public companies often experience extreme price swings. IPO stocks have been known to surge on their first day of trading only to give back gains in the months following.
Consider the historical context
According to a database of IPO statistics dating back to 1980, despite the bull market over the last three plus years, there were 164 IPOs from 2022-2024 that produced an average one-year return of -17.9%.
Of course, any IPO can defy gravity and produce strong results in its early trading days. It is important to do your own research, and if you decide to purchase shares, consider a position size for your portfolio that could tolerate ups and downs should the company experience large price fluctuations.
Before you invest, ask yourself:
Does this fit within my overall investment strategy and time horizon?
Can I tolerate significant short-term losses if the stock fluctuates heavily?
Have I done independent research beyond the headlines?
Is my position size appropriate for the level of risk involved?
As with any investments, diversifying and spreading your assets across multiple positions is key. This can reduce the likelihood that a single security becomes the sole driver of success or failure.
Possibilities beyond the IPO
If IPOs are not for you, Ally Invest has a variety of accounts, like Robo Portfolios, that allow you to select an investment portfolio that’s diversified across a mix of assets tailored to your risk tolerance, financial goals and time horizon. If you prefer a more hands-on, one-to-one relationship, check out Personal Advice, a financial advisory offering by Ally Invest.
