Elon Musk’s SpaceX is about to make its debut on Wall Street. What to know

Elon Musk’s rocket company SpaceX will make its Wall Street debut on Friday, with institutional and retail investors expected to snap up 555.6 million shares on sale at $135 per share. Musk, who is already the richest man in the world, may become its first trillionaire.

Why go public now?

In a video conference on Musk’s social media platform It’s doing so now because the company plans to put 100,000 next-generation Starlink satellites into orbit. Deploying AI data centers in space is a “huge new growth base and it takes capital to make it happen,” he said.

Some firsts

SpaceX will likely become the largest IPO ever, with proceeds of about $75 billion. Musk could become the world’s first trillionaire. SpaceX hopes to become the first company to send people to Mars. In fact, part of Musk’s future compensation depends on SpaceX eventually establishing a colony of at least 1 million people on the Red Planet.

What are the pros and cons of an IPO?

Going public provides SpaceX with access to the capital it needs. But it also exposes them to greater shareholder scrutiny and greater regulatory oversight. This includes providing quarterly financial reports, which critics say incentivizes short-term thinking over long-term planning and creates unnecessary costs for the company. Securities regulators are currently soliciting public comment on a proposal to require public companies to file financial reports only twice each year.

SpaceX relies a lot on Musk

The company credits Musk as the “driving force” behind its growth, innovation and success. But what happens if Musk is no longer in the picture? SpaceX warns that losing Musk could disrupt its ability to execute its strategy as well as damage its reputation and relationships with customers, partners and other stakeholders. The company also warns that finding a replacement with the same skills and experience as Musk will take a long time, if not nearly impossible. As Wedbush Securities analyst Dan Ives wrote on Wednesday: “At the end of the day, Musk is SpaceX and SpaceX is Musk.”

Musk is dominant

The CEO will own a majority of a special class of stock, giving him control over decisions about the company’s strategy, finances and employees. Regarding the latter, due to his ownership of most of the Class B shares, the only person who can fire Musk as CEO…is Musk.

SpaceX competition

Analysts say that by pioneering reusable rockets, SpaceX has a clear lead over competitors such as Blue Origin, led by Amazon founder Jeff Bezos. Starlink’s satellite business competes, among others, with AST SpaceMobile — which is relying on a SpaceX rocket to send the latest generation of satellites into orbit next week.

Big bet on artificial intelligence

A prospectus filed last week says SpaceX’s biggest potential market is selling business-oriented artificial intelligence products to transform how people get work done. It’s an opportunity that SpaceX expects to be worth $22.7 trillion if it can somehow dominate rivals like Anthropic, OpenAI and Microsoft in a highly competitive industry. But the prospectus doesn’t show a clear path to profitability for the xAI business, which merged with SpaceX earlier this year.

SpaceX will rely a lot on Starship

Currently, the giant reusable rocket, which is in the testing phase, is the key to realizing Musk’s ambitions. Much of the commercial space business depends on SpaceX developing Starship capability to be fully reusable and useful enough to achieve a quick turnaround between flights. If that doesn’t happen, SpaceX warns that putting data centers and satellites in space will take longer and cost more money, meaning it risks losing customers to the company.

Change the rules

If SpaceX’s IPO is successful, the stock could quickly join the Nasdaq 100, a widely followed index that tracks the 100 largest non-financial companies on the Nasdaq. This is important because some popular funds, such as the $460 billion QQQ exchange-traded fund, mimic the index and will automatically buy everything that is included in the index.

The Nasdaq recently changed its rules to allow select companies to enter the Nasdaq 100 index after only 15 trading days.

Pat stands

SThe Dow Jones &P&P indices, on the other hand, stick to established, more traditional thresholds that would allow SpaceX or other companies with massive IPOs to get into their stocks faster.& P 500 index. This means that companies will still need to wait for their shares to trade for a full 12 months before they can enter the index.

Companies want to be in SThe &P 500 in particular because it is arguably the most important index on Wall Street, with trillions of dollars exactly mimicking it or being measured against it. Vanguard’s VOO fund, which tracks SFor example, the &P 500 company has nearly $950 billion invested in it.