From moonshot to markets: Understand the mechanics before plunging into SpaceX’s mega IPO

EVERY once in a while, the markets are presented with an IPO story that feels larger than finance.

SpaceX is one of those stories, and its IPO will make its much anticipated debut on the Nasdaq on Friday (Jun 12). OpenAI and Anthropic may follow suit later this year.

These are not ordinary companies preparing to enter public markets with just trillion-dollar valuations. They sit at the centre of some of the biggest themes of our time such as space infrastructure, AI, computing power, data centres, national security – and the very next frontier of productivity.

Naturally, this is attracting a lot of attention. SpaceX’s IPO price was set at US$135 a share and more than 555 million shares are available. This means the company will raise about US$75 billion from the offering, putting its valuation at US$1.77 trillion.

OpenAI and Anthropic have also been linked with potential listings that could place them in the trillion-dollar valuation conversation. At that scale, these companies would not just be large by corporate standards. Their market values would be comparable with the annual GDP of many countries.

For investors, however, the more interesting point is not the headline valuation, but what actually comes into the market. In SpaceX’s case, its IPO size is enormous by any historical measure; larger, in fact, than the great mega IPOs of the past.

But against a US$1.77 trillion valuation, this represents only a little over 4 per cent of the company. Put differently, the number that catches the eye is the valuation, but the number that matters for market mechanics is the float.

This distinction is important because it changes the index story.

It is tempting to assume that a US$1.77 trillion company listing on Nasdaq would immediately become a major force in the Nasdaq 100 or, eventually, the S&P 500. Over time, that may well happen; a company of SpaceX’s size and strategic importance will be difficult for markets to ignore.

Free float matters

But the process is neither immediate nor automatic. While SpaceX would look enormous beside the existing Nasdaq 100 universe on a simple full market-cap basis, indices do not work purely on headline valuation.

Free float matters. If only a small portion of the company is publicly tradable at the start, the actual index impact is likely to be much smaller than the full valuation suggests. This means the day-one impact may be more psychological than mechanical.

The listing could dominate headlines, investor conversations and fund manager discussions – but it may not immediately reshape the index in proportion to its headline value.

That is a subtle but important difference. Many Singapore investors own the S&P 500 directly through ETFs, or indirectly through global equity funds and unit trusts. If SpaceX, OpenAI or Anthropic eventually enter the S&P 500, investors who think they are simply buying “the market” may indeed end up owning them as part of that market.

But inclusion takes time and is subject to rules. A newly-listed company generally needs a public trading history, sufficient public float and – importantly – reported profitability.

SpaceX is reportedly not profitable on a net income basis today, which means S&P 500 inclusion should not be assumed as a near-term certainty unless the rules are changed.

This is where the real investment story becomes more interesting.

The IPO is only the first chapter; the second chapter is whether these companies qualify for the major indices. The third is how passive funds, ETFs and benchmark-aware active managers respond. The fourth is what happens when employee and insider lock-ups expire, and more shares become available for sale.

Each stage can create a different type of market impact. The IPO may bring excitement and scarcity. A small free float can support the share price if demand is strong.

Later, potential index inclusion can bring another wave of demand from funds that track or benchmark against the Nasdaq 100 or S&P 500. But at the same time, lock up expiries can bring supply from employees, early investors and insiders who may want to turn paper wealth into cash.

Investor discipline is key

All this brings us back to why the valuation needs to be looked at with some discipline.

SpaceX is not being priced like a traditional aerospace, telecom or defence company. Rather, investors are being asked to buy into Elon Musk’s vision of the future: Reusable rockets, global satellite broadband, space infrastructure, and defence relevance. Perhaps even entirely new commercial activity beyond Earth.

There is nothing wrong with vision; some of the best long-term investments in history looked expensive when measured against the present, and obvious when measured against the future. Nonetheless, there remains a difference between admiring a company and buying its stock at any price.

SpaceX may be a remarkable company; OpenAI and Anthropic may become central to the AI economy. Still, market returns depend not only on whether the story is powerful, but on how much of that story is already priced in.

To that end, past mega IPOs offer a useful reminder. Facebook’s listing in 2012 was highly anticipated, but the stock struggled in the months after its debut, before eventually becoming one of the great long-term winners. Alibaba’s 2014 IPO was historic, yet the shares later faced significant volatility as investors reassessed growth, regulation and governance.

Saudi Aramco’s 2019 listing showed that very large IPOs are never just about the company. They are also about ownership structure, liquidity, index inclusion, dividends and the market’s ability to absorb supply.

And if they are added to major indices, ETF and index fund investors could end up owning them automatically. This can certainly create powerful demand, but it can also concentrate the market further in a small group of dominant companies.

For Singapore investors, that is arguably the most practical point. You may not receive an IPO allocation; you may not even buy SpaceX, OpenAI or Anthropic directly.

But if these companies become large enough and qualify for major indices, they may eventually appear in your global equity fund, your technology ETF or your S&P 500 exposure.

The coming mega IPOs should therefore be seen less as simple opportunities to buy into the future, and more as moments when private market ambition is transferred into public market portfolios. They may be extraordinary companies. They may also become extraordinary investments. But those are not the same thing.

As an investor, one should not rush in simply because the names are exciting, or because the access – at least right now – feels scarce. Instead, one should look past the headlines and pay attention to how it enters his or her portfolio.

Understand the mechanics. Research on the float, the index path, the lock-up schedule and, above all, the price being paid for a very ambitious version of the future.

It would indeed be great to own a piece of what’s to come, but it should still be owned with discipline.

The writer is head of wealth advisory at OCBC.